Glossary
Insetting in 60 seconds
This page gives the idea in four lines, then every term the site uses in one line each.
The idea
Most of a company’s emissions sit in its supply chain. That is its Scope 3.
A supplier can reduce those emissions, but it often pays for the change alone.
With insetting, the companies that buy from that supplier co-fund the reduction.
An independent verifier confirms the tonnes. One credit per tonne is issued to the supplier and recorded on Carbon3, and each funder gets its share to hold, sell or retire.
Key terms
Terms are listed in the order they come up in a project, followed by the standards and rules that apply.
- Insetting
- Funding emissions reductions inside a company’s own value chain, at suppliers it buys from.
- Offsetting
- Paying for reductions or removals outside a company’s value chain to compensate for its own emissions. Carbon3 does not handle offsets.
- Scope 1, 2 and 3
- Scope 1 is direct emissions from sources a company owns. Scope 2 is from the energy it buys. Scope 3 is every other emission in its value chain.
- Scope 3 categories
- The GHG Protocol splits Scope 3 into 15 categories, such as purchased goods and services (Category 1) and upstream transportation (Category 4).
- CO₂e
- Carbon dioxide equivalent: each greenhouse gas expressed as the amount of CO₂ with the same warming effect. One inset credit is one tonne of CO₂e.
- Inset credit
- One verified tonne of CO₂e reduced inside a supply chain, tied to one project and one monitoring period. What a credit represents
- Baseline
- The emissions that would have happened without the project. Reductions are measured against it.
- Additionality
- The test that a reduction would not have happened without the funding. Each project’s validator applies the test its method sets.
- Validation
- Before work starts, an independent body checks the scope, baseline and method, and writes a validation report.
- Verification
- After monitoring, an independent verifier checks the data and confirms the tonnes reduced, in a verification report.
- Issuance
- Credits are issued to the project developer on the Carbon3 registry, one per tonne, each with a unique identifier.
- Future credits
- Credits issued once a project is validated, for reductions still to come. Funders buy them early to pay for the project, so they are usually priced lower.
- Realized credits
- Credits for reductions that have already happened and been verified. One per verified tonne, with no delivery risk.
- Allocation
- Splitting the credits between co-funders in line with what each paid. Each credit has one holder at a time.
- Registry
- The record of each credit and who holds it. Carbon3 is the registry. It does not validate, verify or issue credits.
- Retirement
- Using a credit against a claim. It is recorded with the date and the company, and can never move again.
- Book-and-claim
- A chain-of-custody model, common in fuels, where the low-carbon attribute is traded apart from the physical product, so a buyer can claim fuel used elsewhere in the same system. Book and claim explained
- Mass balance
- A chain-of-custody model where certified and conventional material are mixed, and the certified share is tracked through the chain and booked to specific output.
- GHG Protocol
- The global standard for corporate greenhouse gas accounting. Its revised corporate standard, including how market instruments are reported, is estimated for the fourth quarter of 2028. Where the revision stands
- Physical inventory
- A GHG inventory that reflects the emissions of the activities a company draws on, without adjustment for certificates or credits. SBTi V2.0 bases targets on it.
- Market instrument
- A certificate that conveys the environmental attribute of energy or a commodity, such as an energy attribute certificate or a book-and-claim certificate. SBTi treats carbon credits separately.
- SBTi
- The Science Based Targets initiative sets the standards companies use for climate targets. Its Corporate Net-Zero Standard V2.0, published in June 2026, puts direct reductions first. SBTi V2.0 explained
- Activity pool
- In SBTi V2.0, a shared system a company draws on, such as an electricity grid, supply shed or logistics network, where it can act when direct action is not enough.
- Ongoing Emissions Responsibility
- SBTi V2.0’s framework for mitigation beyond a company’s own targets, including carbon credits, with removals required for Category A companies from 2035.
- FuelEU pooling
- Under FuelEU Maritime, ships combine their compliance balances so that a surplus on one covers deficits on others. The pool’s total must be positive. FuelEU Maritime explained
- CBAM
- The EU Carbon Border Adjustment Mechanism, under which importers of steel, cement, aluminum, fertilizers, hydrogen and electricity pay for the embedded emissions from 2026. CBAM and Scope 3
- Embedded emissions
- The emissions released in producing a good, including its precursors. CBAM prices them. For the buyer, they are part of Scope 3.
- ESRS E1
- The climate standard under the EU Corporate Sustainability Reporting Directive. It requires gross Scope 1, 2 and 3 emissions and separate disclosure of carbon credits. ESRS E1 explained
- SB 253
- California’s climate disclosure law, under which US companies with revenue above $1 billion doing business in California report Scope 1 and 2 from 2026, and Scope 3 from 2027. SB 253 explained