The origin of carbon markets can be traced back since the early 1990âs with initiatives like the USA Clean Air Act and the Kyoto Protocol, and over these past three decades the ecosystem continues to evolve and grow to meet its ultimate goal of reducing carbon concentration in our planet. The present chapter aims to describe the latest developments across the ecosystem standards, especially developments involving the use of distributed ledger technologies.
Ellen Louise Miland Peytz, Patricia Lindqvist Bernburg
Pollution affects the earth and our future, which is why it is important to focus on how to reduce the excessive emissions we are seeing today. The current approach for addressing the problem does not lead to sufficient reduction in the level of pollution; hence it is highly relevant to look for alternative ways to regulate and guide behaviour. In this paper, a decentralised regulatory principle - the Beneficiary-Compensates Principle (BCP) (Gudmundsson et al. 2024) - is analysed as a supplement to the current pollution regulation. The BCP proposes reward rather than punishment â that is, those who reduce their pollution are compensated for their reduction, instead of the general approach where polluters are penalised. The decentralised aspect is included in the principleâs implementation using blockchain technology and the use of smart contracts to facilitate compensation. In the analysis, we explore the need for perfect knowledge about the benefits, as well as the realism behind the assumption of quasilinear preferences. In addition, we look at the challenges associated with the implementation phase. All this is summarised in the discussion, where we consider, among other things, in which scenarios BCP can be successfully implemented and whether these scenarios are also those where the current handling falls short. The scenarios we discuss are at the local level, where there are either no resources or prioritisation to involve central coordination, as well as at the global level. We conclude that BCP has great potential, but there are some barriers such as lack of self-enforcement and the fact that the principle is still under development and therefore relatively unknown to the general public. There is a need to demonstrate usability and build trust for the principle to really be considered as a viable supplement.
Decentralized renewable energy (DRE) systems are becoming a vital part of solving energy access issues and fostering sustainable development in developing countries.In this discussion, we explore how different legislative, economic, and entrepreneurial frameworks can help expand the reach of DRE technologies.We place particular emphasis on the importance of public-private partnerships, innovative business models, and targeted investment strategies that cater to local markets.Despite these hurdles, tremendous opportunities are waiting to be tapped.Creative financing options, community-driven energy projects, and investments focused on climate solutions can all play a crucial role.The transition to renewable energy not only has the potential to create jobs and bolster economic resilience but also to empower youth and communities through skill development and entrepreneurial ventures.Educational institutions and collaborative stakeholder efforts need to step in and help bridge the skills gap, driving inclusive growth.Ultimately, we conclude that a comprehensive and integrated approach, one that combines supportive legislation, financial innovation, and grassroots involvement, is essential for unlocking the full potential of decentralised renewable energy systems.By pursuing these initiatives, we can move toward a just and equitable energy transition that contributes to climate resilience and sustainable development, particularly in the Global South.Significance:
This paper explores the governance paradox within Climate Decentralized Autonomous Organizations (DAOs), offering an analytical framework for understanding decentralized accountability and impact in climate-related initiatives.Climate DAOs, which leverage blockchain technology to drive transparent, community-based environmental projects, face unique challenges in balancing decentralization with effective governance.This study examines the theoretical foundations of decentralized governance, accountability mechanisms, and impact measurement systems within these organizations.Through case studies of leading Climate DAOs such as KlimaDAO, Regen Network, and Toucan Protocol, the paper identifies key governance structures, accountability practices, and impact assessment methodologies.A central theme of this paper is the governance paradox, where the decentralization of decision-making power can lead to both empowerment and fragmentation.The proposed analytical framework provides a comprehensive approach for evaluating governance and assessing the tangible impacts of climate initiatives.This paper contributes to the growing body of literature on decentralized governance and climate action, offering insights for researchers, practitioners, and policymakers working at the intersection of blockchain, sustainability, and governance.
