US Have Carbon Credit Exchanges
In markets with Cap & Trade regulations, management teams are issued a set number of emissions allowances (or credits) to offset their emissions. As companies or organizations reduce their greenhouse gas emissions below this limit, they may then resell the credits in the corresponding compliance carbon market.
There are also a range of non-government backed schemes, such as the Woodland carbon credit exchange and Peatland Code, that have a similar approach to offsetting emissions. Landowners can participate in these schemes, and sell the credits that their farming has generated through a third-party certification process.
Voluntary market – largely unregulated by governments, voluntary markets rely on a set of standards to oversee the integrity of the carbon credits that are traded. Leading bodies that validate credits include Verra, Gold Standard, Climate Action Reserve and the American Carbon Registry.
Does the US Have Carbon Credit Exchanges?
Credits are issued to project developers after they have met stringent rules set by governments or independent certification bodies and then verified by a third-party auditor. These standards typically include accounting methodologies specific to the type of project, independent auditing and a registry system. These standards often ensure that the credits have a high level of quality. They are critical to avoiding accusations of greenwashing, and reducing the risk that buyers will be purchasing credits they can’t use to meet their climate goals.
Buying carbon credits is one way for companies to help meet their climate goals, but the new voluntary market is still in its early stages, according to London Stock Exchange head of sustainable finance Joanne Dorrian. It will take some time for companies and funds to raise the money needed to buy those credits, she said.
With growing pressure on climate change, more and more businesses are pledging to offset their greenhouse gas emissions. But for many, it is too difficult to eliminate all their emissions or cut them down to a sustainable level. One way for companies to do this is by purchasing carbon credits, also called carbon allowances. These are issued by regulators under a cap-and-trade system and allow businesses to emit up to a certain amount of CO2e (carbon dioxide equivalent) that year.
A company can then sell those credits to another business or individual. This process is called “permit trading.” There are two markets where carbon credits can be purchased: a regulated market, which is controlled by regulations such as cap-and-trade programs; and a voluntary market, where businesses and individuals can purchase carbon offsets of their own accord.
These two markets are connected by brokers and retail traders who bundle carbon credits together into portfolios. These portfolios then sell them to end buyers, usually with some commission. While most of these transactions are happening in private conversations and over-the-counter deals, some carbon exchanges have started to emerge. These exchanges have the potential to become global marketplaces for the trading of carbon credits, similar to the oil and gas industry.
