The carbon credit exchange market is growing as businesses and individuals seek ways to reduce their carbon footprint. There are multiple players in the space, including brokers and project developers. Some even act as traders and financiers. The top six carbon credit exchange platforms provide an array of services, from aggregating demand to providing an avenue for businesses to meet their regulatory requirements.
The current carbon markets are a complex ecosystem of buyers and sellers, including large energy companies, banks, and investors. The supply side is regulated by standards agencies that define projects and verify compliance. These include established entities such as the American Carbon Registry, Climate Action Reserve, and Gold Standard. These are nongovernmental organizations that host credit registries, and earn revenue from the offsets they recognize. In addition to these private standards agencies, some governmental bodies have set carbon pricing policies and established credits as an official currency in their countries.
carbon credit exchange platforms are an important tool for the overall efficiency and transparency of the carbon market. They facilitate two-way trading, aggregate carbon market liquidity, and make it easier for buyers and sellers to identify the best available options. Whether they are designed for buyers and sellers, or for the broader industry, these platforms can be used to reduce costs, improve the quality of the carbon offsets, and increase liquidity.
One of the main challenges to carbon credit trading is the complexity of the transaction process. In addition to the fact that buyers and sellers must agree on the price of an offset, they must also determine whether or not it is eligible under the country’s carbon allowance rules. This is a crucial step in ensuring that the carbon offsets comply with regulations.
There are two main types of carbon credit markets: voluntary and regulated. The latter adheres to strict rules and is usually governed by laws and regulations. This type of market is the largest in Europe, accounting for over half of the global market value. It is a result of investment in clean power generation and electrification, as well as industrial growth across the region.
The AirCarbon exchange (ACX) is an innovative platform that uses distributed ledger technology (DLT) in a traditional commodities market framework. Its goal is to securitize carbon credits around market demand, allowing more traders to gain exposure to the asset class. Its initial focus was CORSIA, the carbon offsetting and reduction scheme for international aviation.
This platform allows participants to buy and sell Verra certified emissions reductions (VER), also known as carbon credits, in lots of 100 tonnes of CO2e equivalent. The platform also offers a variety of other products, such as Emissions Trading Scheme (ETS) credits, CDM, and Kyoto Protocol Reference Credits. The CTX is expanding rapidly and currently operates in the UK, Australia, and Europe. The company plans to launch in Africa soon. The company’s early customers include oil and gas companies, airlines, and finance firms. Increasingly, these companies are making net-zero commitments and will need a mechanism to actualize them.