5 Industry Challenges Slowing Down Blockchain Adoption for Climate Change

Introduction

Blockchain technology has been widely heralded as a game-changer for sustainability, particularly in digital carbon markets. With its ability to provide transparency, efficiency, and trust, blockchain has the potential to revolutionize how we track, trade, and verify climate action. However, despite its promise, adoption has been slower than expected.

From scaling challenges and reputational concerns to education gaps, regulatory uncertainty, and the need for real-world impact, the blockchain climate sector faces significant roadblocks. This article explores these key challenges, why they matter, and what it will take to ensure blockchain delivers on its sustainability potential.

1. Scale and Coordination

Digital Carbon Markets - a major use case for blockchain technology in the realm of sustainability - is way behind the curve.

Carbon markets need to grow—fast—if we’re going to keep up with global climate goals. But here’s the catch: scaling up won’t be as simple as flipping a switch. ⚡ Instead, it requires an extraordinary level of coordinaton across a wildly diverse mix of players: 🏛️ regulators, ✅ certification bodies, 🌱 farmers and land stewards, 💼 corporate sustainability teams, 🚀 tech startups, and 🌍 global policymakers—all working in sync.

Digital carbon markets offer huge advantages over traditional ones, making transactions more transparent, efficient, and scalable. 📈 However, the industry faces a tough balancing act. If we don’t "thread the needle" 🪡—carefully and quickly weaving together regulations, technology, and market adoption—carbon markets risk falling short of the speed and scale needed to truly impact climate change. 🌡️⏳ The time for action is now!

2. Reputational Challenges Facing the Industry

Our trust in institutions; banks, churches, corporate brands, is collapsing. And with scandals being reported in the news, it’s not surprising to find that there are major trust issues when it comes to both the carbon markets, and blockchain tech as well. But this is part of an evolution of trust. Trust is becoming distributed. And so, the way trust is built, managed, lost and repaired is changing - slowly.

Whilst carbon markets were designed to help the planet, not everyone trusts them. Many people—including climate advocates—worry that carbon offsets can be misused for corporate greenwashing , allowing companies to appear eco-friendly without making real emissions cuts. To gain public confidence, carbon markets must become more transparent and verifiable.

At the same time, blockchain itself also has a reputation problem. Thanks to wild swings in cryptocurrency markets and high-profile scandals, many people still associate "crypto" with fraud and speculation rather than real-world solutions.

And unfortunately this skepticism spills over into blockchain-based climate tech, making governments, businesses, and investors hesitant to jump in.

Until blockchain and the voluntary carbon markets can shake off the bad press and prove its value in creating trustworthy, transparent carbon markets, adoption may remain slower than the planet can afford.

For more information, here is Rachel Botsman talking about how the blockchain will revolutionize trust on a global scale - after a trust shift takes place across a behaviour or sector.

3. Overcoming Complexity and Education Gaps

When I researched my thesis on Climate AI Models, one of the biggest impediments I kept on finding to businesses taking climate tech action, was leadership. And leadership, because they didn’t buy into climate change, and didn’t understand the science.

And it’s the same with blockchain.

Whilst blockchain has huge potential to supercharge climate action, it’s the same problem: most people don’t understand it. The technology moves fast, it’s complex, and to many outside the Web3 space, it feels like a secret club with its own language and rules.

Right now, there aren’t enough spokespeople who can clearly translate blockchain’s benefits into terms that climate leaders, policymakers, and businesses can grasp. 📢🛠️

Beyond the education gap, some in the regenerative finance (ReFi) space have been accused of elitism —dismissing traditional carbon markets as outdated. But here’s the reality: real impact requires collaboration. The industry must engage with historical market players, learn from their decades of experience, and find common ground instead of operating in an echo chamber. Only then can blockchain truly scale its impact on climate action.

4. Maintaining Focus on Real World Impact

Blockchain and regenerative finance (ReFi) promise game-changing solutions for climate action—but some critics argue that the space talks a big game without always delivering. Because the industry is so digital-first, it can be hard to tell the difference between marketing hype and real-world results. And sometimes marketing wins out of meaningful action, with projects getting funding based on buzz rather than actual impact.

To prove its worth, the ReFi space must prioritize substance over spectacle—focusing on verified emissions reductions, regenerative land practices, and tangible environmental benefits instead of just tokenomics and tech jargon. Only then will blockchain move from promise to planet-positive progress.

5. Lack of Regulatory Clarity

One of the biggest hurdles for blockchain in climate action is unclear and inconsistent regulation. Both industries—blockchain and carbon markets—are navigating a legal maze where rules haven’t caught up with innovation. This lack of clarity makes it harder for companies, investors, and developers to move forward with confidence. 🚦🛑

A key issue? No one seems to agree on whether digital environmental assets, like tokenized carbon credits, should be classified as securities or commodities. If they're treated like securities, they could face strict financial regulations, slowing down market participation. If they’re considered commodities, they might fall under different (and often lighter) oversight—but no clear consensus exists.

The U.S. Securities and Exchange Commission (SEC) is expected to issue guidance on how tokenized carbon credits will be regulated, but so far, it’s all speculation. Until firm rules are in place, many companies hesitate to innovate in this space for fear of legal repercussions. Investors remain cautious, and progress stalls. 🚧

Adding to the uncertainty, the Science-Based Targets initiative (SBTi) has delayed releasing guidance on what qualifies as a legitimate net-zero contribution. This leaves businesses unsure whether blockchain-enabled carbon markets will be recognized as credible solutions for reducing emissions.

Without clear, standardized regulations, blockchain’s potential in climate finance remains trapped in legal limbo—and that’s time the planet simply doesn’t have. For blockchain to truly drive sustainability, policymakers must step up and provide clear, supportive regulations that encourage responsible innovation while maintaining market integrity.

Conclusion

Blockchain has the power to revolutionize sustainability, but its success depends on overcoming key barriers. First, the industry must scale rapidly and improve coordination among diverse stakeholders to ensure digital carbon markets fulfill their potential. Second, addressing reputational concerns—both around carbon markets and blockchain itself—is essential for building trust and credibility. Third, education and regulatory clarity are critical to driving wider adoption and investment.

For business leaders, the key takeaway is clear: engagement, collaboration, and advocacy for clear regulations will be essential to unlocking blockchain’s potential for climate action.