<p>Offsetting projects issue carbon credits by, e.g., preventing emissions or improving carbon storage. They are currently either classified based on types – avoidance, reduction, or removal – or based on sectors, such as forestry &amp; land use. These classifications are inconsistently defined and not interconnected. Moreover, they do not reflect that calculations and associated risks vary between projects, resulting in a lack of robustness of carbon credits. Therefore, we here introduce a mechanism-based framework to categorize carbon offsetting projects that reflects project-specific characteristics and consistent impact quantification. This framework consists of three decision trees to categorize projects into two first-level and 20 second-level categories. The first-level categories consider the project’s mechanism, i.e., whether a project affects greenhouse gas sources or storage. The second-level categories distinguish these mechanisms in more detail, into how projects achieve this effect. Case studies and the reallocation of existing sectors demonstrate the framework’s practicability and imply its fitness for purpose across projects in well-established and developing sectors.</p>