CarbonChain: A Blockchain-Enabled Decentralized Marketplace for Verified Carbon Credit Trading and Emission Reduction

The carbon offset market is an essential component in the mitigation of climate change globally [1], [2], [23]; however, its efficacy is often thwarted by inherent inefficiencies, lack of transparency, and issues of trust. The issues of fraudulent credit creation, double counting, lack of registry, and long settlement times [3], [4], [10] have been prevalent in the carbon market, which is primarily being driven by the centralization of the trade system that is based on multiple actors in the system In this paper, an outline for the development of a decentralized carbon credits trading market based on blockchain technologies is discussed. The proposed trading market utilizes smart contracts and carbon credits in the form of blockchain tokens to provide automated, secure, and transparent trading without the need for centralized supervision [11], [12], [24]. The unchangeable records maintained in the blockchain ledger provide secure traces for the validation of emission reductions, while cryptographic tools help in securing confidential trade between peers. The analysis conducted in this paper provides an understanding of how blockchain technology can greatly increase market efficiency.