As the carbon credit market continues to grow, with demand continuing to push up credit prices, you may be asking yourself: what do credit buyers do with the credits? To answer that question, we need to back up a bit in the process.
When a carbon credit generator, such as Indigo Ag, works with a grower to implement qualifying practices to generate carbon credits, the data collected to document the practice is used to measure and model the carbon sequestered. That process and resulting information is reported to the carbon registry (Indigo works with Climate Action Reserve, a leading U.S. registry) and then verified by an independent third party verifier, attesting to the accuracy and quality of the carbon credit. After that step, each carbon credit receives a unique serial number.
What Do Carbon Credit Buyers Do with Their Credits?
When a carbon credit buyer completes their purchase, they have two options with the purchased credits:
1. The generator can retire the purchased credits on behalf of the buyer. The registry retires the purchased credits and records the transactions, much like a register of deeds records changes in title ownership for real estate or the attachment or satisfaction of a mortgage on a title of real estate.
2. The buyer can also take possession of the credits, which is also recorded by the registry. Once they have possession, they can choose when to retire purchased credits using the process above, allowing credit buyers to hold credits for retirement in future years.
What Does it Mean to Retire a Credit?
Retirement of any carbon credit means the credits cannot be retired again. The retirement of credits through the registry becomes a critical part of the carbon emissions accounting process for organizations seeking to prove to customers and investors with independent third party information that the credits they purchased are not only real, but cannot be used again, ensuring integrity in the entire carbon credit system.
Registry tracking of the status of carbon credits, via that serial number, is key to ensuring a trustworthy process. Carbon credits that do not follow registry protocol do not have the same traceability, proof of verification, or standards of additionality and permanence, and therefore lack the integrity in how they were created and how they were utilized after a purchase, leaving some carbon credit buyers open to scrutiny. In the past, buyers of carbon credits that did not use registry protocols have sometimes faced criticism for the integrity, causing significant reputational risk for the brand.
All carbon credits generated by Carbon by Indigo use registry protocols, ensuring that the credits are high quality and have integrity after the purchase.
To learn more about carbon farming, read more from our series Carbon Farming 101.