CDP Technical Note: “Retirement” and “Cancellation”
of instruments
CDP Corporate QuestionnaireContentsVersion .......................................................................................................................................... 3
Terminology .................................................................................................................................. 4
Cancellation ............................................................................................................................. 4
Retirement ............................................................................................................................... 4
Surrendering ............................................................................................................................ 4
Introduction ................................................................................................................................... 5
Carbon credits use and registries ............................................................................................... 6

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VersionVersion

Revision date

Revision summary

1.0
2.0
2.1
2.2
3.0

June 25, 2013
January, 2014
2016
2017
2018

4.0

2021

5.0
6.0

January 21, 2022
June 28, 2024

First published version.
“Introduction” and “Carbon credits use and registries” sections revised.
“I-RECS” added to instruments used to track electricity.
Sources of definitions added.
Formatting updated to align with the 2018 CDP climate changequestionnaire.
IPCC definition of Annex B Party, and AIB EECS definition ofcancellation added.
Minor editorial updates
Updated to align with the 2024 CDP Corporate Questionnaire.

Copyright © CDP Worldwide 2024
All rights reserved. Copyright in this document is owned by CDP Worldwide, a registered charity number
1122330 and a company limited by guarantee, registered in England number 05013650.

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Terminology
Cancellation
Internal transfer of a unit to a cancellation account, in order that it may not be used for compliancewith an emission target.
See: https://unfccc.int/process/the-kyoto-protocol/registry-systems/registry-functions
Retirement
Internal transfer of a unit to a retirement account, in order that it can be used by the Annex B Party1
for compliance with its emission target.
See: https://unfccc.int/process/the-kyoto-protocol/registry-systems/registry-functions
Surrendering
The accounting of an allowance by an operator or aircraft operator against the verified emissions ofits installation or aircraft (COMMISSION REGULATION (EU) No 389/2013, of 2 May 2013).

1 Annex B Parties/countries: The group of countries that have accepted greenhouse gas (GHG) emission

reduction targets for the period 2008–2012 under Article 3 of the Kyoto Protocol.
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Introduction
The objective of this document is to clarify terminology related to the use of carbon credits andother instruments frequently used by companies.

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Carbon credits use and registries
States and companies use a variety of instruments to manage their carbon obligations andcommitments. Examples of such instruments are:
 Carbon units, established by either international or national regulatory mechanisms forpurposes of accounting, compliance and trading between parties. These include:••

Units created under the UNFCCC:o AAU – Assigned Amount Unito RMU – Removal Unitoo

ERU – Emission Reduction Unit
CER – Certified Emission Reduction

otCER – temporary Certified Emission Reduction

olCER – long-term Certified Emission Reduction

Units created under the European Union Emission Trading Scheme (EU ETS):o EUA – European Unit Allowance Carbon credits, established by voluntary mechanisms or standards
 Instruments used to track electricity, such as:•GO – Guarantee of Origin•

REC – Renewable Energy Certificate•

I-REC – International Renewable Energy Certificate

These instruments convey information that entitles their users to make certain claims. They can besold in the market, which then enables others to claim (what is conveyed by) the instrument. Often
instruments are created and managed under an electronic registry, rather than in physical form.
These electronic registries have specific mechanisms in place to track the ownership of theinstrument, whether the instrument can still be traded or if it has been used against a specific use
case. Such use cases include: An organization fulfilling a regulatory obligation, e.g. companies under the EU ETS arerequired to surrender an amount of allowances equal to their verified emissions from theprevious year by 30th April.
 An organization fulfilling a voluntary commitment, e.g. a company has a voluntary target tooffset 100% of its emissions during 3 years using CER’s.
 A state fulfilling a regulatory obligation.
To fulfill these use cases, organizations are required to undertake certain actions that permanently
remove the instruments from the market. After taking those actions it is no longer possible to use
the instrument for any other purpose. This mechanism is fundamental for the environmental
integrity of the system ensuring that a unit shall not be accounted twice.
These important actions are often referred to as “retirement”, “cancellation” or “surrendering”. Even
though these terms are often used interchangeably in the marketplace, they actually have different
meanings, as detailed in the table below. CDP has adopted the terminology used by CDM and theEU ETS for use in its questionnaires and guidance documents. The definition of “cancellation”
provided by AIB EECS is also included in the table below due to its relevance to Instruments used
to track electricity (GO, REC, I-REC).

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ActionRetirement

Cancellation

Surrender

CDM2
Internal transfer of a unit
to a retirement account,in order that it can beused by the Annex B
Party for compliance with
its emission target
Internal transfer of a unit
to a cancellation account,in order that it may not be
used for compliance with
an emission target

EU ETS3‘Retirement’ means theaccounting of a Kyoto unit
by a party to the Kyoto
Protocol against thereported emissions of that
Party
‘Cancellation’ means thedefinitive disposal of a
Kyoto unit by its holder
without accounting itagainst verified emissions[Not defined]‘Surrender’ means theaccounting of anallowance by an operator
or aircraft operatoragainst the verified
emissions of its
installation or aircraft

AIB EECS4[Not defined]‘Cancellation is themechanism whereby
the EECS Certificate
is removed fromcirculation.
Cancellation occurs
at the point at which
the value of theCertificate isrealised.’[Not defined]

From the table above, it is evident that these registries (CDM, EU ETS) use different terminology
depending on the actors that perform the actions. The actions are similar in nature in that their
purpose is to ensure that the instrument ceases being available for use by anyone else. For
example: An Annex B Party “retires” AAU’s in the national registry for complying with its Kyoto
obligations.
 An organization (company, NGO, etc.) “cancels” CER’s or ERU’s (or other Kyoto unit types)
in the CDM registry for its own compliance purposes. These units may not be then used byAnnex B Parties for their own compliance purposes.
 An operator (company) under the EU ETS “surrenders” an equal amount of allowances to
its verified emissions to fulfill its legal obligations. For all purposes this action is similar to a“cancellation”, it just happens with EU ETS units and not with Kyoto type units.
For the purpose of responding to CDP, the term “cancellation” shall be preferred to the other two“surrendering” and “retirement” – unless referring specifically to “EUA surrendering” or “retirementby an Annex B Party to the Kyoto Protocol”.
Different regulatory initiatives might use and introduce different terminology for actions that aresimilar in nature. To the extent possible CDP will attempt to analyze and document the use of suchterminology. Companies are welcome to contact CDP to share information about such instances.

2 The source of these definitions is:https://unfccc.int/process/the-kyoto-protocol/registry-systems/registry-functions which follows and is inaccordance to DATA EXCHANGE STANDARDS FOR REGISTRY SYSTEMS UNDER THE KYOTO
PROTOCOL, TECHNICAL SPECIFICATIONS (Version 1.1.10) that can be found at
http://unfccc.int/files/kyoto_protocol/registry_systems/application/pdf/des_full_v1.1.10.pdf
3 The source for these definitions is COMMISSION REGULATION (EU) No 389/2013 of 2 May 2013
establishing a Union Registry pursuant to Directive 2003/87/EC of the European Parliament and of theCouncil, Decisions No 280/2004/EC and No 406/2009/EC of the European Parliament and of the Counciland repealing Commission Regulations (EU) N. 920/2010 and N. 1193/2011that can be find at http://eurlex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:122:0001:0059:EN:PDF
4 The source of this definition is EECS Rules Release 7 v12: https://www.aib-net.org/eecs/eecsr-rules
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