Nasdaq Study Shows Structural Reform Needed to Unlock Global Carbon Markets

Price transparency, market inefficiencies, and fragmentation remain critical structural barriers to scale

Carbon credit registry reform is the most important facilitator of growth

NEW YORK, March 27, 2024 (GLOBE NEWSWIRE) -- Nasdaq (Nasdaq: NDAQ) today published the results of a global survey examining the voluntary carbon market (VCM) ecosystem, with responses from over 130 decision-makers across project owners, financial investors, commercial banks, brokers, and market operators, produced in partnership with the ValueExchange.

The survey reveals that the market for voluntary carbon credits is growing and attracting more diverse participants, but price transparency, market inefficiencies and fragmentation are preventing scale. Carbon credit registries are seen as having the power to address many of these challenges and unlock the potential of the industry.

Roland Chai, Executive Vice President and Head of European Market Services, at Nasdaq said: “Global carbon markets are at a critical juncture. Truly scalable, trusted carbon markets can have a profound and lasting impact; the question is how we get there. By identifying the structural inefficiencies holding the market back, we can propose long-term solutions and help build global consensus. Addressing these barriers to scale can only come from a coordinated push from policymakers, market infrastructure providers, and participants across the financial services ecosystem.”

Demand for carbons credits is being constrained

Demand for carbon credits arises from a broad range of players and objectives: 67% of corporates are driven by their ESG priorities, 50% of commercial banks purchase credits to decarbonize their investment portfolio, and 45% of investors are primarily seeking a financial return. There is also a clear desire for companies to expand their activity with more than half of corporates expressing a desire to double their exposure to the asset class.

However, despite the diversified demand for carbon credits, current market structures are stifling demand as well as the broader evolution of the market. Challenges in issuance, verification, trading, reporting, and retirement processes prevent 18% of all survey respondents from participating in today's voluntary carbon markets. A further 11% saw their volumes capped at less than half of their targets due to the same issues, with 40% constrained by at least a quarter.