Addressing the shortcomings of the Voluntary Carbon Markets (VCMs), a nascent blockchain industry has disrupted this area with an ever-growing number of projects leveraging open-source, decentralised base-layer platforms (e.g. Ethereum, Cosmos) and business-oriented decentralized applications (Dapps). Building on this emerging digital infrastructure over the Internet, community-driven decentralized autonomous organizations (DAOs) are building new socio-technical systems for decentralized finance (DeFi) and, more recently, regenerative finance (ReFi). Both areas are making their way into VCMs promising improved transparency, efficiency and greater accessibility. This paper examines the goals, scope, and intended outcomes of prominent blockchain-based ReFi projects in the VCM space. In particular, it explores the potential for commons-based outcomes emerging from peer-to-peer configurations in the VCM. Using a qualitative approach, the study analyses text-data from industry whitepapers focusing on the cases of Celo, Regen, Toucan, Klima and Moss. The findings show the ReFi ecosystem as a low-transaction-cost environment fostering open-source prototypes of peer-production for carbon accounting and trading. These innovations materialize through application interfaces operating on base-layer blockchains running smart-contracts and tokens. The tokenization of real-world assets (RWA) or rights (e.g. renewable energy generation, storage capacity, or forestry land) and the automation of operations (e.g. exchanges) via smart contracting, provides participants with new affordances for secure, bi-directional coordination in near-real time. The preliminary conclusion is that, while the ReFi organizations considered seem to be Ostrom-compliant with regard to some principles (e.g. clearly defined boundaries, procedures for making own rules, monitoring, or minimal recognition of rights) others are still ad-hoc practices or work in progress (e.g. graduated sanctions or dispute resolution mechanisms). This study contributes to the critical exploration of enhanced governance mechanisms, enabled by technological innovation, that can address climate action challenges and provide viable alternatives to traditional market-based approaches.
The global climate crisis demands urgent and transformative financial mechanisms to support mitigation and adaptation efforts. Traditional climate finance models face significant challenges, including inefficiency, limited transparency, and inequitable access, particularly for marginalized communities. Decentralized Finance (DeFi), based on blockchain technology, offers a promising solution by enhancing transparency, utilizing smart contracts, and enabling decentralized governance. This study explores the role of DeFi in revolutionizing climate finance through a mixed-methods approach. It combines quantitative analysis of blockchain-based climate finance transactions with qualitative insights from industry experts, policymakers, and developers. The findings reveal that DeFi can reduce transaction costs, improve transparency, and democratize access to climate funds, with case studies such as KlimaDAO and the Toucan Protocol illustrating its potential in carbon credit systems and renewable energy projects. However, challenges such as regulatory uncertainty, technical vulnerabilities, and scalability issues persist. This research contributes to the growing discourse on integrating DeFi into climate finance by proposing a conceptual framework for its application and outlining future research directions. The results have significant implications for academics, practitioners, and policymakers striving to create effective, scalable solutions for financing climate action.
Sohaib Uz Zaman, Muhammad Mohtashim, Syed Hasnain Alam
The investigation examines private financial institutions which act as decentralized development planners in Pakistan to explain how institutional channels enable financial actors to guide corporate ESG behavior. The worldwide increase in sustainable finance activity has resulted in limited academic research on its actual effects in emerging economies. The research analyses the effectiveness of influence channels such as reputation, divestment, litigation and ratings which shape sustainable productive investment. This research employed a cross-sectional design to gather data using structured questionnaires from Pakistani professionals working in banking, insurance, and regulations sectors who focus on ESG matters. SmartPLS 4.0 performed Partial Least Squares Structural Equation Modeling on the data which verified the direct and mediated relationships that exist between ten elements of the Channels of Influence framework. Multiple moderating factors such as coalition-building and litigation strengthen the force that ESG capital has over sustainable investments. The research presents a specific multivariate model that sheds light on ESG finance operations within developing economic frameworks. The research provides strategic guidance to Pakistani regulators and investors about aligning institutions and policies to strengthen climate finance transitions.
