carbon finance Archives - Respira International

Retired carbon credits explained

By Jen StebbingNews

When we hear the word ‘retirement’, most might imagine a pension, large quantities of free time and perhaps a new-found love of gardening. Given these connotations, it is perhaps unsurprising that used in the context of the voluntary carbon market, the concept of retirement can create confusion.

In the carbon markets, retirement has a different meaning. In its essence, a retired carbon credit means its buyer has ‘redeemed’ the one tonne of carbon reduction it represents and claimed it against their own emissions which they have not yet been able to cut.

When a buyer retires a credit they have purchased, the credit is removed from the market. This means no one else is able to counterbalance their emissions based on the carbon reduction the credit represents.

To put this in context, 196 million carbon credits were retired overall in 2022. If these retirements had been evenly distributed throughout the year, more than 500,000 credits would have been retired every, single day. Although this represents a 1.3 percent decline on the previous year, the most recent market sentiment survey from the IETA found optimism among its respondents. Based on the responses from market participants the survey predicts that the market will soon return to a positive upward trajectory.

Wait, how are credits generated?

To truly understand the concept of a retired carbon credit, let us first refresh ourselves on the basics of credits.

What? A carbon credit represents one tonne of carbon dioxide or an equivalent volume of another greenhouse gas (CO2e) that has been either removed from, or prevented from entering, the atmosphere.

However, historically not all credits have been created equally. Learn more about the criteria for a ‘good’ credit with this article from our archives.

How? A credit can be generated from nature-based projects, technological climate solutions or even renewable energy generation. The volume of CO2e avoided or removed from the atmosphere is calculated and a corresponding number of carbon credits is conservatively calculated.

The calculation process involves following established methodologies, baseline allocation and verification. Find out more about this process here.

Why? Carbon credits are sold to individuals and businesses to support their decarbonisation strategies. The carbon finance generated from these sales funds further climate mitigation activities and can even support the delivery of impactful, non-carbon benefits for people and nature.

For an example of carbon credits in action, please see this case study of the Gola Rainforest Conservation Project. And to learn more about the responsible purchase of credits, see this flyer on the mitigation hierarchy.

But why do you need to retire credits at all?

In this section we will cover why carbon credits need to be retired, including:

Confirming impact
Claims
Double-counting

When a buyer purchases carbon credits in line with the mitigation hierarchy, the positive benefits of those credits are not automatically attributed to that individual or company. Rather, the buyer ‘holds’ these credits until they wish to retire them. However, once a retirement has been executed, the buyer is free to claim the positive impacts the credits represent. This effectively ends the credit’s ‘life’ for it cannot be reused or reclaimed.

In this way, retirement stops the benefits of credit from being claimed multiple times. In the industry, this is known as preventing double-counting. Only the stakeholder who retires the credit can claim the emission reduction it represents towards its climate targets and they can only do so once. Retirement is extremely important for driving credibility and traceability when using carbon credits to achieve net zero.

What’s the process for retired carbon credits?

Before a carbon project can issue credits, it will complete a process of verification which happens within a framework set up by a programme, such as VCS by Verra or Gold Standard. Only after verification are credits issued in a dedicated registry. Credits are always marked with a unique serial number which allows them to be tracked and accounted for.

Carbon credits can be owned by a number of market participants – the project developer, financing institution, intermediary or a company wishing to use them to counterbalance their own emissions. They can be traded, sometimes several times, among the market participants. This means that carbon credits can exist, unretired, for some time. However, at the point of retirement carbon credits are permanently removed from circulation and cannot be resold. This prevents any double-counting of emission reductions. Information on historic retirements is stored in publicly accessible emission registries, driving transparency for the market.

The future of retired carbon credits

As technology advances, stakeholders across the voluntary carbon market are working to better the carbon markets including the retirement process itself. Blockchain, Tokenization and Distributed Ledger Technology (DLT) all hold great potential for scaling of the voluntary carbon markets. These technologies can boost the overall transparency of credit retirements and support the overall integrity of the markets. We look forward to engaging with new innovations as the world of credit retirements develops and interacts with these emerging technologies.

5 July 2023

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“We are not a broker, we’re a carbon finance company”

By Jen StebbingNews

Traditionally, carbon credits have been bought and sold by brokers on a spot basis, but at Respira, we operate differently, and have helped to shift towards a carbon finance model of carbon credit trading. We recognise that the broker approach creates little long-term certainty for carbon communities, and, at times, even curtails the development of high-quality projects. This is why we offer an alternative – a model prioritising the overall stability of our flagship portfolio projects.

