Carbon offset is replacing the pollution of one company with the non-pollution of another. Carbon credits are the trading mechanism for carbon offsets. Or put another way, a company that directly or indirectly emits a lot of carbon dioxide has two choices. It can continue to do so, and be penalised for not helping to reduce its carbon footprint (e.g. by regulators, government or shareholders), or, it can buy carbon credits to offset its own emission from someone who have earned such credits.

Source: Carbon credits and offsets – What’s the scam? – Michael West