The short explaination: Burning carbon credits is the equivalent of stamping a single-entry ticket into a concert; it’s been used, it can’t be used again.
When does a carbon credit retire?
A carbon credit certifying agency measures the potential carbon to be removed from the atmosphere. They then can issue and sell carbon credits for the project developer. This gives the project developer financing to continue the project. The certifying agency like Wildsense tracks the issuing of carbon credits in a registry.
Those carbon credits are sold to a company or individual. They can then be “burned,” or traded on the VCM. If a company or individual burns the credits, it’s typically to apply them towards a carbon-neutral goal. This is known as compensating for carbon emissions.
Once a carbon credit is burned, or retired, it doesn’t exist anymore. This means neither the carbon credit holder nor the certifier can sell the credits on the VCM. They also cannot be counted the following year as carbon compensation.
It’s usually corporations with carbon neutrality goals that retire carbon credits. Let’s look at how that works.
The Corporate Pathway
With the number of corporate carbon neutrality pledges, corporations purchasing VCM credits to compensate for their emissions is also on the rise¹.
A good example of this is Lyft, a popular competitor to Uber. The company bought and retired enough carbon credits in 2020 to equal the total amount of carbon emissions in its greenhouse gas inventory report².
Like in the Lyft example, a company that compensates their emissions with carbon credits reports them on the company’s corporate social responsibility (CSR) report. This states clearly the action they’re taking to compensate for their carbon footprint. At this time on the VCM there is no requirement for companies to clarify on their balance sheet between burned carbon credits and carbon credits they are trading on the VCM.
Compensating carbon in this way is one tool in the toolkit companies are using to “clean up” their environmental impact.
CarbonABLE and Corporate Buyers
One side of CarbonABLE’s mission is financing carbon sink restoration projects through the creation of NFTs with a real-world backed yield. Those projects issue carbon credits that CarbonABLE receives. On the other side of our mission, our team of experts trade those carbon credits on the VCM (this creates the yield for our NFT holders).
If a company purchases carbon credits from CarbonABLE traders or they purchase a block of NFTs, they can claim them as carbon compensation. In both cases we’d issue a certificate. This certificate proves that they purchased the carbon credits and that we retired them in their name. The credits can no longer be used to compensate for emissions nor can they be traded.
Retiring carbon credits responsibly, i.e. when they’ve been accounted for on a company’s environmental impact report, is just one way that CarbonABLE is acting today to secure a better future for tomorrow.