Leveraging Blockchain Technology for Innovative Climate Finance under the Green Climate

The rapid development of digital technologies such as blockchain and distributed ledger-based systems holds transformative potential for the ﬁ nancial sector. Promising applications include asset management as well as peer-to-peer networks for the transparent exchange of data and information. International climate ﬁ nance stands to bene ﬁ t in particular ways from these new opportunities in ﬁ nancial technology. Distributed ledger technologies could be leveraged to support climate action, for example by facilitating transparent and standardized transactions, or by enabling more ef ﬁ cient monitoring and accreditation processes. In view of these promising opportunities, we focus our inquiry on the case of the Green Climate Fund to explore how distributed ledger technologies can be used for innovative climate ﬁ nance. Based on our analysis of different digital system models and potential use cases, we then discuss some of the technical and political challenges that may arise, for example with regard to standards and safe-guards, governance processes, country ownership, and further capitalization. Our ﬁ ndings show that distributed ledger-based systems could bene ﬁ t the work of the fund in key areas such as multi-stakeholder coordination and impact assessment. However, our analysis also points to the concrete limitations of technology driven solutions. Digital technologies are not a standalone solution to persistent resource allocation and governance challenges in international climate ﬁ nance, especially because the design and deployment of these digital systems is inherently political.


Introduction
The advent of the Anthropocene and the looming climate crisis have sparked vivid debates about the future of the human species, based on the growing realization that human activities have shifted the Earth system toward a critical "no-analogue state," meaning a state in which the Earth system is outside the range of its natural variability (Crutzen and Steffen., 2003: 253). Responding to this fundamental shift arguably requires an equally fundamental shift in our understanding of the complex interactions between the environment, society, and technology. Scholars in the fields of environmental politics and Earth system governance have thus pointed out that governance in the Anthropocene should be predicated on environmental reflexivity, the effective rethinking of dominant institutions, and the fundamental transformation of behavioral patterns that degrade the environment and endanger social cohesion (Biermann and L€ ovbrand, 2019;Dryzek and Pickering., 2019). Simultaneously, societies need to seize the opportunities and minimize the risks of accelerating global digitalization. 1 The ubiquitous application of digital technologies creates new interdependencies and fundamentally impacts all aspects of society, including ethics, politics, law, business, finance, security, labor markets, and environmental sustainability, thus requiring new forms of cooperation (United Nations, 2019a).
Technological change driven by digitalization may, on the one hand, provide unprecedented opportunities for the advancement of human welfare and help accelerate progress towards achieving the SDGs and the Paris Agreement on climate change (United Nations, 2018;WBGU, 2019). On the other hand, there is the imminent risk that unregulated digitalization may create entirely new challenges, or further exacerbate existing ones. Unchecked digitalization processes may, for example, lead to the fundamental disruption of political, legal or financial systems. Digitalization may also negatively affect sustainability goals due to the increase in energy demand caused by the large-scale application of digital technologies (De Vries, 2018;Mora et al., 2018;United Nations, 2019b). 2 Nonetheless, there is a surprising dearth of research at the intersection of global environmental politics and technological change, specifically on the ways in which particular technological forms are reshaping human behavior and interactions. More targeted research is urgently needed to maximize potential benefits and minimize the risks of digital transformations for both humans and the Earth System as a whole.
We contribute to addressing this research gap by examining the role of blockchain and distributed ledger technology (DLT) for innovative digital financing of the SDGs, and Goal 13 (Climate Action) in particular. Blockchain and DLT, as the underlying technological infrastructures for cryptocurrencies such as Bitcoin and Ethereum, have attracted considerable attention for at least a decade. They can be described as "a novel and fast-evolving approach to recording and sharing data across multiple data stores (or ledgers) [which] allows for transactions and data to be recorded, shared, and synchronized across a distributed network of different network participants" (Natarajan et al., 2017: 7). Blockchain, in particular, is a specific type of DLT and can be used as a general-purpose tool for creating decentralized and secure peer-topeer applications in digital networks, for example with the aim to expedite payments, to create new financial instruments, or to organize the transparent exchange of data and information (De Filippi and Wright, 2018).
