Building with Blockchain in the Carbon Market. Part 1.
The global carbon market is at a crossroads. What began as a promising mechanism for channeling finance into climate action has grown increasingly complex—competing standards, opaque trading systems, and fragmented data flows. It’s now clear that the market’s infrastructure must be rebuilt around transparency, trust, and technology that can scale quickly and direct funding to climate solutions faster.
Blockchain has already proven to be that digital foundation, unifying fragmented systems while bringing transparency to transactions, liquidity to markets, and credibility to the very idea of carbon offsetting. Here’s how it’s reshaping the carbon market from the ground up.
A Fragmented Landscape
The Taskforce on Scaling the Voluntary Carbon Markets (TSVCM) seminal report in 2021 highlighted a number of challenges that have emerged from this complexity, particularly noting fragmentation across the market. Years of uncertainty before global climate agreements were finalized led to an ecosystem in which standard setters, verifiers, and project developers each built their own systems, often competing with one another. The result is a patchwork of platforms, registries, and trading mechanisms that fail to connect smoothly.
This fragmentation manifests in several key ways:
Disjointed carbon standards make it hard to compare offsets
Fragmented liquidity prevents buyers and sellers from finding each other efficiently
Fragmented demand channels are split between corporate and retail participants
A lack of clarity around offset quality and a maze of trading venues have drawn criticism from activists, NGOs, and the media. These structural inefficiencies make it difficult to scale the VCM in line with the Paris Agreement and the growing urgency of climate action.
Fortunately, the market is moving toward consolidation. Leading standard bodies such as Verra and Gold Standard are establishing clearer quality benchmarks, and stakeholders are increasingly focused on the integrity and transparency of carbon claims. While this brings much-needed confidence to the supply side of the market, it does not directly address the persistent challenges of fragmentation and underdeveloped trading infrastructure.
The next phase of growth will require a systemic upgrade of that infrastructure—aggregating similar products and streamlining transactions—to achieve greater efficiency, trust, and scalability.
New Market Infrastructure: Blockchain in Action
Decentralized finance (DeFi) has already demonstrated how interoperable blockchain applications can drive innovation in financial products. The same principle is now being applied to carbon markets.
A compelling example comes from Ascend Bit Corp, a blockchain solutions company under Thailand’s Charoen Pokphand Group. Partnering with Carbonmark, Ascend Bit integrated carbon offset functionality directly into TrueMoney Wallet, Thailand’s largest fintech app with over 20 million monthly active users. Through Carbonmark’s API, users can offset between 70–930 kg of CO₂ for set periods (7, 30, or 90 days), with every transaction recorded transparently on the blockchain.
Within just one month of soft launch, more than 27,000 users purchased offsets equivalent to planting 180,000+ trees. By embedding automated carbon offsets into everyday financial tools, Ascend Bit has not only simplified individual climate action but also built trust and engagement through verifiable, real-time impact.
Tackling Liquidity and Scalability
Liquidity—or the lack of it—is another major hurdle. The TSVCM acknowledges that poor liquidity compounds fragmentation and limits scalability. Matching each unique buyer with a corresponding supplier in today’s over-the-counter (OTC) carbon market is slow, opaque, and inefficient. Typical transactions involve brokers trading in tranches of 10,000–250,000 tonnes, with limited standardization and little interoperability across exchanges.
In contrast, DeFi’s blockchain architecture supports aggregated, transferable carbon products. Projects like KlimaDAO have pioneered “carbon classes”—standardized groupings of carbon credits that improve liquidity and price discovery. The emergence of Core Carbon Reference Contracts—liquid, on-chain reference instruments—further enables transparent pricing, supplier financing, and the replacement of illiquid OTC trades with real-time markets.
This shift toward standardization and on-chain liquidity mirrors developments in traditional finance: as products adhere to widely recognized standards, quality improves and efficiency follows. The same evolution is now underway in carbon markets.
Transparency, Data, and Trust: Blockchain’s True Advantage
Beyond trading mechanics, blockchain introduces something even more fundamental: trust through transparency.
Blockchain’s core attributes—decentralization, immutability, transparency, and security—create a “trustless” system where participants no longer need to rely on intermediaries or centralized registries. Instead, the blockchain itself guarantees data integrity and system uptime.
Historically, carbon market data has been retrospective, opaque, and costly to access. Analysts have had to rely on periodic surveys and paid reports to gauge market activity. Blockchain transforms this dynamic entirely by offering real-time visibility into transactions and market behavior.
Using public block explorers (such as Polygonscan), anyone can view:
The total transaction volumes of specific carbon pools
Price histories and spot rates
The number and origin of tokenized offsets
How offsets are retired or utilized on-chain
Imagine being able to visualize live financial flows to offset projects across different geographies—tracking how capital moves into forestry, renewable energy, or carbon removal initiatives. This level of transparency not only strengthens trust but also unlocks unprecedented analytical and policy insights.
The Foundation for Scalable Climate Action
Both voluntary and compliance carbon markets are evolving rapidly, converging into hybrid systems that are already delivering strong results and reshaping the global carbon landscape. Blockchain is emerging as the critical infrastructure layer the market needs to scale responsibly. By unifying fragmented systems, improving liquidity, and enabling transparent data access, blockchain can help transform the VCM from a niche, opaque market into a robust, interoperable system capable of meeting the scale of global climate challenges.
The intersection of technology, finance, and environmental integrity marks the beginning of a new era—one where every tonne of carbon offset is verifiable, transferable, and truly impactful.
