Landmark Pilot Signals Connected, Transparent and Secure Future for Carbon Markets

Carbon credit transaction network Carbonplace and Singapore-based Climate Impact X (CIX), a global marketplace and exchange for quality environmental credits, have announced a successful series of proof-of-concept transactions that will dramatically increase the speed, security and accessibility of carbon market trading.

This landmark pilot, carried out on CIX’s Project Marketplace, paves the way for the enhanced connectivity between buyers and sellers required to support carbon market liquidity and scale. With demand for carbon credits expected to increase exponentially, the ability to settle quickly and with confidence is key to supporting the growth of the market.

The due diligence involved with procuring quality carbon credits including know-your-customer (KYC) and anti-money laundering (AML) processes is often technical and requires businesses to invest significant resources.

This due diligence is crucial to transparency and certainty in the market, but the processes can prevent access for carbon market participants, notably sellers in developing economies, and restrict the liquidity necessary for efficient and scalable trading.

This pilot has demonstrated that it is possible to simplify the transaction process, shorten the settlement cycle and allow parties to transact with confidence by drawing on the robust in-built compliance processes of Carbonplace members and the CIX marketplace.

Mikkel Larsen, Chief Executive Officer, Climate Impact X, said, “Enhanced transparency, connectivity and cross-border trading are essential to effectively scale carbon markets. We believe that the combined proposition of CIX and Carbonplace offers something that is truly unique in the market. Together, we bring an unparalleled and reliable platform to businesses and financial institutions that offer seamless access to quality carbon credits, with an easy settlement system that reduces complexity and drives transparency.”

SWIFT System of Carbon Markets

Carbonplace, which settled the transactions and established the technical, legal and operational framework for execution, leverages the compliance capabilities of the financial institutions behind the platform to remove frictions in counterparty due diligence and onboarding.

The blockchain-enabled fintech, which is due to launch in early 2023 and has been likened to the SWIFT system of carbon markets, is being developed by nine of the world’s largest banks accounting for nearly $9 trillion in total assets, NAB, NatWest, Standard Chartered, BNP Paribas, CIBC, Itaú Unibanco, UBS, BBVA and SMBC.

The CIX Project Marketplace is a digital trading venue that connects carbon market buyers and sellers. It curates and organises projects in a way that makes quality credits easily accessible, allowing developers and suppliers to reach a wider pool of corporate buyers and institutional investors.

As part of the integration, customers of the participating banks will gain seamless access to CIX’s marketplace; while CIX-onboarded buyers and suppliers will be able to access a broader selection of carbon projects and audience, respectively, through Carbonplace’s distribution network.

The technology integration tested three types of transaction most likely to occur on the platform among buyers and sellers of Carbonplace and CIX. Counterparties in the pilot transactions are customers of Carbonplace and CIX, as well as Carbonplace’s founder banks.

These included project suppliers Carbon Growth Partners and Sustainable Carbon, as well as Pavilion Energy, NatWest and Itaú Unibanco on the buyer side.

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