6 Carbon Credit Exchanges (and Why Number 4 is the Best)

Georgette Kilgore headshot, wearing 8 Billion Trees shirt with forest in the background.Written by Georgette Kilgore

Carbon Offsets Credits | October 13, 2022

Carbon credit exchange circular motion graphic showing money being changed into trees, being changed into carbon credit tokens, which is being delivered to a industry complex.

The carbon credit exchange platform is emerging as carbon trading gains popularity among consumers and businesses.

And the carbon market is growing for a reason.4 It provides excellent tools for organizations seeking to reduce their carbon footprint and comply with both voluntary and mandatory emissions regulations.

Check out these top 6 carbon credit exchanges.

Top 6 Carbon Credit Exchanges

1

Carbon Trade Exchange

This exchange gathers multiple players under one service.

2

Xpansive

This exchange has evolved to incorporate new technology.

3

Toucan Protocol

The German-based exchange is determined to make DeFi work.

4

AirCarbon Exchange

This exchange is the best for its versatility.

5

Carbon Expert Romania

This exchange is located Romania.

6

Texas Climate and Carbon Exchange

This exchange is like everything Texas does…BIG.

But, what’s the best carbon credit exchange to use? This guide examines the best six exchanges and explains why number 4 is the current best of the bunch.

1
Carbon Trade Exchange (CTX

Benefit #1: One of the early participants in the global carbon market, the Carbon Trade Exchange (CTX), has its headquarters in London, England. In contrast to previous carbon exchanges, CTX is a member-based spot exchange that welcomes a wide range of market players.
Benefit #2: Single brokerages and project developers to multinational conglomerates can use the platform. CTX provides other services in addition to carbon exchange facilitation.
Benefit #3: The three main methods are carbon footprinting, carbon offsetting, and developing low-carbon projects.
Rating: 5 out of 5

2
Xpansive

Benefit #1: In 2019, Xpansive, based in the United States, helped form the Australian platform CBL. The company's CBL division is the largest spot exchange for environmental, social, and governance (ESG) commodities.
Benefit #2: Its popularity with investors has resulted in $178.5 million in funding over seven funding rounds. Carbon, Renewable Energy Certificates, and Digital Natural Gas are some examples.
Benefit #3: Customers of Xpansiv's CBL platform can buy and sell carbon offset projects from various international registries.
Rating: 5 out of 5

3
Toucan Protocol

Benefit #1: The Toucan Protocol was founded in Berlin, Germany, in 2020. It creates the foundation for carbon markets to fund climate crisis solutions.
Benefit #2: Since that time, it has raised $7.5 million in investment. Its goal is to establish programmable carbon as a new kind of money to make DeFi (decentralized finance) functional.
Rating: 5 out of 5

4
AirCarbon Exchange (ACX)

Benefit #1: In 2019, Singapore became home to AirCarbon Exchange, a digital exchange platform where airlines may buy and sell carbon credits. Through three separate funding rounds, the company has secured $3.6 million.
Benefit #2: Deutsche Borse provides the funding for this carbon swap.
Benefit #3: To date, ACX has worked with over 130 different companies. Businesses, investors, stockbrokers, and those working on carbon projects all fall under this category. This carbon exchange implements DLT in an established commodities market framework.
Benefit #4: Similarly, it uses the most up-to-date blockchain technology to produce carbon credits that can be traded like stocks.
Rating: 5 out of 5

5
Carbon Expert Romania

Benefit #1: Carbon Expert Romania is headquartered in Bucharest, Romania. The Exchange provides in-depth knowledge of ETS trading and voluntary emissions markets, as well as the mechanics and trends of worldwide carbon markets.
Rating: 5 out of 5

6
Texas Climate and Carbon Exchange (TCCX)

Benefit #1: Texas Climate & Carbon Exchange (TCCX) uses CTX's electronic platform to facilitate transactions as a worldwide carbon credits trading network. Its headquarters are in Austin, Texas.
Benefit #2: In addition to trading voluntary carbon credits, the Exchange also trades California compliance credits.
Benefit #3: With the platform, businesses can easily connect with buyers and sellers of credit all around the globe in a transparent, quick, and simple way. TCCX continually expands its membership and range of credit offerings, making it a dynamic and multifaceted marketplace.
Rating: 5 out of 5

Why Number 4 Is the Best?

AirCarbon Exchange is the best because it’s the simplest, most streamlined carbon exchange system. It makes learning how to invest in carbon credits easy and fast.

