Carbon Purging

With all of the myriad carbon markets out there, it is very easy to get the three confused, or even think they are one in the same. Governments and markets in many countries, including the US, UK, and EU, have laws that force companies to purchase permits to release carbon dioxide (CO2) pollution into the atmosphere.

Carbon trading is when companies purchase carbon credits, or permits, directly, or through secondary market channels, and sell them to other companies or individuals, typically taking a profit for the service.

Carbon offsets are financial instruments representing a reduction in greenhouse gas emissions. Carbon offsets are measured in metric tons of carbon dioxide-equivalent (CO2e). Though one carbon offset is meant to represent the reduction of one metric ton of carbon dioxide, many times there is no actual reduction. Companies that are currently doing things to reduce their CO2 often apply for carbon offset credits after the fact. Also, government-mandated reduction projects can often qualify for carbon credits

Finally, carbon retirement is when CO2 pollution permits are purchased, whether through a trader or an authorized government issuer, and are “retired”, typically meaning put into a trust preventing their use. This means that measurable amounts of CO2 are prevented from being released into the atmosphere.