Carbon Credit Exchanges

Carbon markets are a key component of climate action, but they have also been criticized for their lack of transparency and robustness. Voluntary carbon markets could help companies and individuals meet their climate commitments while creating new opportunities for businesses and investors, but only if they can be built on a strong foundation. Project developers set up carbon projects that are designed to reduce greenhouse gas (GHG) emissions, often by developing clean energy or restoring nature. These can range from large-scale industrial projects, like a wind farm or hydro plant, to community-based projects, such as cleaner cookstoves.

The market is a competitive environment, so project developers need to be transparent and consistent in their reporting, both on project design and the volume of credits they emit. It is also important for them to be transparent about their costs, because this helps buyers determine whether they are getting a good value for their money.

The end market is made up of carbon credit exchange businesses and individuals that have committed to offset some or all of their GHG emissions through purchasing carbon credits. These include airlines, oil and gas firms, and some major global corporations that have net-zero targets or are looking for an alternative way to hedge against carbon emissions.

What Does Carbon Credit Exchanges Do?

Brokers, usually NGOs or project developers, buy and sell credits from retailers trading on carbon credit exchanges, and then market them to end buyers. This type of broker typically works for a fee. They may or may not be able to offer impartiality about the quality of the credits they are selling, because they have a vested interest in maximizing their profit margins.

Carbon markets are designed to allow companies and countries to voluntarily offset their greenhouse gas emissions. This is accomplished through the trading of carbon credits, which are measurable, verifiable emission reductions from climate action projects that reduce, remove or avoid GHG emissions. A carbon market can be a voluntary system (think: companies that have net-zero targets) or part of a regulatory framework.

Projects are issued with a certificate that demonstrates that they have met certain standards and have reduced or removed GHG emissions. This certification is usually from an NGO or other recognized standards organization. There are many factors that influence the price of carbon credits. Some of these include the type and quality of the underlying project, its age, and a range of other factors that are specific to each credit.

The price of a carbon credit can be difficult to determine, even for experts. That’s why it’s critical to find an exchange that can be trusted to accurately and transparently represent the real value of a given carbon credit. Xpansiv CBL and ACX, two of the largest carbon exchanges in the world, have set up standard products for nature-based credits to make the trading process easier. These include the Nature-based Global Emission Offset (N-GEO) and the Global Nature Token on Xpansiv CBL, and the AirCarbon Exchange’s Global Nature Credit on ACX.

These standard products help ensure that all projects are in compliance with certain basic criteria and that their prices reflect the actual market value. This helps to ensure that consumers of carbon credits can make informed decisions about which projects are the most sustainable, and which aren’t.