A carbon credit exchange is a marketplace where entities can buy and sell emissions reductions to offset their own greenhouse gas (GHG) emissions. One tradable carbon credit equals one tonne of CO2 equivalent (CO2e).

There are many ways to reduce GHG emissions, from reducing the use of fossil fuels in the workplace to planting trees at home. The goal is to create an overall balance that reduces total emissions. The way to achieve this balance is through trading, where companies that emit too much CO2 can make up for it by purchasing credits from developers who have reduced their own emissions. This allows them to stay below their own emissions "cap."

Today, most of the carbon credit exchange traded are sourced from projects that have been registered with a government-approved carbon market scheme. There are a number of environmental commodity exchanges - mostly in North America and Europe - that list these credits for sale and work with registries to enable trades. The carbon credit marketplace also includes brokers and retail traders, who bundle up credits and sell them in portfolios to end buyers, charging a fee for their services.

In addition to these formal exchanges, there are a growing number of private conversations and over-the-counter deals between carbon buyers and sellers. The growth of these markets has been fueled by the increased awareness and desire by individuals and businesses to limit their emissions.

To meet the needs of these markets, there is an emerging market that leverages blockchain technology to enable digital carbon credit exchanges. Essentially, a smart contract encoded on the blockchain allows all transactions to be recorded transparently, and ownership of tokens can be verified by third parties. This type of digital carbon credit exchange offers significant advantages over traditional exchanges that rely on middlemen and other intermediaries.

Are there fees associated with trading on a carbon credit exchange?
The cost of purchasing a carbon credit depends on the level of participation in the market and the stage of the project's lifecycle. The earlier a buyer gets involved, the lower the price is likely to be. The cost of buying a credit will also be influenced by the attributes of the underlying project, for example its location, its type (community-based or industrial), and whether it generates additional social and environmental co-benefits in line with the UN's SDGs.

Platts collects bid, offer and trade data during every trading day and publishes price indications for carbon credits based on their attributes and underlying projects. The price of a carbon credit is determined by the market participants, with the price signal reflecting the supply and demand dynamics for these emissions reductions.

IATA's Aviation Carbon Exchange, or ACE, is a centralized platform for airlines and other aviation stakeholders to purchase CORSIA-related offsets, either for compliance with the airline GHG emission limitation or for voluntary offsetting. ACE applies standard transaction fees of $0.05 per unit, payable by the buyer. These fees are not a mark-up and reflect the costs to ACE of providing an efficient, robust and dependable service.