Related Reading: How to Buy Carbon Credits in 3 Easy Steps (Guide to Buy Carbon Offsets)

Carbon Credit Trading Companies

Trading carbon credits is a growing industry; traders on both ends of the market seek the best carbon exchanges. If you are curious about which ones they are, here are the a few of the best carbon offset companies:

  • QED Environmental Systems
  • Newterra, Ltd
  • Numerco
  • Gen10
  • Climex

Carbon Credit Trading Blockchain

Among the first examples of blockchain’s potential for social good was the tokenization of Carbon credit exchange in 2017.6 There have been many firms that have taken different approaches to the establishment of digital carbon markets.

However, many have failed to gain traction, are still in the prototype stage, have undergone a pivot, or exist just in white paper form.

A photo of a table that shows graphs of cryptocurrency value and beside it is a smartphone and white tea cup.

Carbon credits do not accurately represent their genuine environmental impact, generating demand-supply imbalances. This is because of fragmented implementation, a lack of cross-market interchange of value, and erroneous parameterization of the carbon ratio of specific projects.

As a result, it has led to carbon credit hyperinflation, neither encouraging responsible conduct among emitters nor fostering confidence in carbon credit markets.

Carbon Credit Market

To reduce emissions of greenhouse gases, businesses may buy “carbon credits” as a kind of currency. Governments or regulatory bodies often establish caps on emissions of greenhouse gases.

It may not be cost-effective for certain businesses to begin immediately cutting emissions. As a result, they may buy carbon credits to bring their emissions in line with the limit. And many companies and individuals invest in carbon credit stocks.

Carbon credits are often given as incentives to businesses undertaking carbon offsets (cutting GHG emissions). Excess credit sales might fund emission reduction initiatives in the future.

The Kyoto Protocol legitimized the use of such credits. They are recognized as a simple tool in climate change mitigation, and the Paris Agreement establishes the rules for expanding the development of carbon credits markets.

Carbon Markets

Carbon markets are online exchanges where carbon credits may be purchased and traded. It is generally accepted that one ton of carbon dioxide or its equivalent in another greenhouse gas reduced, stored, or avoided is equivalent to one trading carbon credit. Generally speaking, carbon markets may be categorized into two basic categories: compliance and voluntary.

Carbon Trading Companies Stock

Many individuals advocate for a quick shift away from carbon-intensive electricity production. Of course, this change does not occur instantly.

Consequently, several countries have implemented carbon credit systems. Many are pondering the best way to put money into carbon credit equities.

Carbon credits may be obtained in two ways: by reducing a company’s own carbon emissions or by purchasing credits from businesses that have generated more than they need. This provides a method through which they may achieve emission reduction goals without cutting their carbon output.

Related Reading: Carbon Credit ETFs: Highest Yield Carbon Stocks (Updated 2022)

Carbon Credit Trading Platform

Based on the underlying infrastructure, the market for carbon credit trading platforms may be broken down into the cap-and-trade system and the foundation and credit system. A cap-and-trade system aims to reduce emissions, which is accomplished by capping emissions overall. Participants may bid on or get free emission permits with an emission reduction goal in mind.

Permit trading between market players and the limited number of available permits establishes a carbon price. Emissions are not capped under a baseline and credit system, but polluters may earn “credits” to sell to others if they cut their emissions more than necessary.

The market for Carbon credit exchange platforms may be broken down into two submarkets: voluntary and regulated carbon. The carbon market that must adhere to regulations is called the compliance carbon market.

Carbon reduction regimes at the national, regional, or worldwide levels are responsible for creating and regulating these markets. In contrast to compliance markets, voluntary carbon markets allow businesses and people to buy carbon offsets for non-mandatory uses voluntarily. Voluntary offset credits are less expensive since they can’t be utilized in compliance markets.

Global Carbon Credit Market Size

The anticipated growth rate for the carbon offset and carbon credit markketplace from 2021-2028 is -0.81%, from an expected $US 203.22 million in 2021 to $ 192 million in 2028.

Carbon offsets are reported in terms of the number of metric tons of carbon dioxide-equivalent, which can stand in for any of six different types of greenhouse gases. These also impact the carbon credit price chart.

GasFormula
Sulfur hexafluorideSF6
HydrofluorocarbonsHFCs
Carbon dioxideCO2
MethaneCH4
PerfluorocarbonsPFCs
Nitrous oxideN2O

When one metric ton of carbon dioxide or its comparable in other greenhouse gases is reduced, it results in one carbon offset.

Carbon Credit ETF

The importance of the broader investing community in pursuing net-zero objectives is becoming clearer by the day.5 Exchange-traded funds (also called carbon credit ETF) have made this possible.

Global investors may help shift the economy to one with less greenhouse gas emissions and more support for business innovation and sustainability by purchasing these exchange-traded funds (ETFs). Not to mention the upside of including carbon allowances, offsets, and credits in a portfolio.

It is well known that the environmental commodities markets move according to their unique supply-and-demand dynamics and show very low correlations to other asset classes.

