Carbon markets have come under heavy criticism for their lack of transparency, accessibility, equitability and quality. Despite broad corporate interest, they also remain underused and fragmented. Along with this criticism, and the growing demand for effective and high-quality carbon credits, there is a renewed enthusiasm for applying emerging technologies and new approaches to expand the reach, credibility and scalability of carbon markets. However, significant work still needs to be done. This paper is an output of the Crypto Sustainability Coalition’s Working Group on Blockchain Carbon Credits. It aims to address a myriad of challenges facing current carbon markets and suggests an ambitious path forward so that they can deliver positive long-term environmental, social and economic impact.
Innovative technological and social infrastructure play equal roles in enabling the next generation of digital carbon markets. This paper focuses on emerging forms of distributed ledger technology (DLT) and their applicability to carbon markets, although this is just one of the many technologies needed to fully enable a digitally native carbon market. DLT allows carbon credits to be represented as universally unique data entities in a digital end-to-end environment. Doing so makes it possible to verify a credit’s provenance, track its secondary exchange and retire it permanently, without the need for centralized intermediaries.