American tech giant Microsoft and universities in Germany and Denmark have discharged a paper outlining the potential advantages of blockchain technology in building a world carbon credit market.
The paper revealed weekday and titled “Blockchain Application for the Paris Agreement Carbon Market Mechanism – a choice Framework and design,” specifically looks at the quality of blockchain and distributed ledger technology for a carbon market mechanism as per Article 6.2 of the Paris Agreement.
The Paris Agreement has the general aim of delivering a worldwide response to the threat of global climate change by keeping global temperatures below two degrees (35.6°F) rise higher than pre-industrial levels. Article 6.2 is intended to supply an accounting framework for international emissions-trading schemes, a kind of market incentive to cut back the amount of greenhouse emission discharged into the atmosphere, in a less-centralized, cooperative format.
Legacy infrastructure solutions for such a market, like the mechanisms set go into the Kyoto protocol of 2005, has limitations because of being based on manual processes among a “centralized and fragmented databank structure,” the paper says. “When only considering legacy information architectures, there’s the danger of planning a ‘new’ post‐2020 market mechanism that’s already obsolete at the date of origin.”
However, the paper’s co-authors, that embrace Microsoft’s information, AI, blockchain and Azure specialist, Laura Franke, furthermore because the Technical Universities of Berlin and Denmark, joined the blockchain’s ability to supply data transparency and unchangeableness – which means information can’t be modified once secured on a ledger – might offer a viable various.
“We found that for the bottom‐up and redistributed governance system visualized within the Paris Agreement, a blockchain application is promising and might yield advantages in increased transparency and enhanced automation,” the paper reads.
Still, blockchain and distributed ledger systems are represented as “nascent” technologies that don’t have the facility to resolve all the carbon market issues.
“This new technology isn’t a cure-all for all issues, and therefore the trade‐offs of applying blockchain technology ought to be assessed case by case,” the team suggests.
As such, the team additional provides a framework for deciding if blockchain would be appropriate for a projected purpose.
Still, the utilization of a blockchain platform “offers clear advantages in terms of ability with alternative emerging technologies, automating the method through good contracts, enhancing transparency, traceability and auditability, and enhancing system security and trust between Parties,” the authors say.
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