🌱 What is the carbon market and how can blockchain technology provide a solution?
If you came from Twitter, you can continue reading right away, but if you started here, continue reading after checking out the introductory tweet:
Major problems that blockchain can solve in the carbon market
In this article, I discussed the problems in carbon markets under transparency and shared potential blockchain solutions with you.
The variety of emission sources, particularly in agriculture and forestry, makes precise data collection challenging. Furthermore, developing standardized procedures for measuring and reporting across industries and regions is difficult that needs global cooperation and consensus.
Another problem is ensuring the accuracy and reliability of provided data, as there is a possibility of incorrect or illegal reporting, which may compromise the carbon market’s efficacy and legitimacy. To address these difficulties, reliable and transparent MRV systems must be developed, techniques must be harmonized, and blockchain technology can be used for reliable data collecting and verification.
Firstly, the transparent nature of blockchain’s public ledger can uncover the variety of credit supply, encompassing traditional, specialized, and innovative project types and methodologies. This structure, which can be accessed and followed by everyone, will strengthen the achievement of the 2 degrees target, which must be achieved by 2030 within the Paris Agreement, particularly in the carbon markets, as I mentioned in the tweet.
Source tracking and verification of credits are important in the journey of carbon credits to both preserve their value and prevent market manipulation throughout the trade. Therefore the traceability feature of blockchain can validate the provenance of carbon credits and offer an unchangeable record of actions along the value chain.
Another problem under transparency is the equal knowledge and objective finality of all those affected by the carbon markets that drive us to the settlement feature of blockchain. Since carbon markets include a wide range of participants, local recipients are another concern due to the lack of transparency. So automation of compensations can be integrated with blockchain that increasing transparency in how funds reach them.
Blockchain technology offers exciting solutions to the difficulties of carbon market transparency. It improves the reliability and integrity of reported data by utilizing its transparent and irreversible nature, reducing the possibility of fraud or incorrect reporting. Furthermore, blockchain allows standards and interoperability by enabling traceability, automating data gathering and verification procedures, and standardization. These features create enhanced reliability, market integrity, and responsibility among players, resulting in more accurate emission measurement and reporting. While blockchain deployment in carbon markets would need collaborative efforts and regulatory assistance, its potential to transform the way emissions are measured, recorded, and confirmed is significant.
I personally can say that it’s very exciting to see many blockchain solutions through climate solutions like carbon markets may develop a more transparent, efficient, and trustworthy mechanism to address climate change by integrating blockchain innovations.