How technology secures trust in carbon markets

By integrating digital MRV into carbon markets, the sector can strengthen credibility, reduce operational risks and ensure that emission reductions are real, verifiable, and trusted

Carbon markets are growing fast, but credibility risks remain a major concern. During a webinar hosted by Africa’s Green Economy Summit, Dr Julian Gonzalo Jimenez , Senior Financial Sector Specialist at the World Bank’s Carbon Finance Solutions Unit, explained the challenges and how technology could help.

“So I think probably the most significant credibility risks in carbon markets arise from insufficient transparency in general,” Jimenez said.

“We can say consistent methodologies across various standards and the absence of clear rules for aligning carbon accounting frameworks also from the project to the jurisdictional programme. So we call it nesting in general, nesting rules.”

He stressed the urgent need for strong carbon market infrastructure, specifically effective Measurement, Reporting and Verification (MRV) systems, so measurement, reporting and verification systems and registries that should be supported by clear legal and financial frameworks.

Effective MRV technology matters in carbon markets

“Usually this infrastructure, when it exists, is fragmented and is not well connected. The lack of status of these elements leads to risks, such as a failure to ensure additionality, which is key, double-counting risks, and finally can pose substantial reputational threats for the institutions, including a potential instance of fraud.”

Digital solutions, Jiminez said, offer a way forward. On-chain technology and on-chain infrastructure can address or mitigate some of these by providing, for example, automated, almost real-time tracking of immutable and transparent records.

“Just to provide you one example, the combination of IoT devices, or the Internet of Things, along with remote sensing imagery, AI algorithms and blockchain—that combination that we used to call digital MRV in general, would allow for near real-time measurements and automated verification of the emission reductions, reducing reliance on manual and audit processes. This is just one example.”

By integrating digital MRV into carbon markets, Jimenez argued, the sector can strengthen credibility, reduce operational risks and ensure that emission reductions are real, verifiable, and trusted.

Cover photo:  masitta©123rf