Nasdaq has introduced a groundbreaking technology aimed at securely digitizing the issuance, settlement, and safekeeping of carbon credits. This innovative offering will be made available to market infrastructures, registry platforms, and other global service providers.
The primary objective of this service is to foster the growth and institutionalization of global carbon markets.
Currently, the carbon credit market operates with bilateral trading and significant reliance on manual processes, limiting its scalability as the market progresses. This rigidity, combined with a lack of standardization in credit data, has hindered substantial capital inflows into the market.
Nasdaq’s Cutting-Edge Carbon Credit Digitization Technology
Executive Vice President at Nasdaq, Roland Chai, highlighted the need for flexibility, standardization, and connectivity in carbon markets. He further noted that:
“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.”
Nasdaq’s new technology will allow market operators and registries to create standardized digital credits and distribute them with full auditability throughout the transaction lifecycle.
- RELATED: The Carbon Credit Lifecycle
Nasdaq has also developed a carbon taxonomy framework that can readily incorporate new types of credit as the market expands. There will also be comprehensive APIs that will allow participants to seamlessly interact across the market.
Together, this will help establish a standardized, trusted ecosystem capable of attracting high-quality liquidity from a variety of investors.
Using smart contract technology, the service enables secure creation, processing, and management of rights linked to the underlying asset. By automating asset servicing and settlement procedures, the technology promises increased efficiency and transparency throughout the trade lifecycle.
Digitization and automation will ensure a comprehensive audit trail of credit ownership and retirement.
The issuance, settlement, and custody capabilities are adaptable to integrate with existing financial system architectures or operate as an independent platform. As such, it allows flexibility to connect with traditional payment networks and bilateral settlement options.
This enables infrastructure providers to continue serving conventional markets while tapping into growth prospects in carbon markets without paying for the substantial costs associated with major changes.
Additionally, Nasdaq offers infrastructure optionality that enables the technology to be deployed on either a centralized database or using private blockchain technology.
Partnership for Carbon Removal Excellence
Alongside the service launch, Nasdaq has unveiled a collaboration with Puro.earth, a prominent standards and registry platform specializing in engineered carbon removal.
Their partnership aims to register CO2 Removal Certificates (CORCs) and monitor the issuance, retirement, and transfer of these assets. The ultimate goal is to prevent duplication of carbon removal projects, ensuring complete traceability and transparency.
The game-changing technology will help propel the growth of voluntary carbon markets through a suite of APIs and standardized contracts.
Standardizing carbon credit contracts is crucial. This is particularly critical at this time when questions arise regarding the real climate impacts of projects generating these credits.
As per Antti Vihavainen, CEO of Puro.earth, accurate management of carbon credit lifecycle is critical in establishing trust. With Nasdaq’s new technology, their carbon crediting infrastructure will be modernized.
It was in February last year when Puro.earth launched Puro Registry in Nasdaq, a public registry dedicated to CORCs.
- READ MORE: NASDAQ’s Puro.earth Launch Carbon Registry
The new system will be accessible through the Puro Connect API, catering to carbon marketplaces and exchanges. It will also align CORCs with Article 6 of the Paris Agreement.
Puro.earth’s Puro Standard represents the first carbon removal standard tailored for engineered carbon removals within the VCM. It also includes top-tier carbon removal methodologies in line with the Intergovernmental Panel on Climate Change (IPCC) definition for carbon removal.
Certified carbon removals suppliers are verified by an independent third-party. Companies seeking to offset their carbon emissions can buy the CORCs directly from suppliers or through a third-party marketplace.
Nasdaq’s cutting-edge technology aims to transform carbon markets by offering digitized issuance, settlement, and custody for carbon credits.
The technology’s integration with Puro Connect API and adherence to IPCC guidelines sets a new standard for carbon removal within VCM. Nasdaq’s innovation paves the way for a dynamic, trusted ecosystem attracting diversified investors while modernizing the carbon crediting infrastructure for market growth.