• Carbon Periodic Table

Why Use Blockchain for Carbon Markets?

Blockchain, or distributed ledger technology (DLT), represent a solution for the major issues that have challenged the carbon credit markets over the past decades. The global market for credits has languished in the doldrums for the last  decade  due to lack of trust, poor performance, lack of trans-jurisdictional standards, and some fraudulent activity. But a blockchain registry of emissions together with growing standardization of emissions measurement and verification, provide assurances for investors and traders alike. The EU guidelines for emissions trading is the final benchmark that allows both emitters and buyers of carbon credits to make informed investment decisions.

The blockchain is designed to be a shared network by all users participating in the validation and maintenance of all transaction records between parties. Its foundation in cryptography via hash technology makes the records that are approved by the parties immutable without the use of a third party for validation. DLT is ideal for economic systems of trade that are cross-jurisdictional and have relied on multiple third-party validating organizations to complete a single transaction. These are the characteristics of the carbon market and we believe is where the most significant hurdle to successful implementation lies.

The gains in transparency, security, traceability, efficiency, lower costs and increased transaction speeds made possible by distributed ledger accounting will completely transform the carbon credit exchange markets.

Blockchains can also be made private, and private and public blockchain technologies can resolve legacy problems and contribute to creating a truly global carbon market ecosystem that will support private equity venture capital and project finance.

  • Transparency

    Despite being viewed as a “commodity”, the carbon that is exchanged on the global carbon markets is, in fact, a “unit” of carbon, representing one metric tonne of carbon dioxide equivalent (CO2-e) as recorded by various authorities as offsets or credits. Measurement and verification has varied around the world and been subject to leakage, misallocation and even manipulation, leading to lack of trust in the markets. Blockchain registration will bring about global standards and a return of trust.

  • Security

    Because consensus amongst the parties – emitters, off-setters, verifiers and traders – is required for every transaction, once recorded on a public blockchain, the amounts of carbon units cannot be falsified.

  • Traceability

    A blockchain ledger unites claimants with verification agents so traders will know immediately the source and value of those units. As all data is shared, it is visible in real time to all stakeholders.

  • Efficiency & Speed

    Agreement amongst the parties to use the blockchain for registration of carbon offsets or credits, will streamline measurement, reporting and verification (MRV) procedures. The time between a claimant’s request for credits, their approval by a designated authority, and their availability for trading on exchanges, will be shortened.

  • Reduced Cost

    Automation of the approval process through multiparty consensus will speed up calculation of national contributions, of enterprise quotas and streamline the whole carbon trading process.