A Blockchain Cross-Border Payment System to Enable a Potential Caribbean Regional Emissions Trading Scheme

Abstract

The implementation of the Nationally Determined Contributions (NDCs) is crucial for achieving the goals of the Paris Agreement. However, the lack of financial support from the international community has been a significant obstacle for the Caribbean Community (CARICOM) Member States. To this end, market-based mechanisms, such as an emissions trading scheme (ETS), included in the Paris Agreement can provide an effective incentive for greenhouse gas (GHG) emitting stakeholders to reduce their emissions and help countries achieve their NDCs. A cross-border payment system is essential for the transfer of funds as well as emissions allowances between regulated entities in different countries in a regional emissions trading scheme. The cross-border payment system needs to be secure, fast, efficient, and cost-effective. Notably, the Caribbean region’s current cross-border payment system is based on correspondent banking, and ill-equipped to properly handle cross-country trading in a potential regional ETS. As a result, blockchain emerges as a practical tool to strengthen the Caribbean’s cross-border payment system to facilitate regional emissions trading. This study explores how a blockchain cross-border payment system can be used for a potential Caribbean emissions trading scheme.