How Companies Are Buying Carbon Credit Exchanges

Carbon Credit Exchanges

A number of global companies have pledged to help stop climate change by reducing their own greenhouse-gas emissions as much as possible. However, they may not be able to fully eliminate or lessen their emissions, and so they are using carbon credit exchanges to offset their remaining emissions by investing in projects that remove or reduce carbon dioxide from the atmosphere.

Many countries have established carbon markets, and these allow for the trading of emissions reductions between organizations. The most developed of these markets is the Emissions Trading System (ETS), a centrally managed and administered trading system in which businesses can purchase or sell allowances to meet their emission targets.

Some buyers of carbon credits are purely voluntary, and purchase them for a variety of reasons, including corporate social responsibility, supply chain transparency, or reputational and ethical considerations. Other buyers procure carbon credits before a compliance carbon market starts, speculatively purchasing them at a lower price than they will eventually fetch in the compliance market.

These purely voluntary carbon-offset programs are regulated in different ways by their respective regulatory bodies, but they typically require that projects be verified and registered in order to qualify as an eligible project. The most common verification process involves an independent third party evaluating a project’s accounting methodology, and certifying the project’s reductions. A wide variety of third-party certification systems exist, from the Verified Carbon Standard, which was launched by environmental and business leaders in 2007, to the Gold Standard, Climate Action Reserve, and the American Carbon Registry.

How Companies Are Buying Carbon Credit Exchanges

One way to enhance the integrity of the global voluntary carbon market is to establish a standardized set of quality thresholds, or a carbon attribute taxonomy. These standards, hosted and curated by an independent third-party organization, would help to ensure that carbon credit exchange projects adhere to best practices and are credible. In addition, they would enable the development of liquid reference contracts for pricing over-the-counter trades.

There are several other factors that also need to be addressed in order to improve the sustainability of the carbon credit marketplace. These include the issuance of more efficient, digital processes that can lower issuance costs, accelerate credit issuance and payment terms, and provide real-time pricing signals for suppliers. It is also important to create a stable, resilient infrastructure that can grow with new and emerging market participants, from single brokerages to project developers.

Nasdaq’s trading platform connects buyers and sellers of carbon assets in a trusted, secure, and scalable marketplace. Our technology matches buyer and seller requirements based on a range of parameters, ensuring that both sides are buying the right carbon credits to meet their needs and regulatory obligations. We also offer a robust and customizable platform that allows for the easy addition of new asset types as the marketplace grows. Click to learn more about our top six carbon credit exchanges, and why they are the best of the bunch.