According to the Gartner 'Hype Cycle' for Blockchain Business, a well-known graphic representation of the maturity and relevance of DLTs for solving problems and exploiting new opportunities, DLTs are expected to reach their full potential over the next five to ten years (Gartner, 2018a). Gartner predicts that "blockchain's business value-add will grow to slightly over $360 billion by 2026, then surge to more than $3.1 trillion by 2030" (Gartner, 2018b). Some of the most promising applications for DLTs include financial transactions, asset and supply chain management, energy markets, decentralized peer-to-peer networks for the exchange and storage of data, as well as social service provision and digital identities (GIZ, 2019;Zwitter and Herman, 2018). Public sector and nongovernmental organizations are currently exploring the potential of DLTs in several areas. These include democratic participation, public procurement, taxation, education, and the establishment of digital asset markets, especially in regulated areas such as insurance, utilities, healthcare, and natural resource management (Gartner, 2019;GIZ, 2019). In addition, DLTs are a means to foster accountability and transparency by augmenting existing organizational processes and institutions to address fraud, counterfeit issues, or corruption, with important implications for the operation of carbon markets and the measuring, reporting, and verification of emissions and their reductions (Aggarwal and Floridi 2019;Chen 2018). Automated compliance mechanisms based on DLTs and 'smart contracts' could even disrupt the regulatory provisions of the current climate regime within a decade by connecting databases of high interoperability to funding sources, and by linking "renewable energy and carbon accounting, reporting, and tracking on a micro-and macro-economic level" (Marke 2018: 272).
Considering these promising developments, the article takes a closer look at the potential of DLTs for addressing salient issues in the context of the Green Climate Fund (GCF). Depending on the specific design of the digital system, DLTs may facilitate more inclusive processes in our societies and offer promising solutions for common concerns in international climate finance such as ensuring accountability and transparency. Nonetheless, it must be noted that DLTs may also fundamentally disrupt the capacity of governments or governance regimes to supervise and regulate economic activities due to the disintermediation of established institutional processes, for example by cutting out traditional intermediaries such as large financial institutions, legal authorities, or governments (De Filippi and Wright 2018). Mitigating the potential risks of DLTs therefore requires a thorough investigation of specific digital systems. DLT system design has very distinct governance implications, since it determines, for example, how the technology can be embedded in societal processes, or how recipients can be linked to funding sources.
We specifically focus our inquiry on the GCF due to its key role in international climate finance. As the largest dedicated climate fund in terms of money pledged, currently US$ 19.9 billion after the recent first round of replenishment, the GCF plays a fundamental role in mobilizing climate finance to achieve SDG 13 and meet the goals of the Paris Agreement (GCF 2019b; Schalatek and Watson 2019: 3). 3 Nonetheless, the challenge to efficiently manage funds in multilateral climate finance remains, and the GCF is no exception to this problem. Direct access to GCF funding is only granted based on complex bureaucratic procedures for the accreditation of implementing partners. To become accredited entities under the GCF, partners have to demonstrate that they can implement fiduciary standards, environmental and social safeguards, the Monitoring and Accountability Framework, the Gender Policy and Action Plan, as well as the Indigenous Peoples Policy (Amerasinghe et al., 2019: 50). Successfully completing this complex accreditation process and demonstrating compliance with social, ecological and fiduciary standards presents a considerable burden for many entities in recipient countries, with real consequences for the ownership and approval of climate change projects (Amerasinghe et al., 2019: 51).
Considering these pertinent challenges, we aim to explore how DLTs could be used to support adequate, effective and accountable climate finance under the GCF. We then discuss political and technical challenges that may arise, for example with regard to GCF standards and safeguards, country ownership, further capitalization, and scalability. We conclude our investigation by identifying key recommendations for innovative climate finance under the GCF.

