How Blockchain-based Carbon Trading Software Can Supercharge Your Sustainability Efforts?

The escalating threat of climate change has undeniably emerged as a significant global concern, impacting the future of our planet. Recognizing the urgency of the situation, numerous international agencies and globally renowned companies across diverse industry verticals are actively exploring innovative strategies to mitigate the carbon footprint and secure a sustainable future for generations to come.

Amidst the multifaceted challenge posed by climate change, various initiatives have been introduced. Each represents a unique piece of the puzzle aimed at solving the crisis. Among those pieces, carbon trading is considered an ideal fit to complete the picture. Companies worldwide are showing a keen interest in leveraging blockchain-based carbon trading software to facilitate transparent, secure, and efficient transactions. This trading mechanism allows companies to participate in the global movement of addressing environmental concerns and fostering a more sustainable future. 

This blog will explore why businesses must invest in blockchain-based carbon trading software to buy and sell carbon credits. 

What is Carbon Trading and How it Works?

Carbon trading, also known as carbon emission trading, involves buying and selling carbon credits and allowing a company or other entity to emit a certain amount of carbon dioxide or other greenhouse gases. Both carbon credits and the carbon trade are authorized by governments.

Carbon trading is based on the cap and trade regulation that has emerged as the best way to address the much larger challenge of reducing sulfur pollution during the 1990s. The cap and trade regulation introduces the market-based incentive model to reduce the carbon footprint. 

• The government sets a cap on total allowable emissions and companies issue permits corresponding to their allotted emissions. 
• If a company emits less than the allocated amount, it can sell its surplus permits to companies exceeding their limits. 
• In the same way, businesses exceeding their emission cap purchase additional permits or face a financial penalty. 
• This model rewards companies that mitigate their emissions

The Pitfalls of the Existing Carbon Trading System

• Lack of Transparency

According to the Guardian, more than 90 percent of rainforest offset credits that Verra approves do not represent genuine carbon reductions. The existing carbon trading system often lacks transparency which raises concerns about the accuracy of emission data and authenticity of carbon credits. Such opacity leads to major problems like greenwashing. 

• Involvement of Carbon Cowboys and other Intermediaries

The traditional carbon trading system involves so-called “carbon cowboys” who act as middlemen working in poorly governed carbon markets. These middlemen pay offset project developers and communities less than what they deserve and then further sell the credits with a big margin to their buyers in developed countries. Such unethical practices not only make carbon trading inefficient but reliance on such intermediaries (brokers, retailers, or carbon cowboy dealers) contributes to prolonged transaction times. 

• Limited Accessibility

The current carbon trading system is complex and inaccessible for smaller businesses with budget constraints. From high intermediary fees to transaction costs, intricate procedures to the need for specialized knowledge somehow restrict the smaller players from participating in carbon trading. This limitation inhibits the inclusivity of carbon trading and restricts its impact in achieving widespread emission reductions. 

How Blockchain-based Carbon Trading Software Addresses the Shortcomings of Today’s Systems?

• Open Data infrastructure

The lack of transparency often restricts access to high-quality, reliable data, which is crucial for decision-making. A blockchain-based carbon trading software has an open-data infrastructure that ensures secure and transparent sharing of data and enables businesses to identify new climate-friendly opportunities and assess risk associated with it. 

• Accelerates the Carbon Trading Process 

The current carbon trading marketplace involves numerous intermediaries that result in delays. Blockchain-based carbon trading software eliminates the need for brokers and intermediaries, as smart contracts directly connect buyers and sellers, which reduces transaction costs, increases transparency, and makes the carbon trading process quicker.

• Expand Voluntary Markets

Blockchain-based carbon trading software is a prominent tool that plays a crucial role in expanding the voluntary market. The transparent, distributed ledger enables transparent and low-cost carbon trading which makes participation more financially viable for smaller businesses who wish to offset their environmental impact. 

• Decentralization and Democratization

Blockchain-based carbon trading software introduces a decentralized consensus mechanism that eliminates the need for a central authority. This democratization of carbon trading aligns with the principles of environmental stewardship and reduces the risk of manipulation. Participants in the blockchain network collectively validate transactions, which helps build a more inclusive and equitable system.

• Enhanced Traceability and Accountability

From the point of origin to the final carbon credit issuance, every step is recorded on the immutable ledger of blockchain-based carbon trading software. This increased traceability ensures accountability, reduces the risk of fraudulent activities, and offers a more robust and trustworthy system for carbon trading. 

Conclusion

To conclude, blockchain-based carbon trading software can revolutionize the way carbon credits are bought, sold, and traded. The technology addresses the existing challenges and introduces a new paradigm of transparency, accessibility, and efficiency throughout carbon trading.

Antier understands how blockchain is redefining carbon trading and helping businesses or entities intensify their efforts to combat climate change. Our blockchain developers are always ready to assist businesses from industry verticals to leverage blockchain for efficient carbon trading. Our multidisciplinary team of carbon credit trading platform development builds a promising platform for a more sustainable and accountable system. Schedule a call with our team to get detailed information about our carbon credit development and other related services.