How Blockchain and Carbon Markets Can Unlock Capital to Accelerate Climate Action

At their core, carbon credits are financial tools driving capital towards direct, verifiable actions that mitigate climate change. Global demand for carbon credits is projected to grow by a factor of 100 by 2050, with the global voluntary carbon market (VCM) poised to reach $50bn by 2030.

However, the VCM has recently come under heavy criticism for its lack of speed and transparency and issues regarding product quality, threatening investor confidence and the pace of growth.

So, how can we ensure carbon markets reach their full potential? And what role can blockchain play?

Reduce, Protect, Remove

The VCM allows corporations to complement their decarbonization efforts by buying carbon credits voluntarily, each usually representing one tonne of greenhouse gas emissions that has been avoided, reduced or removed (e.g. from reforestation to engineered carbon dioxide removal and sequestration). This flow of capital enables these climate positive activities to scale.

Corporations, asset managers and investors are starting to recognize carbon and ecological assets as a new, diverse and promising asset class.

The quality and price of a carbon credit are influenced by a number of criteria including project type, size, permanence and additional co-benefits. These attributes can be hard to evaluate and de-risk. Due diligence is often complex, time consuming and expensive.

Today's VCM lacks the infrastructure to deliver the necessary levels of transparency, trust, efficiency, liquidity, value and fair pricing for buyers and suppliers. The status quo is inhibiting the growth required to truly help meet climate goals.

How Can Blockchain Help?