DLTs for innovative climate finance
The question of how DLTs can be leveraged for 'social good' is increasingly attracting the attention of policy makers, lawyers, tech developers, business leaders and practitioners in the fields of sustainable development and humanitarian action (Al-Saqaf and Seidler, 2017;Kewell et al., 2017;Kshetri, 2017;Reinsberg, 2019;Schulz et al., 2020;Zwitter and Boisse-Despiaux, 2018). New actor coalitions and technology networks with a focus on DLT 2 Disintermediation in the economic sphere can be defined as "a process that provides a user or end consumer with direct access to a product, service, or information that would otherwise require a mediator such as a wholesaler, lawyer, or salesperson" (United Nations 2019b: 12). In the social and political domains, in particular, disintermediation refers to a process that directly links individuals to each other in digital peer-to-peer networks and reduces or eliminates the influence of governments and other regulatory bodies. Disintermediation can be both beneficial and risky, depending on the specific context. In the field of digital financial technology, or 'FinTech', the focus rests primarily on how financial services can be delivered through digital infrastructures. It needs to be better understood how the conversion from analog to digital technologies in financial functions may result in systemic changes to financial systems, for example through the disintermediation of the banking and capital market sectors, or due to the shifting roles of regulatory and supervisory bodies, with important implications for governance (Paech, 2017;Reijers et al., 2016;United Nations, 2019). Actors in the private sector, ranging from large corporations and banks to smaller businesses and start-up companies, are now actively involved in research and development activities centered on DLTs. The overall aim is to benefit from newly emerging business opportunities, and to avoid being 'disrupted' by technological innovation. At the same time, it is evident that FinTech innovations based on DLTs will also affect climate finance in the near future. International climate finance, aimed at supporting developing countries' responses to climate change, stands to benefit in particular ways from these new technological possibilities. Emerging DLTs hold the possibility to facilitate innovative forms of climate finance by enabling decentralized forms of cooperation between stakeholders, and by fostering trust based on transparent, automated and standardized transactions. Nonetheless, realizing the full potential of DLTs requires a sound knowledge of the ways in which these new digital tools may be used to mobilize, allocate and monitor financing flows under the GCF (United Nations, 2019c).

Blockchain and distributed ledger technologies: general capabilities and governance implications
Answering the question of how blockchain and DLTs can be used for innovative climate finance under the GCF requires a closer look at the design, capabilities and governance implications of these nascent technologies. Although there are large overlaps between technology clusters, it has been emphasized that the technical terms 'blockchain' and 'DLT' are not necessarily interchangeable. As Natarajan et al. (2017: 7) point out, it is important to keep in mind that "not all distributed ledgers necessarily employ blockchain technology." The term blockchain generally refers to a specific type of data structure that stores and transmits data in a growing list of data packages called 'blocks'. Each block contains a unique code called 'hash' that sets it apart from every other block, as well as a timestamp and transaction data for verification. These blocks are then linked to each other in a digital 'chain' or peer-to-peer network in a linear and chronological order. Blockchains employ cryptographic signing and algorithmic methods to record and synchronize data across the network in a public, immutable and decentralized manner, meaning that blockchains are largely resistant to fraud or the malicious modification of data since an unchangeable distributed ledger of records is created in the process. Digital copies of the distributed ledger are replicated, shared, and synchronized between all nodes in the network. This makes a blockchain transparent and secure by design, since any given block that has been added to the blockchain cannot be altered retroactively without the alteration of all subsequent blocks, which requires consensus of the network majority. As decentralized databases, blockchains can be used to store a registry of assets and transactions, whereas the term 'asset' may refer to not only money but also to ownership rights, custodianship, contracts, goods, and even personal information (Zwitter and Boisse-Despiaux, 2018).
While the complex technical details of different applications are certainly beyond the scope of this article, it will suffice to say that some DLTs use only certain parts of blockchain technology such as the distributed ledger (Paech, 2017). Compared to a truly decentralized and public blockchain such as the infrastructure underlying the cryptocurrency Bitcoin, where participants in the peer-to-peer network are taking decisions which directly affect the network's overall structure and design, DLTs may only be decentralized in terms of the technological infrastructure. The overall design and organization of the network could still follow proprietary or commercial principles, for example if the respective DLT is developed by private companies or banks to facilitate certain types of financial transactions.
