Blocks and Credits: A Sustainability Lens on Blockchain Technology in Voluntary Carbon Markets

Abstract: Society is dependent processes that emit greenhouse gases such as carbon dioxide into the atmosphere. The accumulation of these gases in the atmosphere prevents sunlight reflected from earth’s surface to get to space thereby warming the earth and causing climate change. To prevent the effects of adverse climate change, the voluntary carbon market was designed to help buyers, individuals or organizations that cannot avoid emission in their process, purchase carbon credits from sellers, entities whose process prevent or avoid carbon emissions. The voluntary carbon market faces challenges like market fragmentation, opacity of records, and delayed processes due to layers of intermediation and double counting. In an attempt to solve these challenges, blockchain, a ledger technology, has been applied by innovative organizations. This thesis researches the possible roles of trading carbon credits using blockchain based platforms in the voluntary carbon market. Furthermore, this thesis focuses secondarily on how the application could increase supply of carbon credits, influence commitment to net-zero, contribute to production of high-quality carbon credits, and promote fairness in carbon trading. A conceptual framework based upon the Oxford Principles for Carbon Offsetting, Taskforce for Scaling the Voluntary Carbon Market (TSVCM), and the Sustainability Principles was used in this study. Seven organizations were investigated in this study through a first phase of interview and a second phase of survey.The findings suggest that blockchain-enabled carbon trading has the potential to enable market growth, foster systems interactions and transition via information technology, and support opportunities for sustainability in the socio-ecological system. Blockchain also inherits the unsustainability of the overall tech and energy sectors wherein it operates. Weak governance systems off-chain from non-disclosures by market players also risk the market system on-chain to vulnerabilities. The authors conclude that trading carbon credit on blockchain-enabled platforms is a step in the right direction in terms of amplifying the contributions the voluntary carbon markets hold for cutting down carbon emissions. They also acknowledge that the blockchain-carbon credit application does not directly address upstream issues of carbon emission but serves as a mechanism to accelerate decarbonization.