Carbon Business
Carbon markets include various players, from carbon project developers to end buyers, each role plays different functions for the market. From the chart below, you can see the relationship among all parties in the carbon market ecosystem. You may click on each box to see more information on every role.
1. Project Developers:
Project developers are individuals or organizations who develop and manage carbon offset projects that are aimed to avoid, reduce, or remove GHG from the atmosphere.
2. VVBs:
Validation and Verification Bodies (VVBs) are independent third-party auditors who are experts in the program scope or technical area they audit. VVBs ensure the integrity and reliability of carbon offset projects by independently assessing the projects’ adherence to established standards through validation and verification process.
3. Registries:
Carbon registries issue carbon credit based on their own standards with monitoring, reporting and verification (MRV) on carbon projects conducted. In a complex carbon market, registries are essential for building trust between buyers and sellers, and for ensuring the quality and integrity of carbon projects. Examples are Verra, Gold Standard (GS), Climate Action Reserve (CAR), American Carbon Standard (ACR), Clean Development Mechanism (CDM), etc.
4. Brokers & Traders:
Both brokers and traders act as intermediaries, facilitating the buying and selling of carbon credits, usually in the over-the-counter (OTC) markets. They help manage the knowledge or market information gap between demand side and supply side, and they are crucial for the liquidity and price discovery in carbon markets. Examples are Welhunt, Southpole, etc.
5. Market Regulators or Platforms:
Market regulators or platforms include: 1) Marketplaces, a digital platform connecting buyers and sellers, e.g. Climate Impact X (CIX), Taiwan Carbon Solution Exchange (TCX); 2) Exchanges, a regulated venue for centralized, transparent, and often real-time trading, with clearing and settlement systems, e.g. Xpansiv, Carbon Trade Exchange (CTX; and 3) Derivatives developers, who create financial instruments to help market participants hedge risks, speculate or ensure future pricing certainty in carbon markets, e.g. ICE, CME Group.
6. Investors:
Investors allocate capital to carbon assets (either carbon credits or projects), to gain financial returns and/or to support climate goals and gain the ESG impact.
7. Governments:
Some governmental carbon levies include the use of carbon credits, like South Korea, Singapore, Taiwan, Vietnam. Besides, some governmental bodies also use carbon credits to offset their emissions.
8. Corporates:
Corporates are usually the end users of carbon credits in voluntary carbon markets. Many companies include carbon credits as one of the tools to achieve their climate goals. Examples include Microsoft, Shell, Delta, TSMC, etc.
9. Rating agencies:
Rating agencies assess the quality, integrity, and impact of carbon credits by evaluating factors such as additionality, permanence, leakage, and co-benefits to help buyers/investors to access the information of credits, reducing the risk of greenwashing and guiding investment decisions. Examples include Sylvera, BeZero, Calyx Global, etc.
10. Supply standardization:
It sets global standards to ensure quality and integrity of carbon credits in voluntary carbon market (VCM). One of the most well-adopted supply standardizations is the Core Carbon Principles (CCPs) set by Integrity Council for the Voluntary Carbon Market (ICVCM).
11. Demand standardization:
It provides guidance on the credible use of carbon credits by companies and other non-state actors. One of the most well-known demand standardizations is the frameworks set by Voluntary Carbon Markets Integrity Initiative (VCMI), VCMI Claims Code of Practice.