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Carbon retirement involves retiring allowances from emission trading schemes to offset carbon emissions. Once retired, the allowances are permanently removed from the market. Under schemes such as the European Union Emission Trading Scheme (EUETS), polluters may purchase EU Emission Allowances (EUAs), which represent the right to release carbon dioxide into the atmosphere. Purchasing these allowances and thus permanently removing them from the market forces other companies to reduce their emissions.

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

Carbon retirement involves retiring carbon credits–certificates representing reduced greenhouse gas emissions or greenhouse gasses (GHGs) removed from the atmosphere. The company might purchase and “retire” carbon credits as compensation for emissions from sources that will eventually be eliminated.

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

McKinsey estimated that in 2020, buyers retired carbon credits for ~95 million tons of carbon-dioxide equivalent (MtCO2e), more than doubling 2017 values.

In 2022, British media CarbonBrief reported that 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