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A Blockchain-Based Financial Instrument for the Decarbonization of Irrigated Agriculture

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  • Julio Pombo-Romero

    (Deparment of Financial Economics and Accounting, Universidade de Vigo, 36310 Vigo, Spain
    Instituto de Energía Solar, Universidad Politécnica de Madrid, 28040 Madrid, Spain)

  • Oliver Rúas-Barrosa

    (Instituto de Energía Solar, Universidad Politécnica de Madrid, 28040 Madrid, Spain)

Abstract

Farming and food production sustainability increasingly depends on the availability of a clean energy model for irrigated agriculture. This can be achieved by massively introducing photovoltaic irrigation systems (PVI) with sufficient quality and reliability. Nevertheless, such PVI projects require high upfront investment and long payback times, so access to long-term, low-cost capital is essential to ensure their competitiveness. In this regard, decentralized financial (DeFi) solutions based on blockchain (BC) technology present a number of features that can be applied to produce financial instruments (FI) well suited to attract investors to PVI projects and to reduce the cost of clean energy for irrigators. In order to assess such a possibility, a DeFi FI tailored for PVI has been produced and implemented in BC. We demonstrate that a single smart contract executed in a distributed ledger can execute the different tasks related to the securitization of PVI assets. The impact on the cost of capital for PVI projects is significant, leading to an estimated reduction in the cost of clean energy for irrigators of 22%. Nevertheless, decentralization also introduces a number of specific risks that must be considered and mitigated.

Suggested Citation

  • Julio Pombo-Romero & Oliver Rúas-Barrosa, 2022. "A Blockchain-Based Financial Instrument for the Decarbonization of Irrigated Agriculture," Sustainability, MDPI, vol. 14(14), pages 1-22, July.
    • Handle: RePEc:gam:jsusta:v:14:y:2022:i:14:p:8848-:d:866565
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    References listed on IDEAS

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    Cited by:

    1. Juan Ignacio Herraiz & Rita Hogan Almeida & Manuel Castillo-Cagigal & Luis Narvarte, 2023. "Experimental Performance Evaluation of a PV-Powered Center-Pivot Irrigation System for a Three-Year Operation Period," Energies, MDPI, vol. 16(9), pages 1-19, April.
    2. Savelli, Iacopo & Hepburn, Cameron & Morstyn, Thomas, 2024. "A blueprint for energy systems in the era of central bank digital currencies," Technological Forecasting and Social Change, Elsevier, vol. 207(C).

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