Granados, Julian and Schlüter, Achim ORCID: (2023) Blockchain and Payments for Environmental Services: Tools and opportunities for environmental protection. . Leibniz Centre for Tropical Marine Research, Bremen, 66 pp. ISBN 978-3-00-075090-8 DOI

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This study investigates how blockchains can contribute to improve the
environmental and social outcomes of Payments for Environmental Services (PES) schemes.

Blockchains are a system of electronic records to establish a consensus around a shared digital ledger of transactions. Transactional information is recorded in blocks and chained together using cryptographic means. Blockchains were first proposed in 2008 as a technology to coordinate decentralized economic transactions through the internet.

Payments for Environmental Services (PES) are widely used incentive-altering mechanisms for influencing human activities to achieve environmental goals. They influence the payment matrix on environment-related activities by offsetting incurred costs and generating additional economic incentives for environmentally
friendly activities. The received environmental payments give serviceproviders the opportunity to diversify their income while reducing their dependency on extractive or environmentally harmful
activities. PES are a particularly relevant tool to ensure the provision of public-good environmental services, which otherwise
would not be provided.

Despite increasing global demand and willingness-to-pay for environmental services, might it be by individuals or states, global PES schemes are very slow to emerge. Bulky transaction costs and insufficient institutional alternatives for conducting environmental transactions are a reason for this imbalance. Difficulties and expenses in finding a conservation counterpart, establishing contract conditions, monitoring outcomes and transferring funds hinder the establishment of such exchanges. Blockchains can help counter these difficulties.

Blockchains offer a decentralized and fraud resistant way of organising and monitoring transactions. Distributed ledgers, smart contracts (automated & only to be changed based on consensus), crypto wallets, and programmable money (which can only be spent or earned under predefined circumstances) are blockchain-supported applications that can help significantly reduce PES transaction costs and increase trust for all parties involved.

This study confronts recurring PES issues and PES design advice with potential blockchain-supported solutions and implementation-favouring tools.

Readers will also find a series of considerations to take into account when planning the usage of blockchains in PES schemes.

This study proposes that the adoption of blockchain technology could allow PES practitioners to design and implement PES schemes in ways that promise to be more effective, efficient and aligned with social co-objectives. The large transaction costs associated with deploying and maintaining reliable structures for payment, monitoring and compliance can be reduced, thus altogether lowering the costs of
PES implementation and increasing the incentives for conservation.

Disintermediation and increased contractual automatization can open the door to new governance structures for peer-to-peer environmental transactions and for the appearance of new market-like structures for environmental service.

Document Type: Book
Programme Area: PA3
Research affiliation: Social Sciences > Institutional and Behavioural Economics
Date Deposited: 09 Jun 2023 07:03
Last Modified: 09 Jun 2023 07:04

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