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A blockchain-based emissions trading system for the road transport sector: policy design and evaluation

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  • Wenxiang Li
  • Luqi Wang
  • Ye Li
  • Bo Liu

Abstract

Emissions trading is a cost-effective climate policy for reducing greenhouse gas emissions. It could also be useful for addressing road transport emissions, especially given that this sector is the largest CO2 emitter in the transportation sector and its emissions continue to increase. However, emissions trading for road transport (ETS-RT) has rarely been implemented due to its complexity. This paper designs a novel and practical policy framework for an ETS-RT based on advanced blockchain technology, including all related entities upstream, midstream and downstream of the road transport sector. First, the government determines the cap and allocates the initial permits. Then, fuel producers, vehicle manufacturers, and vehicle users are involved as regulated entities with tradable emission permits. They are responsible for the three determinants of CO2 emissions in the road transport sector: fuel emission factors, vehicle fuel economy, and vehicle miles travelled, respectively. With all the regulated entities collaborating on compliance, the three determinants can be synergistically optimized so that the efficiency of the emissions abatement can be maximized. In addition, all trading, monitoring, reporting, and verification of the emission permits are automatically executed and recorded via a smart contract deployed on a decentralized blockchain. This approach can dramatically reduce administrative costs, improve transparency and traceability, and eliminate double counting and fraud. Finally, the proposed policy was evaluated using a multicriteria analysis method compared with other possible ETS-RT approaches.Key policy insights Fuel producers, vehicle manufacturers, and vehicle users – who are respectively responsible for fuel emission factors, vehicle fuel economy and vehicle miles travelled – should be synergistically regulated in an ETS-RT to maximize the efficiency of emissions abatement.This can be enabled by advanced blockchain technology, which can eliminate the need for a central authority, while enhancing transparency, traceability and cost-effectiveness.Blockchain technology could also be useful for monitoring, reporting and verification under the Paris Agreement.A blockchain-based ETS-RT is found to outperform other forms of ETS on criteria of acceptability, feasibility and environmental performance.

Suggested Citation

  • Wenxiang Li & Luqi Wang & Ye Li & Bo Liu, 2021. "A blockchain-based emissions trading system for the road transport sector: policy design and evaluation," Climate Policy, Taylor & Francis Journals, vol. 21(3), pages 337-352, March.
  • Handle: RePEc:taf:tcpoxx:v:21:y:2021:i:3:p:337-352
    DOI: 10.1080/14693062.2020.1851641
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    Cited by:

    1. Eduard Romulus Goean & Xavier Font & Yu Xiong & Susanne Becken & Jonathan L. Chenoweth & Lorenzo Fioramonti & James Higham & Amit Kumar Jaiswal & Jhuma Sadhukhan & Ya-Yen Sun & Horst Treiblmaier & Sen, 2024. "Using the Blockchain to Reduce Carbon Emissions in the Visitor Economy," Sustainability, MDPI, vol. 16(10), pages 1-11, May.
    2. Roth, Tamara & Utz, Manuel & Baumgarte, Felix & Rieger, Alexander & Sedlmeir, Johannes & Strüker, Jens, 2022. "Electricity powered by blockchain: A review with a European perspective," Applied Energy, Elsevier, vol. 325(C).
    3. Xiaomei Li & Yiwen Zhang & Zijie Yang & Yijun Zhu & Cihang Li & Wenxiang Li, 2023. "Modeling Choice Behaviors for Ridesplitting under a Carbon Credit Scheme," Sustainability, MDPI, vol. 15(16), pages 1-17, August.
    4. Wang, Haibing & Zheng, Tianhang & Sun, Weiqing & Khan, Muhammad Qasim, 2023. "Research on the pricing strategy of park electric vehicle agent considering carbon trading," Applied Energy, Elsevier, vol. 340(C).
    5. Jieshuang Dong & Yiming Li & Wenxiang Li & Songze Liu, 2022. "CO 2 Emission Reduction Potential of Road Transport to Achieve Carbon Neutrality in China," Sustainability, MDPI, vol. 14(9), pages 1-24, May.
    6. Nie, Qingyun & Zhang, Lihui & Tong, Zihao & Hubacek, Klaus, 2022. "Strategies for applying carbon trading to the new energy vehicle market in China: An improved evolutionary game analysis for the bus industry," Energy, Elsevier, vol. 259(C).
    7. Lu, Youshui & Li, Yue & Tang, Xiaojun & Cai, Bowei & Wang, Hua & Liu, Lei & Wan, Shaohua & Yu, Keping, 2022. "STRICTs: A Blockchain-enabled Smart Emission Cap Restrictive and Carbon Permit Trading System," Applied Energy, Elsevier, vol. 313(C).
    8. Xiangyang Yu & Xiaojing Wang, 2023. "Research on Carbon-Trading Model of Urban Public Transport Based on Blockchain Technology," Energies, MDPI, vol. 16(6), pages 1-21, March.

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