Lorenzo Ceragioli, Pierpaolo Degano, Letterio Galletta, Luca Viganò
People increasingly use digital platforms to exchange resources in accordance with some policies stating what resources users offer and what they require in return. In this paper, we propose a formal model of these environments, focussing on how users' policies are defined and enforced, so ensuring that malicious users cannot take advantage of honest ones. To that end, we introduce the declarative policy language MuAC and equip it with a formal semantics. To determine if a resource exchange is fair, i.e., if it respects the MuAC policies in force, we introduce the non-standard logic MuACL that combines non-linear, linear and contractual aspects, and prove it decidable. Notably, the operator for contractual implication of MuACL is not expressible in linear logic. We define a semantics preserving compilation of MuAC policies into MuACL, thus establishing that exchange fairness is reduced to finding a proof in MuACL. Finally, we show how this approach can be put to work on a blockchain to exchange non-fungible tokens.
Alberto Ballesteros-RodrĂguez, Juan De-Lucio, MiguelâĂngel Sicilia
The voluntary carbon market offers a flexible and cost-effective way to reduce greenhouse gas emissions, which has led to increased interest in these markets. Within the decentralized finance ecosystem, Decentralized Autonomous Organizations leverage the tokenization of carbon credits to enhance efficiency and transparency. KlimaDAO, established in August 2021, aims to accelerate the adoption of carbon markets by integrating blockchain technology to facilitate transparent, secure, and accessible carbon trading. This study analyzes the evolution of KlimaDAO by evaluating its market capitalization, token prices, staking participation, carbon credit retirements, market participation, and concentration. The analysis reveals that while KlimaDAO initially achieved significant engagement and activity, it now faces challenges associated with market maturity and participant retention. Finally, the study highlights the importance of standardization and regulatory frameworks to enhance interoperability, transparency, and legitimacy within the tokenized carbon market.
Based on the provincial panel data from China, this study explores the impact of digital finance on provincial carbon productivity. Further, the regional heterogeneity and spatial spillover effect, the moderating effects of financial supervision and environmental decentralization, and the mediating effect of green technology innovation are analyzed. The results show that digital finance can significantly improve provincial carbon productivity, and clearly promote carbon productivity in the underdeveloped provinces (i.e., central and western regions), but not in the economically developed provinces (i.e., eastern region). Digital finance has a positive spatial spillover effect on carbon productivity. In addition, financial supervision and environmental decentralization play moderating effects in the impact of digital finance on carbon productivity. Green technology innovation plays a partial mediating effect in the impact of digital finance on carbon productivity. This study provides a reference for improving carbon productivity and developing a low-carbon economy.
The global energy sector is undergoing a significant transformation, driven by the emergence of âprosumersâ - individuals who generate and consume energy. This shift is redefining traditional roles and is propelled by a growing demand for sustainable and renewable energy. Prosumers utilize decentralized energy sources, such as solar panels and wind turbines, enhancing energy independence by producing their own energy and selling any surplus back to the grid. However, this decentralized landscape presents challenges in accurately tracking carbon emissions and establishing equitable pricing mechanisms. In response to these challenges, we propose an innovative blockchain-based peer-to-peer (P2P) trading platform for carbon allowances. This novel approach gives prosumers a decisive influence over energy pricing, ensuring a more equitable distribution of energy resources. The blockchain framework benefits from decentralization, promoting transparency, security, and an immutable record of energy transactions and carbon emissions. To evaluate the platformâs effectiveness, we will initiate a real-world pilot project within the Education City Community Housing (ECCH) to gather empirical data over one year. The pilot will involve various participantsâincluding prosumers and traditional consumersâand will meticulously monitor energy production, consumption, and trading activities. By comparing this decentralized system with traditional energy models, we aim to assess its impact on carbon emissions, user satisfaction, and overall economic viability, paving the way for a sustainable energy future. ⢠Web-Based Energy and Carbon Trading Marketplace. ⢠Collect and analyze energy and carbon trading market dynamics in a residential neighborhood market. ⢠Blockchain platform to verify the feasibility of the use of a decentralized trading application.
