Carbon Credit Glossary
Key terms used in the voluntary carbon market — defined for CFOs, controllers, and auditors.
- Carbon Credit
- A tradable certificate representing one metric tonne of CO₂ equivalent (CO₂e) reduced, avoided, or removed from the atmosphere. Issued by registries after independent verification.
- Vintage
- The calendar year in which the emissions reduction or removal actually occurred. Auditors use vintage to match credits to the reporting period being claimed.
- Retirement
- The permanent cancellation of a carbon credit in the registry so it cannot be resold or reused. Retirement is the act that enables an organization to make a climate claim.
- Serial Number
- The unique identifier assigned to a specific block of credits by the issuing registry. Serial numbers enable complete chain-of-custody traceability from issuance through transfer and retirement.
- Climate Claim Statement
- The formal assertion made when retiring credits — e.g., 'Acme Corp retired 500 VCUs (Verra, 2022 vintage) to offset 500 tCO₂e for FY2023.' Must be timestamped and linked to specific retired credits to be audit-defensible.
- Additionality
- The principle that an emissions reduction would not have occurred without the carbon credit financing. A project must demonstrate additionality to receive registry approval.
- Permanence
- How long the carbon sequestration or reduction will last. Forest projects carry permanence risk. Registries manage this through buffer pools — a percentage of credits held in reserve to cover potential reversals.
- Co-benefits
- Positive social, environmental, or economic impacts beyond the primary carbon reduction — biodiversity protection, local employment, clean water access.
- VCU (Verified Carbon Unit)
- The credit unit issued by Verra under the Verified Carbon Standard (VCS). One VCU = one tonne of CO₂e reduced or removed.
- GS VER (Gold Standard Verified Emission Reduction)
- The credit unit issued by Gold Standard. GS VERs require projects to demonstrate sustainable development co-benefits in addition to emissions reductions.
- ACR (American Carbon Registry)
- A US-based voluntary carbon registry operated by Winrock International. ACR credits are recognized by the California Air Resources Board for use in the California Cap-and-Trade program.
- Subledger
- A detailed subsidiary ledger that supports a general ledger account. A carbon credit subledger tracks individual credit lots, retirements, and valuations, feeding into the intangible assets or inventory line on the balance sheet.
- Impairment
- A reduction in the carrying amount of a carbon credit below its book value. Under IAS 36 and ASC 350, credits must be tested for impairment when indicators suggest the carrying amount may not be recoverable.
- Cost Basis
- The original purchase price of a carbon credit, including directly attributable transaction costs. Used to calculate gain or loss on retirement and to test for impairment.
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