Current challenges

How ReFi is going to redefine the market?

Low liquidity

Currently, the carbon market is relatively illiquid, with low levels of trading activity and a lack of standardized systems and protocols for buying and selling carbon credits. This can make it difficult for companies and individuals to offset their carbon emissions in a timely and cost-effective manner.

Cryptocurrencies and or tokenized carbon credits have the potential to improve the liquidity of the carbon market by enabling faster and more efficient transactions. By using blockchain technology, buyers and sellers of carbon credits can securely and transparently trade on a decentralized platform, without the need for intermediaries or centralized marketplaces. This can make it easier for companies and individuals to buy and sell carbon credits, increasing the overall liquidity of the market. Additionally, the use of tokenized carbon credits can help to standardize and automate the trading process, making it more efficient and accessible to a wider range of participants.

Double accounting

The practice of selling the same carbon credits to multiple buyers. This can lead to companies and individuals overstating their carbon reduction efforts, and ultimately undermines the effectiveness of carbon credits as a tool for combating climate change.

Blockchain technology helps prevent double accounting by providing a transparent and immutable record of transactions. Because all transactions on the blockchain are verifiable and publicly accessible, it is impossible for the same carbon credits to be sold to multiple buyers. Companies and individuals can accurately track their carbon reduction efforts and ensure that carbon credits are used effectively to offset emissions. The use of smart contracts on the blockchain can further automate the trading process and ensure that carbon credits are automatically transferred from the seller to the buyer, reducing the potential for errors or fraud.

Additionality

Emission reductions or removals from a mitigation activity are additional if the mitigation activity would not have taken place in the absence of the added incentive created by the carbon credits. Essentially, an additional project means that the only way the project would exist is because of the funding from carbon credits. In order to qualify as a genuine carbon offset, the reductions achieved by a project need to be "additional" to what would have happened if the project had not existed.

Blockchain helps to address concerns about additionalities in carbon credits by providing a transparent and immutable record of carbon reduction projects. Furthermore, by using smart contracts and other blockchain-based tools, it is possible to automate the tracking and reporting of environmental, social, and economic benefits of carbon reduction projects, which further verifies the additionalities of projects.

Greenwashing

Greenwashing is a term used to describe the practice of companies making false or exaggerated claims about the environmental benefits of their products or services in order to improve their public image. This can be a concern for companies because it can lead to negative public perception and potential legal actions if the claims are found to be untrue.

Blockchain prevents greenwashing by providing a traceable and immutable record of transactional data and underlying assets. Companies can prove the validity and accuracy of their environmental claims, and enable consumers and regulators to verify the information for themselves. By using blockchain to store and manage data related to environmental sustainability, companies can demonstrate their commitment to green practices and help build trust with consumers and other stakeholders.