This paper aims to comprehensively examine the impact of China's environmental decentralization on corporate environmental, social, and governance (ESG) performance and investigate the underlying mechanisms. We analyze data from Chinese listed firms spanning from 2010 to 2020. The empirical findings demonstrate that: Firstly, environmental decentralization significantly inhibits corporate ESG performance. Secondly, fiscal decentralization acts as a moderating factor whereby an increase in its level strengthens the inhibitory effect of environmental decentralization on corporate ESG performance. Thirdly, heterogeneity analysis reveals that the impact of environmental decentralization varies across different types of firms in terms of their ESG performance. Privately-owned, high-polluting, and high-tech companies are particularly inclined to reduce their ESG performance with increasing levels of environmental decentralization. Finally, our mechanism analysis indicates that environmental decentralization curtails ESG practices by exacerbating financing constraints for firms and deregulating ecological environments. These conclusions remain robust after addressing potential endogeneity issues and conducting various sensitivity tests. These findings offer valuable insights for policymakers to promote sustainable economic development.
Abstract State-of-the-art macroeconomic agent-based models (ABMs) include an increasing level of detail in the energy sector. However, the possible financing mechanisms of renewable energy are rarely considered. In this study, an investment model for power plants is conceptualized, in which energy investors interact in an imperfect and decentralized market network for credits, deposits and project equity. Agents engage in new power plant investments either through a special purpose vehicle in a project finance (PF) structure or via standard corporate finance (CF). The model portrays the growth of new power generation capacity, taking into account technological differences and investment risks associated with the power market. Different scenarios are contrasted to investigate the influence of PF investments on the transition. Further, the effectiveness of a simple green credit easing (GCE) mechanism is discussed. The results show that varying the composition of the PF and CF strategies significantly influences the transition speed. GCE can recover the pace of the transition, even under drastic reductions in PF. The model serves as a foundational framework for more in-depth policy analysis within larger agent-based integrated assessment models.
Professor Rebecca Willis in an interview with Josh Emden Josh Emden (JE): We've heard that the Labour government have talked about a âdecade of national renewal' and has a very explicit clean growth mission. At the same time we know that the government will soon need to start decarbonising sectors (for example heat decarbonisation) that people will start to feel impacted by more directly in order to keep track with net zero targets. How do you maintain public support for what could be substantive policy interventions over a sustained period of time? âpeople have next to no confidence about government's ability to lead and to get things doneâ JE: On that point about showing it in their policies, we've seen how the government is moving quickly on things like planning reform to speed up developments like onshore wind and solar farm development. From your perspective, what would successful engagement actually look like in practice and how do you kind of encourage people to buy into a process that seems like it's moving so quickly? âDon't just present them with a wind turbine project where the only possible input is a yes or noâ There might be some areas where that just might not be possible, the obvious one being the sightliness of pylons, since it costs a lot more to reroute or to go underground. But in those cases, you still need to explain to people properly why these pylons have to go here and reassure them that the government will do what they can to help the community. People should be involved as equal stakeholders alongside industry and government when discussing how the net zero goal should be achieved. JE: How would you get companies to commit to this? RW: So this is something that the new government could literally pick up off Ed Davey's old desk from when he was secretary of state for energy and climate change back in 2015. Just before the onshore wind ban, he set up a taskforce to get community energy players to talk to the renewables industry about how to offer shared ownership and I was co-chair of that taskforce. We negotiated that developers should be required to offer a stake in ownership to local communities, for example through enabling them to buy a 10 per cent stake of the site through a co-op. The way that we envisaged it was that it would initially be a voluntary agreement, but that it would move to legislation if the developers didn't make an effort. JE: We've talked about ways to engage with citizens but how do you also avoid a potential accusation of nimbyism and creating too much red tape? âthe actual battle is, as the Labour party knows well, is for the centre groundâ By taking concerns seriously, you can develop a really good working relationship with people, which then prevents that sort of unhelpful blanket opposition. We've been talking about wind turbines but it's exactly the