Respira is not a broker. Rather, we are a source of non-dilutive private capital. We offer revenue certainty for project developers through a guaranteed floor price for carbon credits and use our balance sheet to support them with long-term offtake agreements. Not only does this enable project developers to expand with confidence, but also creates greater certainty for our buyers who can lock-in future prices.

The Respira model

The Respira ethos

Respira International was co-founded by Ana Haurie and Robin Bowie in 2019. They saw the urgency with which we must address the climate crisis and recognised the role the private sector must play in these efforts. To drive the necessary levels of corporate action, the voluntary carbon market offered great potential. Speaking of the role of high-quality carbon credits in mitigation, Robin said:

“Buying voluntary carbon credits provides an engaging and impactful way for companies to compensate for residual emissions whilst on the pathway to reducing internal emissions. It enables corporations to go beyond what they are mandated to do through regulation.”

He continues:

“Through integrated plans which combine value chain emissions reductions with appropriate use of carbon credits, corporations can set a powerful and engaging example for others to follow.”

Now, four years later, Respira International continues to expand. Our diverse team combines a 30+ year track record in global financial markets with a deep understanding of carbon project development in leading international conservation organisations.

Reflecting on the Respira team, Chris Villiers, Director of Portfolio Management, said:

“Respira has brought together a team with the network and experience to develop products in the voluntary carbon market that can attract institutional capital at scale that will be used towards reducing emissions globally and deliver significant climate impact.”

The time is now

Our team knows we cannot delay climate action. In the next seven years, we must significantly decarbonise our economies if we are to meet the targets set by the Paris Agreement. Eva Weightman, Director of Corporate Client Relations, said:

“With 2030 fast approaching, there is no time to sit idle. The world needs business leaders to act with urgency and curb their companies’ emissions if we are to limit global temperature increase to 1.5°C above pre industrial levels. ”

Chief Technology Officer, Jon Mulder agrees:

“The time to act on decarbonisation and nature restoration has never been more critical. The solutions exist today and must be scaled and deployed more rapidly. We all have a role to play and carbon credits provide a vital service in protecting and restoring nature.”

If we are to achieve our 2030 ambitions, Finance Director, Peter Christie, argues that businesses must take voluntary action on climate mitigation.

“In the absence of direct regulation by governments, companies need to voluntarily ramp up their decarbonisation efforts so we can collectively solve the climate crisis. Carbon credits are an essential part of the business toolkit.”

Respira is committed to nature

However, carbon credits are not uniform in the benefits they deliver. Credits can be generated from activities which remove carbon from the atmosphere or from projects that prevent additional carbon emissions from release. But regardless of whether a project focuses on removal or avoidance, they can deliver a great many benefits for people and nature. It is with these projects – those with measurable impacts, aligned with the UN Sustainable Development Goals – that Respira partners.

This is why our flagship portfolio focuses predominantly upon nature-based projects such as forest conservation or mangrove restoration. Director Natural Climate Solutions, Ed Hewitt, further explains Respira’s investment rationale.

“There is a critical need to attach a monetary value to services that nature provides such as carbon capture, water quality, clean air and biodiversity.”

Ed continues:

“Carbon is really the first to be monetised at scale. By doing this we can financially incentivise the conservation and restoration of forests, soils and wetlands, helping us address the twin challenges of climate change and nature loss.”

Josh Schaefer, our Portfolio Director, explains that climate change and nature loss are inseparable challenges.

“Global emissions reductions can’t be achieved without tackling nature loss, because the earth’s natural ecosystems absorb roughly half of man-made carbon emissions – as well as providing numerous other benefits for people and biodiversity. Verified carbon credits have proved to be an effective way to finance the protection of natural ecosystems.”

Our CEO, Ana Haurie, concludes with a call to action:

“The time for the financial sector to act on climate is now. The predicted growth of the voluntary carbon market, with an increasing focus on nature-based solutions, provides a unique opportunity for institutional investors to benefit from this new asset class, while also supporting sustainable development goals and making a positive impact,” she said.

We encourage you to view our introductory video to learn more of our non-broker approach. And if you would like to find out more about our team, you can read more here.

27 June 2023