Blockchain for Governance of Sustainability Transparency in the Global Energy Value Chain: Part 2, Reconciling the Technology/Regulation Mismatch

Abstract

In this second part of a two-part article we continue our consideration of how global energy value chains could be managed more sustainably through blockchain by greatly increasing transparency. The aim is to use this transparency to incentivise more sustainable behaviour on the part both of energy producers and suppliers and of consumers. Incentives of this kind are market based, and so we have concentrated on market-based instruments in the energy sector, emphasising those that decrease the CO2 footprint of energy consumption, such as emissions trading schemes and renewable energy certificates. Blockchain can enhance transparency by improving the quality of, and access to, sustainability-related information. However, existing laws and regulatory frameworks that govern market-based instruments may prevent these benefits from becoming fully realised. We review the governance frameworks of market-based instruments in several international jurisdictions (Brazil, India, Kazakhstan, Mexico, South Africa and Ukraine, as well as the European Union with particular reference to the Netherlands and United Kingdom (which was a member of the EU at the time of this writing), to ascertain how laws, rules and regulations may limit transparency of sustainability information. We also consider jurisdictional differences to identify difficulties in the creation of a global framework for managing sustainability information from market-based instruments. Jurisdictional differences mean that a one-size fits all solution may not be possible. To overcome this, we propose a blockchain governance model, using aggregated blockchains and peering agreements. It allows flexibility when disclosing information, through layering of permissions, and this means that it should be possible to construct a transparency system which complies with existing domestic legal and regulatory requirements, rather than requiring major legal and regulatory change.