same with other policy proposals, whether that's low traffic neighbourhoods or heat pumps. âjust myth-busting is not going to do the jobâ RW: Engaging the majority of people who may worry about climate change but for whom it isn't front of mind is the key here because it gives you a social mandate for change. At the moment, reflecting their views is mainly done through polling, but polling's too much of a snapshot. A better way is through the kind of deliberative research we do, like climate assemblies and juries, where you're actively recruiting those people, asking them to spend a decent amount of time on learning and giving their views, and you're normally paying them for their role as well. This kind of work could be replicated by having a kind of standing panel or body, either at local or national level, ideally both. For example, at national level, you could have a citizens' climate panel, which worked alongside the same sort of timeline as the climate change committee. In this scenario, the climate change committee are the expert technocrats and the panel would work in conjunction with them to offer citizens' views. The climate change committee have actually already gone quite a long way down that route, and they are now using deliberative research as one of their ways of developing their carbon budget proposals. You could also institutionalise this model as a permanent panel that could sit within parliament. JE: How do you make sure a panel like that is not perceived to be superseding democratic processes? RW: You obviously have to recognise parliament as the sovereign body and so to be democratically sound, any kind of citizens' panel or deliberative forum would have to report to parliament. You can then put some safeguards in place, which require parliament to respond to it the same way that they do for the climate change committee, for example. âthe absolute worst thing you can do as a policymaker is assume that your household is typicalâ It's also worth saying that getting citizens involved in co-design of policy is second nature for other policy areas like health. For example, if you're designing a new approach for the management of a chronic condition like diabetes, for instance, you would always ask patients and their families. The idea of designing a service for diabetes without engaging patients nowadays is crazily old fashioned and paternal. Citizens' engagement for climate change needs to be just as normal and routine. JE: How big or small should a citizens' climate panel be? RW: There's no reason why you have to go really big with these processes. It's often better to have small numbers and having detailed discussions in a deliberative format tells you all you need to know. We've actually tested this. We did some research on public attitudes towards advertising of high carbon products and services. We compared the findings from a citizens' jury of 25 people and a poll of 2,000 people. The results from each were really consistent with each other. JE: What are some examples of best practice you've seen when it comes to engaging citizens? RW: I'd point to the journey the climate change committee has been on to include social research and particularly deliberative research in their advice to government. This started with Chris Stark's engagement in Climate Assembly UK, the national climate assembly that parliament ran in 2019 to 2020. He was involved in that, was sceptical beforehand but he actually said that the process taught him the importance of going out and talking to people, giving them the time and space to develop their views, and as a result, the climate change committee changed the way that it gathers its evidence for its advice to government and is now including deliberative research and social research. So that is a really good model now and it allows them to give advice to government, which has been socially proofed and isn't competing against technical or economic analysis. âit allows them to give advice to government, which has been socially proofedâ RW: There is a huge amount of climate misinformation online but to an extent that is filling a vacuum because for a long time politicians have not made the positive case for climate action and there hasn't been that kind of shared agenda. We've just done a meta-analysis of all the recommendations of all the citizens' juries and climate assemblies in the UK that have taken place and the number one recommendation by far is a desire from participants for more information, education and leadership on climate. And people really feel this strongly and often end up asking: If we are facing a climate emergency, why aren't people talking about it all the time? Rebecca Willis is a researcher with 20 yearsâ experience in environment and sustainability policy and practice, at international, national and local level. She is a professor in practice at Lancaster Environment Centre, and an expert lead for Climate Assembly UK, the national Citizens' Assembly commissioned by parliament. In 2009 Rebecca founded Green Alliance's Climate Leadership Programme, an initiative to support members of the UK parliament, and still supports Green Alliance's work in this area. Previously, she was a member of the Scientific Advisory Committee for the UKRI Energy Programme, council member of the Natural Environment Research Council, vice-chair of the UK Sustainable Development Commission, and director of Green Alliance.
