09.13.2022

Nasdaq Sees Potential of Carbon Removal Market

09.13.2022
Shanny Basar
Nasdaq Sees Potential of Carbon Removal Market

Nasdaq will migrate Puro.earth, the carbon removal market, to its matching engine next year and has ambitions to launch futures on carbon removals as the market grows.

In June 2021 Nasdaq announced its acquisition of a majority stake in Puro.earth, the first marketplace to offer industrial carbon removal instruments.

Puro.earth focuses on verified net-negative technologies that can remove carbon at an industrial scale and store it for a minimum of 50 years. The market takes different methods of CO2 removal and turns them into digital tradable assets called CO2 Removal Certificates (CORCs) that are verifiable and tradable through an open, online platform.

Fredrik Ekström, head of Nasdaq Stockholm, European fixed income and ESG told Markets Market that the group has a focus on ESG and sustainability.

Fredrik Ekström, Nasdaq

Ekström said: “Puro.earth is early in the carbon removal journey and we see a lot of demand over the next five to ten years.”

He was appointed the chairman of Puro.earth in 2021. Ekström joined Nasdaq as chief risk officer for Nasdaq Clearing in 2010 and has held a variety of roles, including president of Nasdaq Clearing and head of Nasdaq Nordic Fixed Income Exchange.

Puro.earth said in a blog that the cumulative committed trade value of CORCs grew five times compared with the period prior to Nasdaq’s involvement. In the year following Nasdaq’s investment Puro.earth issued 135,000 CORCs, representing 135,000 tonnes of CO2 removed from the atmosphere for the long-term, up from 74,000 in the two previous years.

Carbon removals is a nascent market according to Ekström and he explained that Nasdaq is supporting its scaling up and innovation in new methodologies as the firm is an advocate of markets and transparency.

Since acquiring a stake in Puro.earth, Nasdaq has set up an external advisory board for the carbon removal market led by Professor Myles Allen, director of the Oxford Net Zero Initiative. Since the Nasdaq  investment Puro.earth has launched the Puro Registry, an online platform where anyone can view if a corporation has used CORCs to neutralize emissions. Nasdaq has also launched the first price reference indexes for carbon removal credits which is based on transactions on Puro.earth.

In March this year Nasdaq launched three commodity reference price indexes based on the trading of CORCs.

Antti Vihavainen, chief executive of Puro.earth, said in a blog that the launch marked an exciting moment for the voluntary carbon market as the new index family brings price transparency and helps corporations understand the true cost of removing their emissions.

“This will stimulate growth by supporting the business case for new carbon removal projects and helping potential investors into these ventures make better informed decisions,”  Vihavainen added. “As projects from innovative carbon removal methodologies become operational thanks to the corporations and investors that support new approaches, additional indexes will be launched.”

Vihavainen continued that the launch of the index family is a clear result of the partnership with Nasdaq and allows carbon markets and ESG communities to use carbon removal data as a valuable metric to manage, compare and report.

He believes the indexes will create a surge in corporate demand for negative emissions, bringing liquidity to the carbon removal suppliers who need the revenue streams from CORCs to start and grow.

Vihavainen also wrote that besides targeted growth in North America and Europe, Puro.earth will continue to expand in Latin America and Asia, and continue to enable new carbon removal methodologies as technology and science evolves.

He estimated that a fully functioning carbon removal industry could remove more than 10 gigatons of CO2 each year.

“We hope to play an instrumental role in building a world where any company can help reverse climate change by removing its carbon emissions from the atmosphere,” Vihavainen said. “Bolstered by Nasdaq’s support, we continue to strive to achieve this hugely important and worthwhile proposition.”

Puro.earth will also migrate to Nasdaq’s matching engine early next year according to Ekström. He said: “We have ambitions to launch futures contracts on carbon removals as the market grows.”

Volatility

Ekström continued that equity markets have had heightened volatility for two years and Nasdaq Nordic had record trading and listings in 2021. In addition Nasdaq Nordic listed a record number of corporate bonds last year and 30% were sustainable issues.

“We have large buffers for capacity but have also been adding extra capacity,” he added.

There have been 13 listings on the Main Market this year but many larger IPOs have been pushed out to 2023 as they hope for volatility to come down.

Ekström said opportunities include ESG and continuing to be the leading market for growth companies.

“We are also focussed on moving our markets to the cloud, how digital assets will reshape financial markets and launching more Nordic market products around ESG and our data,” he added.

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