Exchange operator Nasdaq has introduced technology designed to securely digitize the issuance, settlement, and custody of carbon credits.
Nasdaq plans to offer this technology to market infrastructures, registry platforms, and other global service providers as part of its efforts to support the development and institutionalization of global carbon markets. Despite being a relatively nascent market, the carbon credit operating model is primarily characterized by bilateral trading and a significant reliance on manual processes, which limits scalability as the market evolves.
The goal is to empower market operators and registries to create standardized digital credits and distribute them with complete auditability throughout the transaction lifecycle. Nasdaq has also developed a carbon taxonomy framework to accommodate new types of credits as the market progresses, along with a suite of APIs enabling participants to engage across the market.
The new service will utilize smart contract technology, allowing clients to create and manage rights, obligations, and other information pertinent to the underlying asset. Issuance, settlement, and custody capabilities can be integrated with existing technology architectures in the financial system or utilized as a standalone platform.
Roland Chai, EVP and head of marketplace technology at Nasdaq, stated that the fragmented technological landscape in trading and settling carbon credits has hindered the industry’s growth and maturation as an asset class. He emphasized the challenges posed by a lack of system flexibility, standardization, and connectivity, which have impeded critical infrastructure providers and institutional investors from effectively accessing the market.
Bringing institutional-grade technology to the forefront is expected to enhance liquidity across carbon marketplaces and pave the way for increased interoperability between registries in the future. Additionally, Nasdaq has partnered with Puro.earth, a standards and registry platform for engineered carbon removal, to register CO2 Removal Certificates (CORCs). This registry tracks the issuance, retirement, and transfer of these assets, ensuring traceability and transparency to prevent double counting of carbon removal projects.