Exchange operator Nasdaq has launched technology that securely digitises the issuance, settlement, and custody of carbon credits.
Nasdaq says it will provide the technology to market infrastructures, registry platforms, and other service providers globally as it works to support the development and institutionalisation of global carbon markets.
Despite being a relatively young market the carbon credit operating model is characterised by bilateral trading and a heavy reliance on manual interaction, providing limited ability to scale as the market develops.
Nasdaq is aiming to allow market operators and registries to create standardised digital credits and distribute them with full auditability throughout the transaction lifecycle.
The firm has also developed a carbon taxonomy framework that can incorporate new types of credit as the market evolves, along with a set of APIs that will allow participants to interact across the market.
The service will tap smart contract technology, allowing customers to create and process rights, obligations, and other information relating to the underlying asset. The issuance, settlement, and custody capabilities can be integrated with existing technology architectures used across the financial system, or deployed as a standalone platform.
Roland Chai, EVP, head of marketplace technology, Nasdaq, says: “Fragmented technology choices in the trading and settlement of carbon credits has prevented the carbon industry from growing and maturing as an asset class. A lack of system flexibility, standardization, and connectivity has made it challenging for critical infrastructure providers and institutional investors to access the market in a meaningful way.
“Bringing institutional grade technology to underpin the market will drive ever-greater liquidity across carbon marketplaces and open the possibility of greater interoperability between registries in the future.”
Alongside the new service, Nasdaq has teamed up with Puro.earth, a standards and registry platform for engineered carbon removal, to register CO2 Removal Certificates, or CORCs. The registry tracks the issuance, retirement, and the transfer of the assets, providing traceability and transparency to avoid double counting carbon removal projects.