Carbon Credit Exchanges Commodities
The world needs to reduce its carbon and greenhouse gas emissions, and the trading of carbon credits can help. But, unlike other commodities, putting a price on carbon credits can be challenging. The value of a particular credit depends on its type, geography, vintage and other attributes, making it harder for buyers to find what they need and sellers to find the right buyer. A new standard is helping to address these challenges, but it takes a long time to establish a market.
The most common way to buy or sell carbon credits is through a carbon market, which may be regulated or voluntary. A regulated carbon market adheres to rules set by governments or environmental organizations. The other is a voluntary carbon market, which is not governed by any rules and can operate at a more relaxed pace.
A carbon credit exchange is an online marketplace that connects supply and demand for carbon credit exchange. One carbon credit represents a tonne of CO2 or an equivalent amount of another greenhouse gas that is reduced, stored or avoided. Companies and individuals use them to offset their emissions or compensate for those of others. The price of a carbon credit depends on the specifics of the project and how much is saved, but typically ranges from several dollars per tonne for reforestation or afforestation projects to $100 or more for technology-based emission reductions.
How Are Carbon Credit Exchanges Commodities?
Some of the most active carbon markets are in the United States, which has a national program called the EPA Clean Power Plan to reduce emissions from energy production. The plan, which has already been implemented, has led to the creation of an exchange that allows businesses and individuals to trade credits for meeting their emission goals. Other global exchanges have been created to meet the needs of governments, companies and other stakeholders who are trying to achieve ambitious climate targets.
One of the key issues with the current voluntary market is that it’s difficult to know which carbon credits are legitimate and of good quality. To combat this, a group of business and environmental leaders launched Verra, a nonprofit organization that sets the most widely used standard to verify carbon credits, called the Verified Carbon Standard. This standard combines accounting methodologies specific to the project type, independent auditing and a registry system. This helps ensure that the carbon credits buyers purchase are genuine and reduce their carbon footprint.
Launching a successful carbon credit exchange requires scalable and secure infrastructure. Nasdaq’s marketplace services technology matches buyers and sellers based on multiple parameters, so that they can trade with confidence. Our technology can also be expanded, so that you can add new asset types as your marketplace grows. It’s also designed to reduce counterparty risk by allowing buyers to choose the seller of their choice. To learn more about how we can support your carbon credit exchange, please contact us. We’ll be happy to discuss your needs and provide you with a free demo of our technology.
