In an insightful discussion with Finextra, Hirander Misra, the Chairman and CEO of GMEX Group and head of its carbon tracking subsidiary, ZERO13, explored the intricacies and potential of the carbon market.
Misra founded ZERO13 after recognizing the disorganization prevalent in the carbon market. The initiative emerged to fill the existing void in carbon exchange infrastructure. Leveraging AI and blockchain technology, ZERO13 aims to tackle significant challenges within the global carbon market, including fragmentation, greenwashing, and transparency issues.
“Carbon operates as an intangible asset primarily driven by sustainability concerns. There’s often a disconnect between those focused on sustainability and those in financial markets,” Misra explained. His extensive career has been dedicated to bridging the gap between technology and business, which now informs ZERO13’s mission.
The fintech company has garnered acclaim, recently receiving the UAE TechSprint award at COP28 for its innovative blockchain solutions in climate finance. ZERO13 provides a platform-as-a-service designed to facilitate trading and issuance of carbon credits and ESG assets, connecting international carbon exchanges and registries for verification, pricing, and settlement through APIs and blockchain.
### Navigating the Decentralized Market
Misra points out that the carbon market remains decentralized and non-standardized, complicating trading efforts. He emphasizes that this market is often misidentified; many confuse registries with actual market activities. Currently, there is a lack of interoperability among various carbon registries—such as Vera and Gold Standard—making standardization and management of carbon credits especially challenging since they operate globally.
Government-to-government trading is still emerging, and Misra likens the carbon market to the London Stock Exchange, noting that it operates centrally with clearly defined buyers and sellers. In contrast, the carbon market has investors and projects distributed worldwide, leading to confusion reminiscent of the early days of cryptocurrency, where many were unsure how to invest or understand pricing mechanisms.
Despite the inherent instability of the decentralized nature of the carbon market, Misra observes that it was previously difficult to even acknowledge this decentralization.
To enhance communication and collaboration within the industry, Misra advocates for standardized orchestration across registries. He believes that simplifying connectivity among various entities will broaden the market access and enhance its efficiency.
“With an orchestration layer, each entity—be it a country or an operational entry—can seamlessly connect, creating a hub-and-spoke model. This facilitates horizontal and vertical networking, thereby establishing interconnected networks that can engage with others, such as the Ghana Carbon Registry,” Misra stated.
### Identifying Infrastructure Challenges and New Opportunities
Misra believes the UK is poised to become a climate hub, potentially opening up new markets and securitizing carbon assets, which could channel investment liquidity to countries in the Global South, addressing the multi-trillion-dollar financing gap. He envisions carbon assets as a potential national export commodity.
Drawing parallels to the London Stock Exchange, he highlighted its framework for Special Purpose Vehicles (SPVs) to generate cash flow into the carbon market, allowing investors to earn returns based on carbon credits.
In light of the Trump administration’s influence on the global climate finance landscape, Misra noted, “For economically viable projects, there will be backing from the US. The approval of voluntary carbon credit derivatives trading under the Democrats by the CFTC could transform carbon into a more tradable asset class, benefitting US futures exchanges the most.”
He added, “In the UK, there’s significant potential to export technology and expertise to Global South countries, offering a strategic geopolitical advantage. The Trump administration is unlikely to retreat from these opportunities, especially when they make economic sense.”