Blockchain Application on Carbon Trading for Australian Carbon Market

Globally, the 27th Conference of the Parties to the United Nations Framework Convention on Climate Change (COP27) urged all parties to fulfill the Paris Agreement of limiting long-term global warming well below 2 ℃, and to work hard to keep the 1.5 ℃ target alive by taking bold and immediate action to reduce greenhouse gas (GHG) emissions. In Australia, on 8 September 2022, the Senate passed the Climate Change Bills, ensuring Australia's emissions reduction target of 43% by 2030, compared with 2005 levels and net zero emissions by 2050. The Australian government wants to reform Safeguard Mechanism and create a trading scheme for the heavy emission entities by July 2023. Although more countries are putting carbon pricing at the centre of their mitigation strategies, the existing carbon trading systems suffer from weak regulation, poor monitoring, verification, and reporting (MRV), lack of participation, carbon credit scams, and non-transparent trading. Therefore, this paper studies the current carbon market of Australia and learns from implementation of carbon trading in other countries then proposes a blockchain-based carbon trading system to enable carbon permits to trade reliably and transparently through smart contracts and distributed ledger in Australia. A multicriteria analysis method was adopted to evaluate the proposed blockchain-based carbon trading system and the results show that the proposed blockchain-based carbon trading system performs better than the conventional CAT concerning the weighted total score. Thus, the proposed blockchain-based carbon trading system is an effective instrument to limit GHG emissions and may be used to guide Safeguard Mechanism reform implementation.