TRADING AND SETTLEMENT INFRASTRUCTURE FOR REMOVAL UNITS

Authorities and market operators can establish systems that help buyers and sellers transact in recognised removal units. Price information helps participants compare offers; trading venues match orders; clearing arrangements manage counterparty default; and settlement services coordinate payment and transfer through existing registries. Together, these services can reduce transaction costs and failed delivery. The lever concerns buying and transferring units whose eligibility and legal status are established elsewhere. Creating registries, determining credit legal status and drafting model contracts remain separate interventions. Trading infrastructure makes purchases easier; it does not itself create an obligation to buy removals.

Standardisation requires agreement on what a contract can deliver, including method, durability, vintage, certification, reversal and replacement rules. Broad categories can hide quality differences, while numerous narrow categories can divide already low trading volumes. Trading and settlement rules must reflect the unit’s established legal status, since this affects ownership, tax, security interests and insolvency. Exchange-traded derivatives should therefore follow credible certification, registry and spot-market systems rather than substitute for them.

Common transaction interfaces can reduce processing costs, while registry reconciliation and clearing reduce duplicate transfers and counterparty risk. Transparent prices help buyers, suppliers and lenders compare deals. Forward contracts allow projects and buyers to fix future prices, improving revenue forecasts and price-risk management. Nasdaq and Puro.earth’s carbon-removal indexes show that completed CDR transactions can already produce reference prices, although those indexes are not themselves a forward market.

Standardisation can make unlike removals appear interchangeable or give weak units the credibility of an exchange-listed product. Low trading volumes can produce unstable or distorted prices, while derivatives can become detached from physical delivery. Competing registries and contract families can fragment activity; a dominant venue creates concentration risk. Incorrect transfers, cybersecurity failures and poor registry reconciliation can also compromise ownership records.

Monitoring can compare participation, traded and delivered volumes, failed settlements, registry discrepancies and concentration. Bid-ask spreads could shed light on transaction costs, while open interest shows outstanding futures contracts. Evaluation should distinguish trading activity from physical delivery and retirement.

Registries, certification bodies, suppliers and buyers can define eligible units and test contract terms. Exchanges, clearing houses and industry associations can develop trading and settlement rules. Financial regulators can oversee conduct, while tax authorities and insolvency experts help operators apply the unit’s established legal treatment.

Exchanges, registry operators and industry bodies build and operate transaction interfaces, trading venues, price data and settlement services. National regulators supervise trading. International and supranational bodies can provide transfer infrastructure through Article 6.4 and the Union Registry. Regional and municipal authorities qualify only where they operate comparable transfer or trading systems themselves, as in the California–Québec registry and Tokyo’s carbon-credit market. These competences support market infrastructure; they do not independently establish CDR eligibility.