CIX Carbon Exchange

At the Exchange, buyers and sellers can conduct business in standardized carbon contracts in real time. The infrastructure will be built with speed, security, and scale. Because of this, it is highly recommended for institutional investors, brokers, and traders who need to trade liquid, standardized contracts without the danger of exposure to counterparty risk.

Carbon Credit Price Chart

Screenshot of a graph from HIS Markit that shows the increasing value of HIS Markit Global Carbon Index.

(Image Source) Global Weighted Average Carbon Credit Price.8

Carbon Credit Price per Ton

Carbon credit prices are often lower than the $40–$80 per metric ton of carbon dioxide released called for by the Paris accord to prevent global warming below 2 degrees Celsius.

Carbon Credit Price per Acre

These days, many carbon markets are attractive to many landowners—from large corporations to individual homeowners. If landowners are interested in participating in a carbon market, their decision will be heavily influenced by the current annual price of carbon.

In a meta-analysis of several studies, researchers found that landowners were willing to accept an annual rate of $21.60 per acre in Exchange for carbon storage. Forestry experts should consult with landowners to determine whether and how carbon management may be included in existing plans.

Carbon Credit Price Index

If you are interested in the worldwide carbon credit exchange market, you may use the Global Carbon Index, the first globally focused benchmarking and investable index of its kind. The IHS Markit Global Carbon Index reflects the most actively traded futures contracts for carbon credits. Futures contracts are a component of the Global Carbon Index.

From fixed-income and credit derivatives to stocks in the United States, Europe, Asia, and developing markets, IHS Markit is a leading source of indexes around the globe.

How To Invest in Carbon Credits ETF

The retail sector of voluntary carbon markets is still in its infancy at the time of writing. Companies and large institutions have more options since they may deal directly with carbon offset projects and similar enterprises. However, there are a few entry points for private investors into the carbon markets, including;

  • Carbon mutual funds ETFs
  • Green companies
  • Carbon credits futures
  • Company watchlist

Carbon Credit Stocks

It may be years before a highly controlled global carbon market is established, although the Article 6 agreement at COP26 established the basic basis for one. It’s also unclear how it will connect with the present regulatory and voluntary carbon markets when it does. Will it coexist alongside already-established needs or integrate with them?

Here are the major carbon credit stocks;

  • Kraneshares Global Carbon Strategy ETF
  • Brookfield Renewable Partners
  • Carbon Streaming Corporation

Companies Investing in Carbon Credits

When meeting net zero and carbon neutral objectives, businesses of all sizes face an uphill struggle, but carbon credits can help mitigate inevitable greenhouse gas (GHG) emissions. Carbon offsets may be the only option to mitigate the ecological effects of activities without effective low-carbon options, such as shipping and air freight.

Companies in many industries have opted to engage in carbon offsets for these and other causes. They include shell, General Motors, Microsoft, Disney, Honeywell, JetBlue, and many others.

Carbon Credit Investment Funds

A carbon credit investment fund is an innovative funding technique that assigns a monetary value to carbon emissions. It allows businesses who want to offset their emissions to purchase carbon credits generated by sustainable initiatives. This enables the funding of innovative initiatives that deliver sustainable energy options to people in underdeveloped nations worldwide.

Are Carbon Credits a Good Investment?

Yes. Carbon credits may become more popular as efforts to decarbonize the global economy ramp up.2 However, various variables may make mobilizing and bringing the total potential supply to market difficult. Because accounting and verification procedures differ, high-quality carbon credits are limited.
A cartoon photo that shows a satellite scanning the ground while people below it are clueless.

Scaling up carbon markets needs a new action plan. The buyer-supplier pairing would be more effective if all credits could be characterized using similar characteristics.

Carbon Credits Stock Price

In today’s markets, the value of a single carbon credit ranges from a few cents per ton of Carbon emissions to $15/mtCO$300/mtCO2e or even $20/mtCO2e for reforestation or afforestation initiatives to $100 or even $300/mtCO2e for technology-based removal works like CCS.

Best Carbon Credit ETF

The KraneShares Global Carbon Strategy ETF KRBN, with $922.62M in assets, is the largest ETF for carbon credits. The carbon credits ETF with the best performance over the most recent trailing year was GRN (25.77%).

Carbon Credit Market Price

The commercial sector is becoming more conscious of the actual worth of natural capital,3 such as a predictable climate and healthy ecosystems, as well as advancements in social metrics like bettering health and gender equality. Regarding the environment, Swiss retailer Coop sets an internal price on carbon at CHF 150 (approximately $150) to encourage investment and creativity in emissions-reduction initiatives that are Gold Standard-certified and benefit people in their distribution networks.

