Blockchain for the carbon market: a literature review
André Luiz Coelho Merlo, Diogo Mendonça, Joel dos Santos, Sérgio T. Carvalho, Raphael Guerra, Diego Brandão
Abstract
The increasing urgency of climate change demands innovative solutions to reduce the environmental impact of human activities. While carbon credits have become a pivotal tool in reducing greenhouse gas emissions, their effectiveness is hindered by challenges such as lack of transparency, inefficiencies, and governance issues in carbon markets. This article uniquely explores how blockchain technology addresses these gaps by automating processes like verification and validation through blockchain-based smart contracts. Unlike previous reviews, our work focuses on platform interoperability and the integration of blockchain within the “3D’s” of decentralization, decarbonization, and digitization, providing a structured analysis of its potential to transform carbon markets. This comprehensive review synthesizes findings from academic papers, international reports, and technical documents, showing that blockchain technology improves transparency, reduces fraud, and ensures compliance with regulatory standards for the carbon market. However, interoperability between platforms and governance issues remain a challenge.