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Carbon retirement involves retiring allowances from emission trading schemes as a method for offsetting carbon emissions. Once retired, the allowances are taken off from the market cannot be used again.

Under schemes such as the European Union Emission Trading Scheme EU Emission Allowances (EUAs) represent the right to release carbon dioxide into the atmosphere and are issued to all the largest polluters. Buying these allowances and permanently removing them from the market forces other companies to reduce their emissions.

Over time, the scheme will offer fewer allowances, making it much harder for industrial companies to sustain high emission levels without incurring financial penalties.

Carbon retirement involves retiring carbon credits which are certificates representing quantities of greenhouse gases that have been kept out of the air or removed from it. To compensate for emissions from sources that it can eventually eliminate, the company might purchase and “retire” carbon credits.

An article published on journal Energy Policy in January 2008 argued that compared to traditional offsetting projects, retirement is straightforward and transparent. According to the article, there are no complex projects, methodologies, brokers, or intermediaries, and the issue of additionality is overcome.

McKinsey's estimated in 2020, buyers retired carbon credits for some 95 million tons of carbon-dioxide equivalent (MtCO2e), which would be more than twice as much as in 2017.

British media CarbonBrief analyzed in 2022, 146 million carbon credits were retired from the four largest registries for carbon-offset projects in the voluntary market, more than double the volume just three years earlier.

References

1. Rousse, Olivier (January 2008). "Environmental and economic benefits resulting from citizens' participation in CO2 emissions trading: An efficient alternative solution to the voluntary compensation of CO2 emissions". Energy Policy. 36 (1): 388–397. doi:10.1016/j.enpol.2007.09.019.
2. "Carbon credits: Scaling voluntary markets | McKinsey". www.mckinsey.com. Retrieved 2024-02-21.
3. Pearson, Josh Gabbatiss, Tom (2023-09-28). "Analysis: How some of the world's largest companies rely on carbon offsets to 'reach net-zero'". Carbon Brief. Retrieved 2024-02-21.{{cite web}}: CS1 maint: multiple names: authors list (link)

External links

• Carbon Offset Solutions

• Carbon finance