Since the technical terms 'blockchain' and 'DLT' are often used indiscriminately, we consider it necessary to define blockchain as a particular type of DLT. We then differentiate the underlying DLT system along the lines of (1) public-permissionless ledgers, (2) public-permissioned ledgers, (3) private-permissionless ledgers, and (4) private-permissioned ledgers, resulting in at least four distinct DLT system models (see Table 1). 4 The first system model (public-permissionless) describes a system where the transaction or data history is publicly visible and every node in the network has permission to verify and add transactions to the blockchain. Bitcoin is a prominent example. The data or transaction history is also publicly visible in the second system model (public-permissioned), but nodes in the network have to gain special permission to verify and add transactions. The network maintainer can even appoint privileged parties. Ripple, which is a financial transaction, currency exchange and remittance system intended for banks and payment networks is an example for such a model. Ripple uses a distributed consensus ledger (XRP) instead of the classic blockchain. The third model (private-permissionless) refers to a network where anyone can verify or add transactions, but only a specific group of pre-approved nodes is able to view the respective data or transaction history. One example is the LTO Network, a platform to run trustless workflows, targeting multinationals and governments. LTO uses a hybrid blockchain with a private layer for data sharing and process automation, and a public layer which acts as an immutable digital notary. The fourth system model (private-permissioned) can be described as a private consortium ledger. Only pre-approved nodes have permission to view the data or transaction history, as well as to verify and add data or transactions. Use cases include Hyperledger Fabric, a private permissioned blockchain backed by IBM, innovative supply chain management systems, or banking consortia. These four different system models clearly illustrate that the effective use of DLTs for climate finance will not only depend on general technological capabilities and the actors involved in DLT implementation or regulation, but also on initial design choices. In order to explore specific fields of application for DLTs in the context of the GCF, initial design choices are of crucial importance, as they may create path dependencies or lock-ins, with concrete governance implications. For example, permissionless systems allow participants to collaborate with any other party on a case-by-case basis, whereas permissioned systems such as consortium blockchains are less flexible and only allow for interactions between preapproved members (nodes). Design choices also influence whether the DLT network is based on notions of openness, cooperation and transparency, or on proprietary and commercial principles. This specific design choice is also tightly linked to questions of legal regulation, since it needs to be ensured that the benefits of datadriven innovation are balanced with concerns about privacy, ethics, sustainability, and basic human rights.
Therefore, it is important to be cognizant that the design of DLT systems is inherently political. DLT design choices seriously affect the lives of users because of the various effects that digital products have on people's behavior, attitudes, and needs (Werbach, 2018). In other words, DLT system design encourages certain forms of social interaction and human behavior by defining specific rules for users interacting through the network. This political dimension clearly situates discussions about DLT design within wider debates about the governance of and through emerging technologies (see, for example Epstein et al., 2016;Kuhlmann et al., 2019). One of the key insights that can be gleaned from ongoing debates about the governance of emerging technologies is that DLTs are neither a panacea nor a standalone solution for key political issues in climate finance. In their current state of development, DLTs should rather be seen as versatile tools that can be used to address clearly defined operational and interorganizational problems.

Leveraging DLTs under the Green Climate Fund
Climate finance, generally speaking, refers to all finance flows aimed at reducing emissions, enhancing carbon sinks, as well as reducing vulnerability and supporting resilience to the adverse effects of climate change (UNFCCC, 2014: 5). Exact definitions of climate finance may vary depending on the institutional context and can be distinguished based on financial instruments (e.g., grants or loans), sources of funding (e.g., public or private money), or intended purpose (e.g., mitigation, adaptation, reforestation, loss & damage, etc.). For the purpose of this paper, we define climate finance in accordance with the mission of the GCF, as specifically laid out in its governing instrument, which seeks to promote a paradigm shift in development pathways by supporting developing countries in their efforts to mitigate climate change and adapt to its effects (UNFCCC, 2011). Hence, climate finance is defined by direction of flow (for the benefit of developing countries) and intended purpose (mitigation and adaptation).
Similarly, there are heterogeneous views on the underlying rationale behind climate finance. From a normative perspective, climate finance can be seen as a response to the double inequality of climate change: countries that have contributed the least to global warming are often the most vulnerable and lack the necessary resources to adapt (Barrett, 2013;Gough, 2011). From a strategic perspective, climate finance can be described as a means to correct market failures, to secure support from developing countries in negotiations under the UNFCCC, and to manage climate effects before catastrophic events may occur that would also affect contributing countries (Salisbury and Khvatsky, 2018;Skovgaard, 2012;Kotchen and Martinez-Diaz, 2017). While COP 15 in Copenhagen is widely regarded as a severe political failure, one of its few tangible outcomes was the commitment of developed countries to jointly mobilize US$ 100 billion per annum by 2020 in additional climate finance from both public and private sources (B€ ackstrand and L€ ovbrand, 2016;Bodansky, 2010). It is worth noting that the figure of US$ 100 billion has been strongly criticized as being insufficient to finance a global transition to clean energy and to meet the adaptation needs of the world's most vulnerable countries (Abadie et al., 2013;Moser et al., 2019;UNEP, 2016). The measuring and tracking of climate finance flows presents a considerable challenge as well, and still depends on controversial political definitions (Clapp et al., 2012;Donner et al., 2016;Hall, 2017;Roberts and Weikmans, 2019).
