Creating a Market

The final step required to encourage credit buyers to join in large numbers is to facilitate the buying experience by creating a market for credits that is large, liquid, and where the price is openly “discovered”. Existing markets are siloed, and most of the credits are sold over-the-counter between intermediaries and corporations, where the environmental contributors are left completely in the dark and are often disregarded. Prices of the same amount of material being offset vary dramatically based on factors such as “co-benefits,” “durability,” and “integrity,” making it impossible to grow. This needs to change.

Fortunately, exciting new blockchain-derived solutions are being built to make creating a market cheap, transparent and far more efficient than traditional financial markets. The liquidity pool is one of these incredible solutions. Liquidity pools hold money from investors, who, in exchange for providing capital, earn a portion of the transaction fees occurring within the pool. Liquidity pools offer automatic selling of credits and help establish a real-time price for each credit (e.g., 1 ton of Plastic, 1 ton of Aluminum, 1 ton of Carbon, etc.) Financial institutions and fund managers who want to support the transition to a low-carbon, circular economy can fund liquidity pools. The solution is attractive as they can do so without having to get involved in the funding of specific projects, like is usually the case with green bonds and sustainability-linked bonds. Carrot will employ liquidity pools to create a market for credits of all types. It will do so initially at a global level and later create them by region, country, and perhaps even state. By setting a price and making the purchase easy and completely transparent, Carrot will facilitate the entrance of credit buyers (Producers) into the market around the world.