Transforming Carbon Credit Trading Through Tokenization: A Blockchain-Based Approach to Sustainable Finance

Abstract

The integration of blockchain technology in carbon credit markets has emerged as a transformative solution to address inefficiencies in traditional trading mechanisms. This paper explores the role of tokenized carbon credits, decentralized trading platforms, and smart contracts in enhancing transparency, trust, and efficiency within voluntary and compliance-based carbon markets. By analyzing various blockchain-enabled carbon credit projects, including KlimaDAO, AirCarbon Exchange, and other decentralized initiatives, this research highlights the advantages of digital s regulatory uncertainty, scalability issues, and market adoption barriers are also examined. The findings suggest that blockchain-based carbon credit systems can significantly reduce fraud, increase liquidity, and support global sustainability goals. However, the success of these innovations depends on the development of standardized frameworks, cross-sector collaboration, and regulatory integration. This study provides insights into the evolving landscape of blockchain-driven carbon markets and proposes strategies for enhancing their effectiveness in combating climate change. tokenization, automated verification and decentralised governance models.