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

Author

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  • Rahel Mandaroux

    (Department of Finance, ESCP Business School, 14059 Berlin, Germany)

  • Chuanwen Dong

    (Department of Information and Operations Management, ESCP Business School, 14059 Berlin, Germany)

  • Guodong Li

    (Wolveshill Consulting Ltd., Orpington BR5 3QB, UK)

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.

Suggested Citation

  • Rahel Mandaroux & Chuanwen Dong & Guodong Li, 2021. "A European Emissions Trading System Powered by Distributed Ledger Technology: An Evaluation Framework," Sustainability, MDPI, vol. 13(4), pages 1-21, February.
    • Handle: RePEc:gam:jsusta:v:13:y:2021:i:4:p:2106-:d:500245
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