Current Market Dynamics

Wide Quality Spectrum

High-quality carbon credits are scarce because accounting and verification methodologies vary and because credits’ co-benefits (such as community economic development and biodiversity protection) are seldom well defined. When verifying the quality of new credits—an important step in maintaining the market’s integrity—suppliers endure long lead times. When selling those credits, suppliers face unpredictable demand and can seldom fetch economical prices.

Lack Of Liquidity

Today’s voluntary carbon market lacks the liquidity necessary for efficient trading, in part because carbon credits are highly heterogeneous. Each credit has attributes associated with the underlying project, such as the type of project or the region where it was carried out. These attributes affect the price of the credit, because buyers value additional attributes differently. Overall, the inconsistency among credits means that matching an individual buyer with a corresponding supplier is a time-consuming, inefficient process transacted over the counter.