Why blockchain is key to fulfilling ICC Carbon Pricing Principles

Transparency, reliability and collaboration are core elements of the Carbon Pricing Principles developed by the International Chamber of Commerce (ICC) to support the global climate strategy. Blockchain technology can support all three of these aspects.

In a webinar organized by ICC Spain and ClimateTrade to launch the Spanish translation of the ICC Carbon Pricing Principles this week, speakers emphasized the importance of a unified and fair carbon price to help global organizations adapt to the climate transition. 

According to José Lindo, Co-Founder and Head of Impact at ClimateTrade, the three keywords to be considered for the correct application of the Principles are consensus, traceability and transparency. “DLT technologies like ClimateTrade bring order to the complexity of all the various carbon markets and mechanisms, creating consensus, trust, transparency and connection with different jurisdictions,” he said. 

Indeed, blockchain technology is based on decentralized governance and data storage, which makes it inherently suited to the pursuit of consensus. Additionally, since all data stored on blockchain is immutable, it allows for full traceability in all transactions.

A fair and ethical carbon price

In terms of transparency, Lindo pointed out that with the upcoming implementation of the Carbon Border Adjustment Mechanism (CBAM) in Europe, countries will be expected to justify how they set the price of carbon emissions locally.

“I’m convinced that the EU and the World Trade Organization will manage to reach an agreement on the key point: creating a fair and ethical price of carbon that jeopardizes neither European companies nor decent job generation in developing countries,” he added.

All speakers agreed that, combined with CBAM, the ICC Carbon Pricing Principles (presented in English at COP26 in Glasgow but only now translated to Spanish) are set to harmonize carbon pricing mechanisms around the world. 

Internalizing externalities

José Luis Blasco, Global Sustainability Director at ACCIONA, noted that the carbon price is a necessary instrument to allow companies to internalize the externality that is climate change. He added that in the context of the generalized Net Zero by 2050 target, companies only have 28 years left to ensure they don’t become obsolete.

However, according to him, the carbon price only begins to accelerate the transition from US$60 a ton; below this price, the mechanism has no tangible impact. While the price of carbon is currently much lower – at least in the voluntary market – companies can already integrate a shadow carbon price of US$60 or higher to internalize the climate transition in their business planning.

The 10 Carbon Pricing Principles

Here are the 10 Carbon Pricing Principles developed by the ICC:

1. Focus on GHG emissions reduction as prime target, including the prevention of GHG leakage
2. Create a reliable, predictable overall framework
3. Promote consistency between climate, energy, trade and taxation policies
4. Create a clear and robust transparency framework
5. Maintain​​ accessibility to and affordability of low-carbon and clean energy sources
6. Promote international linking of carbon pricing instruments
7. Recognize that there is no “one-size-fits-all” single instrument
8. Couple carbon pricing with investment in climate change mitigation and adaptation
9. Ensure international cooperation for greater consistency globally
10. Develop mechanisms through inclusive and transparent consultation with business and other key stakeholders

The full document is available to download from the ICC website.