Carbon Pools

Carbon pools bundle carbon credits that share similar attributes to create more liquid and efficient markets.

The Problem

Carbon credits are an illiquid asset class, meaning that often, they cannot be bought and sold quickly or efficiently. This illiquidity stems from the significant differentiation across projects, vintages, and other characteristics, each effecting a specific credit's market price.

Low liquidity poses challenges for stakeholders in the voluntary carbon market (VCM). On the supply side, project developers may struggle to sell their credits quickly at market prices. For buyers, sourcing credits often involves relying on a network of intermediaries or engaging in lengthy over-the-counter (OTC) transactions. Additionally, the lack of transparent pricing data makes it difficult to assess whether a deal is fair.

A Balancing Act

When carbon assets are bridged and tokenized into TCO2s, they retain their unique characteristics through metadata, such as project- and vintage-specific attributes. Carbon pools introduce a level of standardization by bundling TCO2s with similar characteristics, enabling deeper market liquidity and more efficient transactions.