The idea for a dedicated fund to manage climate finance flows was concretized at COP 15 in Copenhagen, and the GCF was formally established at COP 16 in Cancún in 2010. The GCF was meant to serve as a major, albeit non-exclusive, channel for the US$ 100 billion annually (UNFCCC, 2010). According to its governing instrument, the fund's key mission is to "promote a paradigm shift towards low emission and climate-resilient pathways" (UNFCCC, 2011). This can be seen as a prime example of so-called constructive ambiguity: the wording agreed at the COP was kept rather vague, and the technical details of the fund's institutional and operational design had to be negotiated during a post agreement process. The fund's operationalization took at least until just before COP 21 in 2015, when the GCF approved its first set of funding proposals. Some fundamental governance questions, however, such as decision-making in the absence of consensus remained pertinent until mid-2019 (Feist, 2018;GCF, 2019c: 5;Bowman and Minas, 2019). The main decision-making body in this regard is the GCF's board, which also takes strategic and operational decisions, for instance concerning the approval of funding proposals. The GCF board consists of twenty-four members in total, with equal representation from developed and developing countries. The board generally decides by consensus, although a voting mechanism for decision-making in the absence of consensus has been established recently. 5 Before funding proposals can be put before the board for approval, they are submitted by accredited entities, such as private or development banks. The GCF's secretariat based in Songdo, South Korea, is the entity tasked with conducting the fund's daily operations, including the preparation of decision documents for board meetings, or accepting and managing applications for accreditation and funding proposals. As of 2019, the GCF has had US$ 19.9 billion pledged to it, after the recent first round of replenishment, and it has approved 124 projects worth about US$ 5.6 billion in total (GCF, 2019a; GCF, 2019b). While this is not nearly enough to cover global climate finance needs, the GCF nonetheless is a particularly important institution and therefore well worth studying. The GCF is not only the largest dedicated climate fund and a key institution under the UNFCCC's Financial Mechanism, it is also a salient subject of discussion in climate policy circles, and it is endowed with a mission to induce deep transformational change that goes beyond directly funding projects. It should be noted, however, that the GCF is not the first funding mechanism of its kind. The Adaptation Fund and the Global Environment Facility, for example, were established before. Yet, a certain degree of innovativeness has been attributed to the GCF since its inception. Particularly from the perspective of developing countries, the GCF was meant to depart from business as usual in international climate finance. As one developing country board member stated at the eighth GCF board meeting in Bridgetown, Barbados: "We're not compiling practices from different institutions here. We're going to do business in a new way, and in a way that GCF is mandated to do." 6 Mobilizing innovative technologies such as DLTs to facilitate the work of the GCF will thus depend on the identification of promising use cases and supportive stakeholder networks to provide economic and policy incentives for technology uptake and implementation.

DLT applications and their use potential
In order to facilitate the ongoing debate about climate finance under the GCF, we introduced four basic types of DLT systems that range from public and permissionless DLT systems to private and permissioned solutions, with very specific legal, technical, and governance implications (see Table 1). These four types can serve as a first orientation for decision-makers and the wider climate finance community to consider how different DLT systems may benefit the work of the fund. DLTs are linked to several of the fund's key distinguishing features, as well as to crucial points in the GCF governance process (see Table 2). In the remainder of this section, we examine five key issue areas where DLTs could be leveraged to support the work of the GCF: (1) accountability and trust, (2) accessibility and the required institutional capacity, (3) country ownership, (4) impact assessment, and (5) scalability.
It should be noted, however, that we do not perceive DLTs as the ideal solution for all existing GCF governance challenges, nor do we wish to argue that DLTs are necessarily aligned with the political agenda and priorities of the fund. The operations of the GCF are very much embedded in a political process that will not be fundamentally changed through the incremental implementation of technical fixes. Instead, we aim to illustrate how DLTs could help alleviate a number of pertinent governance challenges in international climate finance due to their basic technical features.
