Blockchain technology is being used to create a more transparent and efficient carbon credit market, which has grown in demand due to the focus on mitigating climate change and reducing carbon emissions. Carbon credits allow the owner to emit an equal amount of tons of carbon dioxide or other greenhouse gases, and the global carbon credit market is expected to reach $2.4 trillion by 2027. Blockchain-powered platforms like Carbonplace are increasing trust and transparency in the industry, but there are limitations to blockchain adoption, such as the inability to verify emission reductions and claims of credit sellers regarding the longevity of credit. There is also a risk of zombie projects being introduced to blockchains, which are carbon offset registries that were inactive until the incentive to generate Base Carbon Tokens (BCTs) came along. More in-depth due diligence is needed for projects using the Toucan protocol to ensure their credibility. However, despite these challenges, the global demand for carbon credits could increase by a factor of 15 or more by 2030, and the marketplace for carbon credits could be worth over $50 billion in 2030, according to McKinsey estimates.
The success of any new carbon credit trading platform or market will depend on the quality of the data used, and there is a need for agreed-upon international standards for which projects qualify to receive carbon credits based on their impact on reducing carbon emissions. Blockchain technology can provide a promising solution for the carbon credit market, but trust and transparency need to be improved to generate an active market of buyers and sellers.
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