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.