Carbon Credit Craigslist vs. Exchange

The current system of separate carbon offset registries is about to give way to the normal market evolution from Craigslist-like single-purpose registries to multi-purpose/product environmental asset exchanges. The transition from barter to true markets of exchange has been seen throughout history as a natural and proper evolution so that markets can grow, be compliant, enable risk management, and serve their ultimate purpose — a transparent and efficient market for all participants.

Buying and Selling Process — the present inefficient process of buying and selling of credits is a major hindrance to the growth and development of the environmental asset markets (e.g., carbon credits). Currently, an entity wishing to purchase carbon credits must review credit listings on a registry such as Verra, then contact the owner of the credits separately to negotiate a transaction. If the buyer and seller agree on a price, the buyer must trust that the seller will inform the registry of the exchange and that the seller has not previously sold the credits in question (i.e., there is no double selling). This means carbon credit purchasing involves interfacing with three separate entities: the registry, the owner of the credits, and the financial institution through which the funds are transmitted.

This Craigslist-like system in which one must leave the listing platform to independently negotiate and transact requires the transfer of funds to take place separately from the transfer of offsets, making the process of buying and selling carbon offsets time-consuming and inefficient. This limits the liquidity of the carbon credit market and makes it difficult for buyers and sellers to find each other, hindering the growth and development of the market.

In addition, incumbent carbon offset registries typically have no means of recognizing credits issued through other organizations, making it difficult for buyers to access a diverse range of carbon credits and limiting the opportunities for market participants to diversify their portfolios. This reduces the efficiency of the carbon credit market, increases the risk of fraud and mismanagement, and makes it more difficult for buyers and sellers to participate in the market.

Capturiant is solving this problem by bringing exchange and registry functions under one roof. By integrating an exchange and registry into a single platform, buyers and sellers will be able to directly transact in carbon credits and transfer funds associated with those credits on a single platform, reducing the time, cost, and uncertainty of transactions, and improving the efficiency of the market as a whole.

Furthermore, as a combined exchange and registry, Capturiant will create a process for listing credits issued by a range of approved organizations, making it easier for buyers to access a diverse range of carbon credits, reducing the risk of fraud and mismanagement, and enabling broader market exposure for credit issuers or project developers. By creating a single source of truth for the carbon credit market, a combined exchange and registry will improve the efficiency, transparency and security of the carbon credit market, making it easier for buyers and sellers to participate in the market.

The current system of multiple Craigslist-like carbon credit registries holds back the growth and development of the carbon credit market, and thus efforts to reduce greenhouse gas emissions. Capturiant’s single-platform approach is creating a more efficient, transparent, and secure carbon credit market. When trading carbon credits is easier for buyers and sellers, the market can only grow.

Capturiant is a global environmental asset validator, registry, and exchange committed to speed, quality, and regulatory standardization. The Capturiant team consists of financially regulated and highly experienced staff, fluent in securities, banking, custody, valuation, commodities, and digitalization. With this skillset, we are bringing standardized methodologies, rapid processing, and lower-cost validation to an inefficient and outdated industry. Credits are digitized and custodied on the Capturiant platform, enabling global transactions. Capturiant’s business model leverages distributed ledger technology and warranty coverage to greatly enhance the trust, transparency, quality, tracking, distribution, retirement, and risk management of credits and ESG instruments. Our process and compliance expertise provides exactly the level of trust and transparency issuers, investors, buyers, and sellers need throughout the entire ESG sector and asset class. Capturiant is headquartered in Houston with branch offices to be established in Zurich, Abu Dhabi, and Nassau.

This article was written by James C. Row, CFA, and Will Baird