Decentralized Finance (DeFi) for Carbon Markets with Blockchain Technology

Abstract

Innovative solutions are needed to reduce greenhouse gas emissions and promote sustainability in the face of climate change, a global problem. Although carbon markets often face problems such as centralization, lack of transparency, and high costs, they are intended to address these issues. A new way to improve carbon markets is offered by decentralized finance (DeFi) powered by blockchain technologies, such as tokenization and smart contracts. These technologies make carbon credit trading more efficient, transparent, and accessible. In this paper, a Systematic Literature Review (SLR) was used to examine 35 studies published between 2018 and 2024. These results are generated using the Technology-Organization-Environment (TOE) framework, which identifies fifteen critical components that influence the adoption of decentralized finance in carbon markets. Scalability and opaque regulation are issues that need further research, although DeFi may be able to address many of these issues. Additionally, the study highlights the role of decentralized finance in supporting the shift towards a greener economy by promoting sustainability and inclusivity. This study advances the understanding of how decentralized finance can aid carbon reduction efforts and improve the way carbon markets function.