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Open AccessArticle

Blockchain Application for the Paris Agreement Carbon Market Mechanism—A Decision Framework and Architecture

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UNEP DTU Partnership, Department of Technology, Management, and Economics, Technical University of Denmark, 2100 Copenhagen, Denmark
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Microsoft, Azure Specialist for Data, Artificial Intelligence and Blockchain, 80797 Munich, Germany
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Technology and Innovation Management, Technical University Berlin, 10623 Berlin, Germany
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DTU, Technical University of Denmark, Center for Entrepreneurship, 2400 Kgs. Lyngby, Denmark
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Author to whom correspondence should be addressed.
Sustainability 2020, 12(12), 5069; https://doi.org/10.3390/su12125069
Received: 24 May 2020 / Revised: 7 June 2020 / Accepted: 15 June 2020 / Published: 22 June 2020
(This article belongs to the Section Climate Change)
This paper evaluates the suitability of blockchain technology for the Article 6.2 carbon market mechanism of the Paris Agreement. The bottom-up approach of the Paris Agreement causes challenges to the robust accounting of mitigation outcomes and information asymmetry, both of which result from a high number of heterogeneous emission accounting systems. Blockchain is an innovative technology that can act as an aggregation platform for these fragmented systems while enhancing transparency and automating accounting processes. However, this new technology is not a panacea for all problems, and the trade-offs of applying blockchain technology need to be assessed case by case. We create and apply an eight-step decision framework for testing the applicability of the technology for the Paris Agreement Article 6.2 carbon market mechanism. The analysis shows that, under current mechanism specifications, a blockchain application can enhance transparency and increase automation, thereby eliminating information asymmetry. We outline a system architecture that allows the linking of the heterogeneous systems, the integration of an Article 6.2 exchange mechanism, and the progress tracking of climate targets. This blockchain architecture offers national Parties the opportunity to co-create a decentralised system in line with the bottom-up ethos of the Paris Agreement. View Full-Text
Keywords: Blockchain; decision framework; climate policy; carbon markets; Paris Agreement; Article 6; permissioned; permissionless; Climate Warehouse Blockchain; decision framework; climate policy; carbon markets; Paris Agreement; Article 6; permissioned; permissionless; Climate Warehouse
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Schletz, M.; Franke, L.A.; Salomo, S. Blockchain Application for the Paris Agreement Carbon Market Mechanism—A Decision Framework and Architecture. Sustainability 2020, 12, 5069.

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