Last updated:
May 24, 2024

Credit Retirement

What is Carbon Credit Retirement?

Credit retirement is the process of permanently removing a carbon credit from circulation after it has been used to offset/neutralise emissions. This action finalises the offsetting process, ensuring that the credit cannot be reused or claimed by another entity. It represents the actual achievement of an emission reduction or removal, and is essential for maintaining the integrity and effectiveness of carbon markets.

Prevention of Double Counting

The primary goal of credit retirement is to prevent double counting, where the same emission reduction or removal is claimed by more than one party. This practice can undermine the credibility and goals of carbon offsetting efforts.

Registries like Verra, Gold Standard, Puro, and EcoRegistry keep track of carbon credits through their lifecycle, including issuance, sale, and retirement. This tracking is crucial to ensure transparency and to prevent double counting, confirming that each credit is only used once.

When Should you Retire Credits?

Credits should be retired when an entity aims to neutralise a certain amount of emissions as part of its sustainability strategy. The timing usually aligns with the entity's reporting period for greenhouse gas emissions.

Timely retirement is essential for entities seeking to fulfil their environmental commitments or adhere to certain standards and certifications.

What Happens if You Don’t Retire Credits?

  • If credits are not retired, they can remain active for trading. This provides a financial opportunity but can also lead to market volatility.
  • Holding credits as investments carries risks, as their value can fluctuate. The non-retirement of credits can also attract scrutiny regarding the sincerity of an entity's commitment to genuine climate action.
  • The environmental benefit of a credit is only realised upon its retirement. Delaying this process means postponing the actual emission reduction or removal, which can impact the entity's sustainability claims and overall climate goals, putting them at risk of greenwashing accusations.
  • Non-retired credits risk being used in ways that don't contribute to genuine emission reductions, such as being counted multiple times or used to greenwash activities without real climate benefits.

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