What are carbon credit retirements?

What exactly are carbon credit retirements, and how do they drive climate action? We look at the lifecycle of carbon credits - from the project planning phase to retirement.

What are carbon credit retirements?

Toucan recently launched carbon credit retirements on the Celo blockchain and on Regen Network. Now, everyone with a crypto wallet can independently compensate for their environmental impact – and do so in minutes instead of months, with verifiable proof of their climate impact. But what exactly are carbon credit retirements, and how do they drive climate action?

In this post, we explore:

By the end, you should be fully equipped to join us in taking positive action for people and the planet!

What are carbon credits and how are they created?

A carbon credit represents one tonne of carbon dioxide that has been prevented from entering or has been removed from the atmosphere. Carbon credits can be purchased by organizations or individuals to compensate for the emissions released by their day-to-day operations.

A carbon credit represents one tonne of carbon dioxide that has been prevented from entering or has been removed from the atmosphere. Carbon credits can be purchased by organizations or individuals to compensate for the emissions released by their day-to-day operations.

Carbon credits are created by carbon credit project developers. They can, for example, be:

  • renewable energy installations, like wind turbines or solar panels
  • tooling or technology to improve energy efficiency in factories
  • initiatives for conserving or restoring forests and other natural habitats
  • technology that is reducing methane emissions from landfills
  • technology that is turning carbon dioxide into minerals and storing it as a rock
Deep dive🧜‍♀️: Carbon dioxide removal solutions
Carbon dioxide removal (CDR) solutions represent an emerging area of focus and innovation within the voluntary carbon market. Indeed, the scaling of these solutions is critical to meeting the net zero aims of the Paris Agreement, with the latest IPCC report outlining a deployment rate of 5-16 giga-…
Learn more about different methodologies to remove carbon 👆

Why are carbon credits important for project developers?

Selling carbon credits provides an additional revenue stream for project developers. A land owner could, for example, help conserve a forest instead of converting it to ranch land; or an energy provider could add revenue through carbon credits, instead of building a cheaper, coal-powered plant.

Important: Projects need to demonstrate that without the revenue generated through carbon credits, they would not be able to exist.
Learn more about this in our post about Core Carbon Principles.

The lifecycle of a carbon credit

It can take up to 5 years to go from initial project planning to the production, verification, certification, and issuance of carbon credits. Several steps need to be taken on this journey…

  1. A project developer assesses the feasibility of a project and selects the methodology that the project will follow. The methodology is a peer-reviewed approach to how the credit will be assessed and verified. It could, for example, relate to a certain type of forest conservation.
  2. Standards bodies and verifiers then assess that the project proposal is valid and accept (or reject) its development.
  3. Several years may pass before the project produces any carbon credits. For example, new trees will need to grow to a substantial size before absorbing carbon.
  4. The carbon project then needs to prove that it is operating successfully in the manner set by its methodology.
  5. Finally, carbon credits can be certified. This again encompasses several steps: documentation submission, monitoring, reporting, and verification of a project’s carbon reduction or removal claims
  6. Once a third-party verifier has checked the project's progress, they give the green light for credits to be issued!

Project developers are free to sell their credits to organizations, individuals, or intermediaries who can re-trade them, or retire them for climate impact.

Carbon credits can be bought through brokers or decentralized digital marketplaces. While brokers fulfill a curating role, carbon marketplaces empower customers to pick specific credit types that align with their preferences. For example, a corporation might want to buy credits from a developer in the country where they produce most of their goods.

Why is retiring carbon credits so important?

Organizations and individuals can take responsibility for their carbon footprint by purchasing carbon credits. Doing so essentially supports and finances the development of projects that benefit the climate and local communities. But for real impact to happen, a credit cannot just be held or traded. It has to be retired.

What exactly is a carbon credit retirement?

When a credit is retired, the carbon offset it represents is permanently removed from market circulation. This means that only the retirerer of the credit can ever claim to have reduced emissions. Only they have released the credits' positive impacts. Retiring a carbon credit is therefore the critical step to achieving net-zero emissions.

In conventional carbon markets, it’s often difficult to verify if a carbon credit has been retired or resold, as organizations don’t have to make trading or retirement information public. This makes it hard to estimate exactly how much climate impact has taken place as a result of carbon credit purchases.

Retiring carbon on the blockchain can counter this opaque environment, as retirements are transparently executed on an open ledger where anyone can view and verify the resulting climate action.

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How can I retire carbon credits on the blockchain?

It is possible for anyone with a crypto wallet to buy and retire tokenized carbon credits on the blockchain!

First, you may want to use a free online calculator to estimate how much carbon you release per year, based on your lifestyle. If you have a business you want to take climate action for, use this calculator instead.

Now, you can retire carbon that covers the calculated amount, or go above and beyond to contribute even more to positive climate action!

3 handy tutorials for retiring carbon credits on-chain

→ Check out this step-by-step guide on how to buy and retire Toucan’s Nature Carbon Tonne (NCT)

→ Want to do it all from your smartphone? Use this guide to retire carbon via Celos mobile app

→ The Senken marketplace enables the retirement of a variety of different credits based on project type

What is Toucan?
Toucan is building technology to unlock climate action at scale. Our digital infrastructure is helping to grow the voluntary carbon market (VCM) in a transparent and high-integrity way. It increases the flow of revenue to the most effective climate impact projects, by bringing established and nascent environmental assets on the blockchain.