Considering the key issue of accountability and trust means to discuss how DLTs can be used to facilitate accountability and trust between parties, since it is a common concern in climate finance to ensure that financial resources are used in a transparent and accountable manner (UNFCCC, 2015, Art. 13). At the GCF, this is ensured through a number of fiduciary principles, standards, and safeguards that need to be met before funding can be disbursed, for example during the accreditation and project approval process. While developed countries held diverse views during the negotiations with regard to how extensive these requirements should be, it was clear to developing countries that the conditionality of standards and contributions could potentially neglect the historic responsibility for climate change and the urgency of action. The main opportunity of DLTs is to provide transparency, a key element under the Paris Agreement (van Asselt et al., 2016;Jacoby et al., 2017). With the use of DLTs, "[u]nrelated parties can reach agreement and coordinate their activities without needing to know or trust one another, and without requiring a central coordinating authority" (Aggarwal and Floridi, 2019: 16). As certain DLT systems provide a decentralized, public register of transactions, these systems have the potential to make financial flows and the use of resources fully transparent to all parties (Retamal et al., 2018: 39). Thus, while much still depends on the institutional and political context, DLT systems offer the opportunity to facilitate trust and accountability between parties based on transparent and standardized transactions. Standards and safeguards would still play a key role in ensuring that the activities of the GCF are in line with its goals, while accountability becomes an inherent feature through the transparency of DLT systems. In other words, DLT systems may reduce the need for conventional oversight measures and may hence alleviate some of the political tensions between developed and developing countries that can derive from such measures.
Concerning access to funding, the capacity to submit funding proposals and to handle them at the GCF secretariat has been a bottleneck since the inception of the fund. Even the process of getting accredited to submit proposals is an administrative burden, especially for developing countries, a challenge which has been frequently emphasized during negotiations. So-called readiness support and fast-tracked accreditation were among the measures to counter this problem. Nonetheless, it has been proposed in light of these pertinent governance challenges that DLT systems could help to ease administrative burdens associated with accreditation and project procedures (Paz Neves and Aleixo Para, 2018: 44f). Mature DLT products are already available and demonstrate that DLT systems hold the potential to facilitate transparent and traceable transactions in climate finance based on clear standards and safeguards (Baumann, 2019). Ensuring transparency with regard to the use of funds has also been a key concern of developed countries in the negotiation process. The transparency that DLTs provide e and the standardized interactions that they facilitate e may help to address these concerns directly, ultimately allowing for easier access to funding. Beyond the disbursement of funds, DLTs could potentially be used for the administrative easing of international standard-setting and enforcement in general (GIZ, 2019). The political and technical implications of these proposals will be discussed in the following section. Besides transparency and accountability, country ownership has been one of the key priorities since the establishment of the GCF. As a financial mechanism under the UNFCCC, the GCF employs a country-driven approach and has made country ownership one of its six investment criteria (Eco Ltd, 2019). Ownership is assessed by considering a funding proposal's alignment with the recipient country's nationally determined contributions or national development strategies, and by considering whether relevant stakeholders have been consulted (GCF, 2018). In addition, National Designated Authorities (NDAs) in recipient countries must provide a letter of no objection for a funding proposal to be approved. This means that enabling access to funding via a DLT system would, at least to some extent, contradict formal requirements of country ownership, as increased accountability resulting from the disbursement of funds through DLTs would necessitate less direct involvement from national governments. Potential conflict with the GCF's country-driven process is, therefore, likely to generate opposition in established GCF governance structures (see section 3 below). Nevertheless, one could equally argue that the direct disbursement of funds through DLT systems is, in a sense, fully in line with a more general understanding of the principle of country ownership, which is to ensure that those who are directly affected by climate change have (transparent) control over the financial means to take action. Regardless of the perspective that one may adopt, these examples illustrate that DLTs are not a panacea for pertinent problems of governance or resource allocation, despite their potential to facilitate efficient and transparent transactions and information exchange.
Another interesting area for the application of DLTs in GCF projects, beyond the disbursement of funds, is the area of impact assessment. This includes questions such as: Are mitigation projects effectively reducing GHG emissions? Are adaptation actions making communities less vulnerable? Various DLT tools are currently piloted to answer these and similar questions in the context of the UNFCCC process, for example by building the next generation of interoperable GHG registries and tracking mitigation outcomes, or by automating and enhancing standardized measuring, reporting and verification (MRV) processes in climate change projects (Fuessler et al., 2019). Especially in the context of MRV processes for mitigation actions, DLTs can enhance impact assessment through the transparent collection and harmonization of data via a DLTbased 'meta-registry' that connects, automates and standardizes heterogeneous emission registries and accounting systems across multiple levels. One prominent example for such a practical application of blockchain technology is the World Bank's 'Climate Warehouse' project, which employs blockchain technology to connect climate market systems via a meta-registry. From August to November 2019, the World Bank's Carbon Markets and Innovation team partnered with the Information Technology Services Technology and Innovation Lab "to implement a simulation of a blockchain-based meta-registry to test how registry systems can be connected in a peer-to-peer arrangement using blockchain technology," and to demonstrate how information changes in the metaregistry could be used to track mitigation outcomes (World Bank, 2019: 3; for more examples in the field of impact assessment, see Table 2). Although additional pilot studies are required to further optimize the performance of DLT systems at scale vis-a-vis existing governance arrangements, this concrete use case serves to illustrate the ability of DLTs to support, and ultimately enhance, regular impact assessments and monitoring activities conducted by the GCF (UNFCCC, 2011: 15).
