Untangling the Wild West

Abstract

The modern world is under great pressure to fight climate change and limit global temperature rises to a sustainable level. As part of new mitigation strategies, the Voluntary Carbon Market (VCM) emerged after the compliance markets materialized. Via the voluntary carbon market companies can offset their carbon emissions. The captured carbon is transformed into ’carbon credits’ representing one tonne of Greenhouse gas (GHG) emissions captured or reduced. One of the leading quality and integrity concerns is the potential double counting of credits. In a nutshell, the voluntary carbon market is based on voluntary carbon offset projects, compliance schemes require governments to report their national mitigation activities in Nationally Determined Contributions (NDC)s, and the private sector needs to report on their environment, governance, and sustainability responsibilities. Double counting occurs among these three activities when captured carbon is allocated to more than one actor. This thesis consists of an exploratory, single case study based on the blockchain solution of Acorn Rabobank. Acorn is both a project developer of carbon credits and the enabler of its own digital marketplace. The data for the case study is comprised of in-house research provided by Acorn, interview transcripts, reports, and news articles. This data is used to answer the research question: “What framework can be developed to evaluate the benefits and limitations of blockchain-based platforms to prevent double counting in the voluntary carbon market?

To answer this research question several research activities were performed. The research activities consisted of selecting and defining the case, data collection, data interpretation, and theory building. Three forms of double counting were established. To further enrich the knowledge base the stakeholder dimension was mapped based on secondary sources and empirical knowledge gained through preliminary interviews. Several mapping techniques were employed to map the interrelations between the market mechanisms and double counting.

The MLGBE framework allows carbon market actors to evaluate and, if applicable, reason about the various available blockchain-based infrastructures as tokenizing carbon credits and the digitized trading of these credits. By doing so, they can identify the stakeholder dynamics with all policies, interrelated treaties, and community plans in place, to develop or evaluate sustainable blockchain-based platforms tailored to the market to prevent double counting.

Scientifically, new theory was built through the development of the MLGBE framework. By integrating multi-level governance theory and business & governance information to the particularities of asset tokenization in blockchain applications, a new approach to evaluate blockchain designs is presented. Secondly, the research delineates the issue of double counting in the voluntary carbon market, Lastly, the research corroborates earlier findings in the logistics domain of the importance of reliability of data elements of blockchain-based applications used for audit trails.

Concerning double counting further research is recommended on the potential of blockchain solutions to link schemes together to facilitate a global carbon market, how these link to the eventual implementation of Article 6, and the potential nesting within countries’ NDCs. For
the MLGBE framework, future research should look into the interaction between the standardization/fragmentation dependent on policy layers and the different rights in the governance
requirements.