Engineering Economic Viability for Carbon Finance: From Credits to Infrastructure for Cost Optimization and Risk Mitigation

The necessary expansion of carbon credit markets, a vital economic tool for climate mitigation, is severely constrained by operational inefficiencies, high intermediary costs, and debilitating verification delays. These persistent structural weaknesses undermine the system’s economic scalability and deter broad market participation, particularly from smaller project developers. This study employs a Design Science Research (DSR) approach to engineer and validate a novel, modular blockchain-based tokenization framework. We frame this shift from credits to infrastructure, reconceptualizing credits as traceable financial instruments rather than simple commodities. The system integrates automated issuance, peer-to-peer trading, and permanent retirement via four dedicated smart contract modules, thereby promoting procedural rigor. Prototype validation, including the analysis of computational demands and deployment gas usage, demonstrates the framework’s potential to significantly reduce administrative friction and verification latency. By replacing costly manual processes with transparent, rule-based execution, this architecture enhances operational efficiency, mitigates systemic risks such as fraud and double claims, and lowers barriers to entry, thereby promoting the long-term economic viability and scalability of global carbon finance.