Carbon Credit Market Growth

The carbon credit market is anticipated to expand by 2027 at a CAGR of roughly 31%, reaching a valuation of $2.4 trillion. The market was worth $211.5 billion in 2019. The considerable rise is due to the continued emphasis on businesses reducing their carbon emissions and to the possibility of mandates from various nations.

Types of Carbon Credits

Carbon credits come in two varieties;

Voluntary Emissions Reduction (VER)

A carbon balance is traded for credits in the open market or voluntarily.

Certified Emissions Reductions (CER)

These are emission units (or credits) made possible by a legal framework to balance the emissions of a project. The primary distinction between the two is that, compared to the VER, the CER is governed by an independent certifying authority.

Carbon Credit Market Cap

According to Refinitiv analysts, the price of traded global markets for carbon dioxide (CO2) permits increased by 164% to a record $851 billion last year. The majority of the rise was attributed to the Emissions Trading System (ETS), the most developed carbon market in the world, which was introduced in 2005.

Carbon Markets: PDF

Many carbon credit brokers use PDF sheets to explain investments and highlight green companies to invest in. Governments all around the globe have developed carbon markets, allowing for the trading of emissions (or emissions reductions) from one organization to another. Theoretically, it makes no difference who buys or sells when it comes to the environment as long as we manage the overall quantity of carbon sold in the market.

Creating a worldwide, or even national, carbon market is a difficult challenge in practice. There are high chances that the systems have flaws, which might make this strategy have little to no effect on decreasing fraud.

Investing in Carbon Markets

While carbon credits are exchanged through a government-based auction system and a limited market, they are regulated in Europe under a system known as the European Union Emissions Trading System. Because of this, there are not many efficient ways to invest in carbon credits. This structure is still more of a regulation suggestion than in use.

If you are an investor, there are a couple of different approaches to investing in carbon credits,1 including individual stocks, Exchange-Traded funds, and futures and purchasing carbon offsets.

Carbon Markets COP26

The transfer of carbon reductions between nations is supported by new market mechanism treaties signed at COP26, which also encourage private sector investment in climate-friendly solutions. Parallel to this, the parties resolved on non-market strategies that will allow for deeper international collaboration on mitigation and adaptation.

List of Carbon Markets

The cost-effective reduction of global greenhouse gas emissions may be largely attributed to international carbon markets. Increasingly more countries are implementing carbon trading schemes. Besides the EU ETS, national or sub-national networks are already in place or progressing in Canada, China, Japan, New Zealand, South Korea, Switzerland, and the United States.

Carbon Market Compliance

Carbon markets operate under both obligatory (compliance) systems and voluntary initiatives. Compliance markets are developed and controlled by mandated national, regional, or global carbon reduction systems. Voluntary markets operate independently of compliance markets and allow businesses and individuals to buy carbon offsets freely without planning to utilize them for compliance requirements.

In some cases, voluntary, unregulated organizations may acquire compliance offset market credits. However, voluntary offset carbon credit exchange credits are not permitted to satisfy compliance market demand until they have been officially admitted into the compliance regime.


References

1Australian Government. (2021, December 08). About Carbon Markets. Clean Energy Regulator. Retrieved September 28, 2022, from <https://www.cleanenergyregulator.gov.au/Infohub/Markets/Pages/About-Carbon-Markets.aspx>

2Australian Government. (2022). How You Can Benefit. Climate Solution Funds. Retrieved September 28, 2022, from <https://www.cleanenergyregulator.gov.au/csf/how-you-can-benefit/Pages/how-you-can-benefit.aspx>

3Department for Business, Energy & Industrial Strategy. (2013, October 07). Carbon Valuation. Energy and Climate Change: Evidence and Analysis. Retrieved 2022, from <https://www.gov.uk/government/collections/carbon-valuation--2>

4U.S. Department of Agriculture. (2022). Carbon. United States Government. Retrieved September 28, 2022, from <https://www.usda.gov/oce/energy-and-environment/markets/carbon>

5U.S. Securities and Exchange Commission. (2021, December 15). Registration Statement. Carbon Offsets Climate ETF. Retrieved September 28, 2022, from <https://www.sec.gov/Archives/edgar/data/1174610/000168386321007205/f10486d1.htm>

6The White House. (2022). Climate and Energy Implications of Crypto-Assets in the United States. Crypto Assets and Climate Report. Retrieved September 28, 2022, from <https://www.whitehouse.gov/wp-content/uploads/2022/09/09-2022-Crypto-Assets-and-Climate-Report.pdf>

7First Global Index for the Price of Carbon Credits. (2019, September 26). pv Europe. Retrieved September 28, 2022, from <https://www.pveurope.eu/financing/first-global-index-price-carbon-credits>

8IHS Markit. (2022). IHS Markit Global Carbon Index [Graph]. IHS Markit. Retrieved October 06, 2022, from <https://ihsmarkit.com/products/global-carbon-index.html>