Carbon Credit Exchange Stocks

Carbon Credit Exchange

Carbon credits allow companies and individuals to offset their greenhouse gas emissions by investing in projects that reduce carbon dioxide and other global warming gases. A credit represents one metric ton of reduced, avoided or removed carbon dioxide emissions and is traded as a commodity in the global market. A company or individual can buy these credits to offset their own carbon emissions, or they can invest in companies that generate, trade or manage carbon credits. There are also ETFs that track carbon credit stocks, providing exposure to the market without having to buy individual stocks.

The current voluntary carbon credit exchange markets are characterized by low liquidity and inefficient trading, with suppliers struggling to meet demand for high-quality credits. The reason is that the market is highly heterogeneous, with each credit having a different set of attributes – from the type of underlying project to the location – and buyers value these additional attributes differently. In addition, the industry lacks a consistent way of verifying and confirming the quality of carbon credits.

With global emissions rising, governments and businesses are under increasing pressure to lower their emissions, and many of them want to do so using carbon credits. As a result, the market for these carbon credits is growing rapidly and is increasingly being used to support clean energy investments, as well as environmental initiatives.

Carbon Credit Exchange Stocks

While the majority of carbon credit trading occurs in private conversations and over-the-counter deals, some exchanges have emerged to connect supply with demand. These include the New York-based Xpansiv CBL and Singapore’s AirCarbon. The two platforms use distributed ledger technology to facilitate trading and settlement, and both are seeking to become the Brent of carbon.

Both platforms are looking to establish standardized products for carbon trading, where credits that have been verified to certain standards are bundled into portfolios of hundreds or thousands of verified issued carbon credits and sold to end buyers. In the case of a reforestation product, for example, traders would purchase bundles of credits from multiple forestry projects in different regions to provide diversity and help them meet their buyer’s requirements.

This approach aims to address many of the issues that plague the voluntary carbon market. Standardized products would ensure that credits adhere to specific quality thresholds, and they could be traded in a more efficient way by facilitating price discovery. In addition, they would help to streamline the process of matching buyers with corresponding suppliers and providing information for risk management.

To develop an exchange like this, you need a robust platform that can support a range of asset types and trading functionality. The platform must be designed to scale to accommodate the growth of new assets, as well as the changing needs of market participants over time. Discover how Nasdaq Marketplace Services Technology can support your exchange’s evolving needs.