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Are Carbon Credit Exchange Still Being Used?

As governments and companies work to meet climate change goals set out by the Paris Agreement, they are also taking steps to reduce their emissions. One way to do this is through the use of offsets - which are credits purchased by businesses or individuals to help compensate for their carbon emissions.
These offsets can be from forestry and renewable energy projects, or technology-based removals such as CCS. They are backed by independent standards, developed by NGOs and market participants, to ensure that the credits being sold are authentic and can be used for offsetting purposes.
The voluntary carbon market (VCM) is growing rapidly. It is fueled by corporate net-zero goals and global environmental concerns. However, the VCM has many problems that can impede its growth. These include:
Heterogeneity in
carbon credit exchange
⁠
can create confusion, lead to a lack of price transparency and undermine confidence in the market. It can also result in inaccurate attribution of impact and demand-supply imbalances, according to a McKinsey report.
Verification of credits is a challenge too, as accounting and verification methodologies differ between project types. It also makes it difficult to identify and verify the co-benefits that are promised when credits are issued.
These co-benefits may include social and/or environmental benefits that are in line with the United Nations Sustainable Development Goals (SDGs). They could be as simple as helping a local community to develop or as complicated as promoting biodiversity conservation.
Several ways to overcome these challenges can be adopted, such as:
Establishing a digital process for registering and verifying credits would lower issuance costs, shorten payment terms, accelerate credit issuance and cash flow for project developers, and help to trace the impact of credits.
It can also help to improve the credibility of companies using offsets, as it would allow them to track the impact of their projects more frequently.
A digital approach also could improve the accuracy of attribution of impact and make it easier to prove that credits are legitimate, said the GHG Management Institute.
Determining the legitimacy of a carbon project is a complex process and can be a difficult task for regulators and investors. It involves evaluating the project's feasibility, assessing its impact, identifying the environmental, social and economic benefits, and establishing whether it meets relevant legal requirements.
Other factors that may influence a project's value include the volume of credits traded, geography and vintage. For example, a reforestation project that helps the environment will often trade at a premium to a project that is more focused on reducing CO2 emissions.
A new Singapore-based platform, Climate Impact X (CIX), is being launched by DBS Group, Standard Chartered and Temasek to facilitate the sale of high-quality carbon credits from projects that conserve, restore and protect natural ecosystems. It will use satellite monitoring, machine learning and blockchain to promote transparency, integrity and quality of the credits.
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