Blockchain and fairness in the VCM

Customer-Centric Fairness: Unraveling Blockchain's Potential in Voluntary Carbon Trading

Master thesis (2024)

Authors

J.T. Roza Technology, Policy and Management

Contributors

Z. Roosenboom-Kwee Economics of Technology and Innovation - TPM (supervisor 1)
G. de Vries Organisation & Governance - TPM (supervisor 2)
Faculty
Technology, Policy and Management
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Published Date

16-04-2024

Language

English

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Faculty

Technology, Policy and Management

Abstract

Carbon trading sets a price on greenhouse gases (GHG), enabling countries and companies to buy emission rights. The carbon market includes the compliant market, regulated by governments, and the voluntary carbon market (VCM), which lacks strict regulation and allows anyone to offset emissions. In the VCM, carbon credits are created through various projects and used to compensate for emissions elsewhere.

The creation of carbon credits in the VCM involves multiple stakeholders, including project developers, validation bodies, brokers, and customers. Given the differences in bargaining power between stakeholders, issues regarding fair revenue distribution exist.

Blockchain technology offers promise in addressing these challenges by providing transparency and accountability. Through blockchain-enabled platforms, customers can access real-time project information, verify emissions reductions, and ensure fair revenue distribution. This transparency fosters trust and empowers customers to make informed decisions.

Research on customer preferences regarding fairness in the VCM is lacking, highlighting the need to understand customer perspectives on fairness and how blockchain can enhance it. This study utilizes Q-methodology to explore customer views on fairness in the VCM.

Three perspectives on fairness, named factors 1, 2, and 3, emerged from the analysis. Factor 1 emphasizes community impact, Factor 2 focuses on market participation and intermediary responsibility, and Factor 3 highlights the importance of broker transparency.

Based on these findings, blockchain implementation should prioritize transparency, standardization, and credibility to increase trust and fairness in the VCM. Brokers play a crucial role in project selection, emphasizing the importance of trust and transparency. Blockchain should focus on increasing transparency throughout the project and carbon credit trading, simplifying information for brokers and enhancing market credibility. Increased transparency and understanding of project co-benefits can shift focus beyond emissions reduction, improving benefit-sharing in the VCM.

This research broadens the discussion on fairness in the VCM and underscores the role of brokers in enhancing trustworthiness and credibility. Brokers should stay actively engaged in blockchain developments in the VCM. However, challenges in blockchain implementation may arise, warranting further exploration.