While carbon offsets which fund renewable energy projects help lower the carbon intensity of energy supply, energy conservation projects seek to reduce the overall demand for energy.

Carbon offsets in this category fund projects of several types:

1. Cogeneration plants generate both electricity and heat from the same power source, thus improving upon the energy efficiency of most power plants which waste the energy generated as heat.

2. Fuel efficiency projects replace a combustion device with one which uses less fuel per unit of energy provided. Assuming energy demand does not change, this reduces the carbon dioxide emitted.

3. Energy-efficient buildings reduce the amount of energy wasted in buildings through efficient heating, cooling or lighting systems. In particular, the replacement of incandescent light bulbs with compact fluorescent lamps can have a drastic effect on energy consumption. New buildings can also be constructed using less carbon-intensive input materials.