Abstract
Enormous amounts of capital will need to be mobilized in the coming decades to drive the transition of our global economy toward climate neutrality. In recent years, the financial system started to move in a more environmentally sustainable direction, inter alia offering more green investment opportunities. Speeding up this process is inevitable if humanity wants to meet the Sustainable Development Goals (SDGs) and achieve the targets of the Paris Climate Agreement. Distributed Ledger Technology (DLT) may enable climate finance to effectively accelerate this transition toward sustainability. Inherent characteristics like security, immutability, transparency, and auditability make DLT a highly promising tool for climate-related use cases. However, the mainstream adoption of these digital innovations is still constrained by various obstacles, including technological and regulatory barriers, especially in the highly regulated finance sector. Existing digital divides between developed and developing nations further exacerbate these challenges. Based on these initial deliberations, this chapter shows how DLT can be used effectively for innovative climate finance. We first introduce the technology and discuss its sustainability as well as different possible DLT governance structures. Based on this introduction, we provide an overview of sustainability-related initiatives and networks linked to DLT. We review various DLT applications in Decentralized Finance (DeFi), asset management, Measurement, Reporting and Verification (MRV), tokenization, and other relevant fields. We conclude with an outlook on the role of DLT in climate finance and present recommendations for overcoming some of the remaining risks and obstacles.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
References
Andoni M, Robu V, David F, Abram S, Geach D, Jenkins D, McCallum P, Peacock A (2019) Blockchain technology in the energy sector: A systematic review of challenges and opportunities. Renew Sustain Energy Rev 100:143–174
Arbol. (2021). Arbol. https://www.arbolmarket.com/. Accessed 27 Nov 2021
BlackRock (2020) Sustainability goes mainstream—2020 global sustainable investing survey. https://www.blackrock.com/corporate/literature/publication/blackrock-sustainability-survey.pdf. Accessed 27 Nov 2021
Climate Bonds Initiative (2021) Record $269.5 bn green issuance for 2020: Late surge sees pandemic year pip 2019 total by $3 bn. https://www.climatebonds.net/2021/01/record-2695bn-green-issuance-2020-late-surge-sees-pandemic-year-pip-2019-total-3bn. Accessed 27 Nov 2021
Climate Chain Coalition (2021) Climate Chain Coalition. https://www.climatechaincoalition.io/welcome. Accessed 27 Nov 2021
DeFi Pulse (2021) Total value locked (USD) in DeFi. https://defipulse.com/. Accessed 27 Nov 2021
Digiconomist (2021) Bitcoin/Ethereum energy consumption index. https://digiconomist.net/bitcoin-energy-consumption. Accessed 27 Nov 2021
Dorfleitner G, Braun D (2019) Fintech, digitalization and blockchain: possible applications for green finance. In: The rise of green finance in Europe. Palgrave Macmillan, pp 207–237
Dorfleitner G, Muck F, Scheckenbach I (2021) Blockchain applications for climate protection: A global empirical investigation. Renew Sustain Energy Rev 149:111378
Dutch Blockchain Coalition (2021) About the Dutch blockchain coalition. https://dutchblockchaincoalition.org. Accessed 27 Nov 2021
Ehlers T, Mojon B, Packer F (2020) Green bonds and carbon emissions: exploring the case for a rating system at the firm level. BIS Quarterly Review, September 2020
ethereum.org. (2020) Upgrading Ethereum to radical new heights. https://ethereum.org/en/eth2/. Accessed 27 Nov 2021
EU Blockchain Observatory and Forum (2021) FAQ. EU Blockchain Observatory and Forum. https://www.eublockchainforum.eu/faq. Accessed 27 Nov 2021
European Commission (2018) European Commission launches the EU Blockchain Observatory and Forum. https://ec.europa.eu/commission/presscorner/detail/en/IP_18_521. Accessed 27 Nov 2021
European Commission (2020) Digital finance package: Commission sets out new, ambitious approach to encourage responsible innovation to benefit consumers and businesses. https://ec.europa.eu/commission/presscorner/detail/en/IP_20_1684. Accessed 27 Nov 2021
European Commission (2021a) Blockchain Strategy. https://digital-strategy.ec.europa.eu/en/policies/blockchain-strategy. Accessed 27 Nov 2021
European Commission (2021b) European green bond standard. https://ec.europa.eu/info/business-economy-euro/banking-and-finance/sustainable-finance/european-green-bond-standard_en. Accessed 27 Nov 2021
European Commission (2021c) Sustainable Finance and EU Taxonomy: Commission takes further steps to channel money towards sustainable activities. https://ec.europa.eu/commission/presscorner/detail/en/ip_21_1804. Accessed 27 Nov 2021
European Investment Bank (2021) EIB issues its first ever digital bond on a public blockchain. https://www.eib.org/en/press/all/2021-141-european-investment-bank-eib-issues-its-first-ever-digital-bond-on-a-public-blockchain. Accessed 27 Nov 2021
Franke L, Schletz M, Salomo S (2020) Designing a blockchain model for the Paris Agreement’s carbon market mechanism. Sustainability 12(3):1068