Abdul Hamid Paddu, Indraswati Tri Abdi Reviane, Nur Dwiana Sari Saudi, Fitriwati Djamâan ¡ 6 authors
This study investigates a fresh perspective on how natural resource rents (NRR) and quantity of natural resources (QNR) modulate the influence of fiscal decentralization (FD) and the Financial Development Index (FDI) on energy efficiency (ENE) and CO2 Emissions. We draw upon the Stochastic Impacts of Regression on Population, Affluence, and Technology framework, taking the BRICS countries as the subject of investigation from 1986 through 2021. Using a panel Method of Moments Quantile Regression with fixed effects, our results suggest that fiscal decentralization is favorable for environmental stability, particularly in BRICS countries with higher energy efficiency and CO2 Emission levels. Increased FDI proves environmentally harmful, with pronounced effects in more energy-efficient nations. Regarding direct influences, NRR and QNR hinder energy and CO2 efficiency, notably in countries with lower energy efficiency and CO2 emissions. Regarding indirect effects, NRR and QNR positively steer the impact of fiscal decentralization and the Financial Development Index on energy efficiency and CO2 Emissions, exhibiting stronger effects in energy-efficient nations. Among other control variables, Eco-Innovation (ECO_INNO), Solar energy production (SEP), Population (POP), and Economic Growth (GDP) foster environmental stability. We propose that fiscal decentralization should be based on a clear and responsible subnational government framework to counter rent-seeking behaviors and weak environmental conservation. Further, inclusive finance must strengthen the accessibility and cost-effectiveness of financial solutions for economic agents, promoting green consumption and investment initiatives to reach environmental stability and other Sustainable Development Goals.
Abstract This paper extends the climate literature by examining the feasibility of integrating subânational governance into global club governance for mitigating CO 2 emissions. Global climate clubs become an argument for having separate bundles of emission targets and incentive mechanisms in the form of opportunities for climate finance and technology sharing among the club members. An exploratory analysis is important to examine the role of import and export taxes and other channels, such as the clean development mechanism, in meeting the objective of nonmember countries to join the club. The crux, however, is how, after determining nationalâlevel quotas, the mitigation responsibilities are shared with subnational entities. We propose a design of a carbon entry tax at the subnational level, namely states, districts, and municipalities. The carbon entry tax uses the nighttime luminosity data published by NASA as a measure of carbon, which constitutes the tax base. The carbon entry tax serves as a fiscal instrument of decarbonization in a decentralized framework.
Abstract Based on the perspective of fiscal decentralization, the study focuses on 30 provinces in China and employs various econometric models including the threshold model, spatial econometric model, mediation model, and regulation model. The research findings indicate that fiscal decentralization has a doubleâthreshold effect on government intervention, market mechanisms, and regional carbon emission reduction. Both government intervention and market mechanisms have inhibiting effects on carbon emission, with significant coefficients of GOVI and MARM at the 1% level. The cooperation between government intervention and the market mechanism effectively limits carbon emissions. Government intervention facilitates regional carbon emission reduction through the construction of new infrastructures and energy structure transformation, yielding a significant intermediary effect. The market mechanism is positively regulated through green finance and technology innovation to promote regional carbon emission reduction. Moreover, government intervention enables the market to achieve carbon emission reduction more effectively, especially in areas with a higher degree of government intervention. Continuous improvement and upgrading of regional and national carbon markets are essential to attain the carbon peak and carbon neutrality goals. Furthermore, attracting more participants to these markets for emission control subjects is necessary to enhance the effectiveness of governmentâmarket coordination.