Whether you’re a company looking to offset your carbon footprint or an individual seeking to reduce your own emissions, the voluntary market for climate credits is a great option. However, there are a few important questions to answer before you dive in.

Carbon credits are a type of green market asset that represents one ton of CO2 equivalent (CO2e) removed from the atmosphere. These can be obtained through a variety of techniques, including forestry or industrial projects. The voluntary market has limited liquidity due to its heterogeneous nature. This lack of price transparency makes it difficult for buyers and sellers to find each other based on their specific requirements. In addition, the heterogeneity of the market can create a risk of money laundering.

In order to overcome these challenges, exchanges have created standard products that ensure the basic characteristics of credits are respected. This can reduce the number of variables that affect prices and improve trading efficiency.

A carbon.credit can be a result of many different activities, such as forestry, farming or industrial projects. Generally, these projects have been certified by a carbon verification entity to meet certain standards and generate a particular amount of greenhouse gas emissions reductions. The resulting credits can then be traded on an exchange for the benefit of end users or companies who are looking to offset their own carbon footprint.

The cost of a carbon credit can vary from a few cents per metric ton of CO2e for afforestation or reforestation projects to $100 or more for tech-based removal projects such as CCS. S&P Global Platts publishes 20 price assessments, with each one reflecting the most competitive credit for that category.

Carbon credits are issued to entities that have reduced their carbon emissions below a cap (known as an emissions limit or “cap and trade”) set by the regulatory market. These management teams then sell their excess credits on the corresponding compliance market, which is overseen by the regulator.

Xpansiv’s X-Trade platform is a marketplace for data-driven, ESG-inclusive commodities, such as carbon, renewable energy, and Digital Natural Gas. The company has a strong track record of hosting over 90% of the world’s voluntary carbon market transactions, and its X-Trade platform offers an intuitive and user-friendly environment for trading ESG-inclusive assets.

Creating an exchange that can trade carbon offsets requires a combination of high-quality technology and scalable infrastructure. The Nasdaq Carbon Exchange platform is designed to meet these challenges. It matches buyers and sellers of carbon credits based on multiple parameters, such as asset types, project type, order type, order validations, safeguards, and more.

It also has a wide range of features that help you grow your exchange and add new asset types as the industry matures. The scalable platform can quickly accommodate new projects and ensure you are always matched with the right sellers.