Carbon Credits Meet Blockchain – Cryptocarbon Projects and the Algorithmic Financialization of Voluntary Carbon Markets

Abstract

The climate crisis has led to the development of projects that are focused on reducing carbon emissions through market mechanisms. This paper explores regenerative finance (ReFi), an emerging movement that uses blockchain to create new financial instruments and platforms to facilitate the financing of sustainability projects. Many ReFi initiatives are cryptocarbon projects, which blend blockchain with carbon credits to accelerate emissions reduction by rapidly scaling up carbon markets. Through document analysis of the white papers of cryptocarbon projects, this study argues that voluntary carbon markets (VCMs) are further financialized by blockchain. Interrogating the claims made by cryptocarbon projects and the governance mechanisms surrounding tokenized carbon-based assets, this paper shows how the application of blockchain to carbon markets may produce distinctive forms of financialization. Such blockchain-based financialization worsens the governance of VCMs by untethering the spatial linkages between carbon credits and their underlying conservation projects. Moreover, the speculative tendencies of cryptocurrency markets make cryptocarbon projects highly susceptible to fluctuating interest in cryptocurrencies and other tokenized assets. This may prevent cryptocarbon projects from realizing their original goal of tackling the climate crisis by using blockchain to boost emissions reduction.