Blockchain can help fix carbon credits market, experts argue – but is it enough?
Experts have suggested that blockchain could provide a way to improve the fractured carbon credit markets and help markets move towards a more sustainable future.
Jeff Ren, OKX Ventures partner, told City A.M. that the “immutable nature of the dataset created and stored” by a blockchain could combat the fragmented and opaque carbon credits market.
Carbon credits, also known as carbon offsets, are permits that allow the owner to emit a certain amount of carbon dioxide or other greenhouse gases. However, the sector has been hit by claims that some credits are more accurate than others.
Ren said: “One fundamental problem [with carbon credits] is different standards and the different stakeholders in the space, and there are different certification agencies, for good reasons and bad”.
In addition, there is no centralised marketplace for the credits to be traded which prevents a consistent carbon price from emerging.
Ren argues this problem can be solved by blockchain. “Putting everything online is about keeping all the stakeholders honest, because otherwise it’ll be difficult to tell one versus the other,” Ren argued.
A blockchain is a type of distributed ledger technology, meaning the data is dispersed around stakeholders. Once transactions are recorded on the blockchain, they cannot be altered later.
“Any transactions that occur on the blockchain could be seen by anyone with an internet browser, and this would bring a revolutionary amount of transparency to a previously opaque process,” he continued.
Manoj Mathew at tech firm Cognizant agreed that blockchain could revolutionise the carbon credits market.
He told City A.M. that blockchain’s decentralised system can “enhance trust and transparency [and] authenticate tracking and reporting of reductions in greenhouse gas emissions.”
Both Mathew and Ren highlighted that blockchain technologies are already helping to make the carbon credits market more transparent.
However, Ren clarified that blockchain would not be able to fix the market on its own. “There need to be people who are there and look at the trees and come up with a model of whether these trees are environmentally friendly,” he said.
Tedd Christie-Miller at carbon credit rating agency BeZero Carbon agreed that “disclosure and transparency are integral” in the carbon credits market. However, he stressed the importance of adequate checks, arguing this should be prioritised over anything else.
“Fundamentally the issue is about making sure the quality of carbon credits are understood. Blockchain, as a tool, is a marginal part of debates around carbon credits as long as there is poor transparency around the credits themselves,” he told City A.M.