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The carbon neutral concept may be extended to include other greenhouse gases (GHG) measured in terms of their carbon dioxide equivalence—the impact a GHG has on the atmosphere expressed in the equivalent amount of CO2. The term climate neutral is used to reflect the fact that it is not just carbon dioxide (CO2), that is driving climate change, even if it is the most abundant, but also encompasses other greenhouse gases regulated by the Kyoto Protocol, namely: methane (CH4), nitrous oxide (N2O), hydrofluorocarbons (HFC), perfluorocarbons (PFC), and sulphur hexafluoride (SF6). Both terms are used interchangeably throughout this article.

Best practice for organizations and individuals seeking carbon neutral status entails reducing and/or avoiding carbon emissions first so that only unavoidable emissions are offset.

The term has two common uses:

It can refer to the practice of balancing carbon dioxide released into the atmosphere from burning fossil fuels, with renewable energy that creates a similar amount of useful energy, so that the carbon emissions are compensated, or alternatively using only renewable energies that don't produce any carbon dioxide (this last is called a post-carbon economy).

It is also used to describe the practice, criticized by some, of carbon offsetting, by paying others to remove or sequester 100% of the carbon dioxide emitted from the atmosphere– for example by planting trees – or by funding 'carbon projects' that should lead to the prevention of future greenhouse gas emissions, or by buying carbon credits to remove them through carbon trading. These practices are often used in parallel, together with energy conservation measures to minimize energy use.

The concept may be extended to include other greenhouse gases measured in terms of their carbon dioxide equivalence.