A European Emissions Trading System Powered by Distributed Ledger Technology: An Evaluation Framework

Rahel Mandaroux,Guodong Li,Chuanwen Dong

doi:10.3390/su13042106

Abstract

The European Union Emissions Trading System (EU ETS) is a major pillar of the European energy policy to reduce greenhouse gas emissions. However, the reportedly pervasive frauds in this market are constraining the beneficial role of the EU ETS. In this conceptual paper, we propose to digitalize the EU ETS by distributed ledger technology (DLT), enabling the verification of authenticity and provenance, proof of ownership, and lifecycle traceability of carbon certificates and assets. Our platform allows verifiable credentials to validate emission allowances, real-time tracking of trading participants’ emissions, and the audit trail reporting of the decentralized trading records. Furthermore, we complement the DLT application concept with a structured interdisciplinary evaluation framework. Our framework and analysis aim to stimulate further interdisciplinary research in this area to support regulators, such as the European Commission, in designing effective digital emissions trading systems.

Highlights

The European Union Emissions Trading System (EU ETS) is the cornerstone of European climate policy to combat climate change
We propose an emissions trading system powered by distributed ledger technology (DLT) to enhance emissions trading and avoid fraudulent activities
We evaluate each factor with respect to the applicability for the EU ETS and elaborate on the consequential challenges for the EU ETS

Summary

Introduction

The European Union Emissions Trading System (EU ETS) is the cornerstone of European climate policy to combat climate change. Set up in 2005, it is the world’s first and largest international mandatory carbon trading program, covering more than 11,000 power stations and industrial plants in 31 countries [1]. It regulates around 50% of the total greenhouse gas (GHG) emissions in Europe. The EU ETS is the cornerstone of Europe’s climate policy to combat climate change It was introduced in 2005 and represents the first and largest emissions trading system of its kind. The EU ETS regulates all European countries plus Iceland, Liechtenstein, and Norway in a cap-and-trade system, covering 45% of all EU’s GHG emissions. The trading volume of carbon emission allowances increased from EUR

Objectives

Results

Conclusion