HSBC and Sustainable Digital Finance Alliance (2019) Blockchain Gateway for sustainability linked bonds. https://greendigitalfinancealliance.org/wp-content/uploads/2019/12/blockchain-gateway-for-sustainability.pdf. Accessed 27 Nov 2021
Hughes A, Park A, Kietzmann J, Archer-Brown C (2019) Beyond Bitcoin: What blockchain and distributed ledger technologies mean for firms. Bus Horiz 62(3):273–281
International Capital Market Association (2021) Bond market size. https://www.icmagroup.org/Regulatory-Policy-and-Market-Practice/Secondary-Markets/bond-market-size/. Accessed 27 Nov 2021
International Energy Agency (2020) World energy investment 2020. https://www.iea.org/reports/world-energy-investment-2020/
InterWork Alliance (2020) Standardizing Sustainability—How the IWA will make this happen. https://interwork.org/standardizing-sustainability-how-the-iwa-will-make-this-happen. Accessed 27 Nov 2021
IOTA Foundation (2021) IOTA 2.0 DevNet (Nectar)—The Era of IOTA’s decentralization starts here. https://blog.iota.org/iotav2devnet/. Accessed 27 Nov 2021
Kannengießer N, Lins S, Dehling T, Sunyaev A (2020) Trade-offs between distributed ledger technology characteristics. ACM Comput Surv 53(2):1–37
Kim S-K, Huh J-H (2020) Blockchain of carbon trading for UN sustainable development goals. Sustainability 12(10):4021
Liu K-H, Chang S-F, Huang W-H, Lu I-C (2019) The framework of the integration of carbon footprint and blockchain: using blockchain as a carbon emission management tool. Technologies and Eco-innovation towards Sustainability. Springer, Singapore, pp 15–22
Malamas V, Dasaklis T, Arakelian V, Chondrokoukis G (2020) A block-chain framework for increased trust in green bonds issuance. Available at SSRN, 3693638. https://doi.org/10.2139/ssrn.3693638
Mandaroux R, Dong C, Li G (2021) A European emissions trading system powered by distributed ledger technology: an evaluation framework. Sustainability 13(4):2106
Mengelkamp E, Notheisen B, Beer C, Dauer D, Weinhardt C (2018) A blockchain-based smart grid: towards sustainable local energy markets. Comput Sci Res Develop 33(1):207–214
Popov S, Buchanan WJ (2021) FPC-BI: fast probabilistic consensus within Byzantine Infrastructures. J Parallel Distrib Comput 147:77–86
Saberi S, Kouhizadeh M, Sarkis J, Shen L (2019) Blockchain technology and its relationships to sustainable supply chain management. Int J Prod Res 57(7):2117–2135
Schär F (2021) Decentralized finance: On blockchain-and smart contract-based financial markets. Federal Reserve Bank of St. Louis Rev 103(2):153–174
Schletz M, Nassiry D, Lee M-K (2020) Blockchain and tokenized securities: the potential for green finance. ADBI Working Paper Series (1079). https://www.think-asia.org/handle/11540/11466
Schulz K, Feist M (2021) Leveraging blockchain technology for innovative climate finance under the green climate fund. Earth System Governance 7:100084
Schulz K, Gstrein O, Zwitter A (2020) Exploring the governance and implementation of sustainable development initiatives through blockchain technology. Futures 122:102611
Smits M, Hulstijn J (2020) Blockchain applications and institutional trust. Frontiers in Blockchain. https://www.frontiersin.org/article/10.3389/fbloc.2020.00005
Treiblmaier H, Rejeb A, Strebinger A (2020) Blockchain as a driver for smart city development: application fields and a comprehensive research agenda. Smart Cities 3(3):853–872
UNCTAD (2020) World investment report 2020—Chapter V—Investing in the SDGs. Geneva. https://unctad.org/system/files/official-document/WIR2020_CH5.pdf
van Wassenaer L, van Hilten M, van Ingen E, van Asseldonk M (2021) Applying blockchain for climate action in agriculture: state of play and outlook. Food and Agriculture Organization of the United Nations. http://www.fao.org/3/cb3495en/cb3495en.pdf
World Economic Forum (2021) Decentralized Finance (DeFi) Policy-Maker Toolkit. Whitepaper. http://www3.weforum.org/docs/WEF_DeFi_Policy_Maker_Toolkit_2021.pdf
YCharts (2021) Bitcoin/Ethereum average transaction fee. https://ycharts.com/indicators/bitcoin_average_transaction_fee. Accessed 18 Nov 2021
Yoshino N, Schloesser T, Taghizadeh-Hesary F (2020) Social funding of green financing: An application of distributed ledger technologies. Int J Financ Econ. https://doi.org/10.1002/ijfe.2108
Zhou Q, Huang H, Zheng Z, Bian J (2020) Solutions to scalability of blockchain: a survey. IEEE Access 8:16440–16455
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Appendix
Rights and permissions
Copyright information
© 2022 The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd.
About this chapter
Cite this chapter
Schloesser, T., Schulz, K. (2022). Distributed Ledger Technology and Climate Finance. In: Taghizadeh-Hesary, F., Hyun, S. (eds) Green Digital Finance and Sustainable Development Goals. Economics, Law, and Institutions in Asia Pacific. Springer, Singapore. https://doi.org/10.1007/978-981-19-2662-4_13
Download citation
DOI: https://doi.org/10.1007/978-981-19-2662-4_13
Published:
Publisher Name: Springer, Singapore
Print ISBN: 978-981-19-2661-7
Online ISBN: 978-981-19-2662-4
eBook Packages: Economics and FinanceEconomics and Finance (R0)