Does the US Have Carbon Credit Exchanges?

As companies aim to reduce their greenhouse gas emissions, one option is to buy credits from another company. But does the US have carbon credit exchanges?

A carbon credit is basically a permission slip that gives the owner permission to emit a certain amount of greenhouse gases. Carbon credits are issued through the government under a program known as a cap-and-trade scheme. In this system, regulators set a cap on emissions, and each company is required to meet the caps by buying or selling permits. Companies with lower than average emissions get to sell their extra allowances, while companies that exceed the limits need to purchase more from other firms to remain in compliance.

But the issuance, buying and selling of carbon credit exchange is also possible on a voluntary basis. This marketplace is called the voluntary carbon market, and it’s become increasingly important in recent years as more and more businesses adopt corporate sustainability goals that require them to offset their emissions or face fines. In addition, environmentally conscious individuals are buying credits to compensate for their own carbon footprints and to support projects that would have happened anyway.

The supply of voluntary carbon credits comes from private entities that develop carbon projects and from governments that operate programs certified by a standard, such as the Verified Carbon Standard. The demand for them comes from people and companies that want to offset their own emissions, those that have sustainability goals to meet and others that are interested in making a profit by trading at a higher price. Today’s voluntary carbon markets are highly fragmented, and matching a buyer with a supplier often involves an inefficient process of negotiating over the phone or via email. This is because different attributes—such as project type, region and certification status—are valued differently by buyers.

To overcome these problems, the voluntary market needs a common standard to validate carbon credits. The most widely used is the Verified Carbon Standard, established in 2007 by environmental and business leaders. This standard combines accounting methodologies specific to each project type with independent auditing and a registry system. It’s designed to give a buyer confidence that the carbon credit it’s purchasing is legit. But because of the wide variety of standards in use, some carbon markets are operating with lax oversight.

Despite this, the United States hasn’t developed a comprehensive national carbon program, though some states have adopted a cap-and-trade system to cut greenhouse gas emissions. The state-level markets may be more flexible than the global marketplace, but they’re still not easy for companies to navigate. Congressional representatives have introduced two bills to address this problem, including the Growing Solutions Act of 2016 and the Climate Opportunity Through Innovation Act. These bills could help farmers, ranchers and foresters learn to participate in the carbon market, as well as provide financial incentives to encourage them to invest in climate-friendly activities. They might also create a national platform for carbon trading that provides consistency and clarity to participants, which in turn will make the market more robust.