Smart contract design and process optimization of carbon trading based on blockchain: The case of China's electric power sector

Abstract

Carbon trading is an important market instrument and policy tool to promote China's practice of low-carbon energy conservation and strive to achieve carbon peaking by 2030 and carbon neutrality by 2060. To improve market flow and respond to the national strategy to support the development of carbon trading in China, a smart carbon trading process optimization framework based on blockchain technology is developed in this article. First, the paper analyzes the current state of carbon trading in China's power sector and identifies the future development trend and barriers to carbon trading in China. Second, a framework for a smart carbon trading system based on the structure and traits of blockchain technology is created to optimize the carbon trading process. Third, the smart contract for the smart carbon trading system is built (including execution logic, transaction matching, contract fulfillment, and other elements). This mechanism measures the reputation of trading users. Finally, policy suggestions are provided to solve the current issues and challenges. According to the research conducted for this paper on “blockchain + carbon trading in China,” carbon trading supported by blockchain technology can guarantee transaction security and efficiency, accurately preserve transaction records, and offer a high level of automated settlement.