Australia’s carbon market needs to be faster and smarter. Blockchain can help

This article and the research it describes were co-authored by Sam Hartmann, who led the work as a graduate researcher at the University of Melbourne.

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Since 2013, Australia’s policy response to climate change has been the Emissions Reduction Fund, which awards government contracts to projects that reduce carbon emissions by planting trees, flaring landfill gas, improving energy efficiency, and other methods. It is supported by a “safeguard mechanism” that imposes a cap on the largest emitters.

Under the Emissions Reduction Fund, the government has contracted 192 million tonnes of emissions reductions from 433 projects, at an average price of about A$12. There are mixed views about whether these projects will be delivered and if they will effectively reduce emissions.

The Australian government often declares its commitment to free markets. But the current system puts all the responsibility for the carbon market squarely on the government’s shoulders. This must be uncomfortable, and an alternative approach would surely be attractive.

Introducing a blockchain technology to the market’s processes would boost transparency, security, efficiency, and integrity. It would also reduce costs, increase competitiveness, and improve equity for participants in the market.

An Australian carbon market blockchain is an attractive potential solution to some of the problems with the current approach to emissions reductions, and a promising foundation for a more open Australian carbon market in the future.