Lastly, scalability constitutes a challenge not only for the GCF, but for climate finance in general. Scalability refers to the scalability of technological and institutional systems on the one hand, and the potential to upscale the total amount of funding available for climate action on the other. The extent to which international climate finance should originate from public or private sources has been the cause for much debate in the global climate negotiations. Developing countries generally favor public over private funding to ensure that adaptation projects with potentially low returns on investment are ultimately realized. The need for adaptation finance alone is expected to be around US$ 140e300 billion per year by 2030, with projected available funding only reaching US$ 25 billion (UNEP, 2016). However, while it is likely that the total amount of funding available for climate action will be insufficient without further involvement of the private sector, climate finance requirements under the UNFCCC are often misaligned with the realities of private sector investments (Pauw et al., 2016). The GCF has thus established a Private Sector Facility, and as of January 2020 about 38 percent of total GCF funding are channeled into private sector projects or activities (GCF, 2019a). DLT solutions might further enhance private sector involvement in climate finance by (a) improving the visibility of investment opportunities, (b) increasing investor flexibility for direct investments in small-scale projects, and (c) facilitating secure accreditation and transparent information exchange among GCF entities and partners (Salisbury and Khvatsky, 2018). This could be done by setting up interoperable databases and registries for the secure peer-to-peer exchange and storage of data or digital assets, primarily to facilitate private sector investment in climate change projects (Baumann, 2019). DLTs could also foster synergies across organizations, given that the GCF Board has been tasked to consider the complementarity of the GCF with other climate finance mechanisms.

Political challenges and technical limitations for DLTs
Having explored the potential of DLTs to address common issues in international climate finance, we now turn to assessing the key political challenges and technical limitations associated with these novel technologies, and especially for their use in the context of the GCF. From a technical and capacity perspective, the implementation of DLTs may be challenging in some instances, especially if digital infrastructure and electricity requirements in recipient countries are not met. This means that the effectiveness of DLTs will depend on "the strength of a country's (digital) infrastructure d the Internet, distributed and cloud computing, electricity supply, and digitized data, all of which power the blockchain, as well as the technological literacy of its population" (Aggarwal and Floridi, 2019: 17). The latter problem of technological literacy also touches on a variety of key debates in fields such as political science, science and technology studies and development studies, most notably those revolving around so-called "digital divides" (see Andreasson, 2015). The term digital divides generally refers to stark demographic and geographical differences concerning the availability, adoption and use of digital technologies. It may also include different cultural perceptions of digitalization. Taken together, these factors play an important role with regard to technology access, and may lead to specific situations in which the implementation of DLTs could widen existing inequalities within or among societies, especially in recipient countries. Differences in technological skills and literacy have to be carefully considered to guarantee that digitalization does not negatively impact social cohesion. Another potential barrier for the inclusive use of DLTs in climate finance is the current shortage of specialists (e.g., coders), together with developer competition and a relatively low interest in climate action within these communities (EIT Climate-KIC, 2018). The deployment of DLTs will thus require initial investments in infrastructure, technical expertise, and research or pilot projects to ensure that standardized DLT systems are implemented for the benefit of all GCF entities and partners.
The high energy demand of DLTs is often seen as another crucial challenge for the sustainable and inclusive use of these emerging technologies. Recent studies show, for example, that the energy demand for blockchain applications such as Bitcoin could lead to a significant increase in carbon emissions (Mora et al., 2018). It is estimated that Bitcoin alone uses the same amount of energy per year as Ireland or Austria, depending on the concrete circumstances of its application (De Vries, 2018). This is certainly a problem for Bitcoin. However, it is a widely held belief in the technical community that the energy problem of DLTs is primarily associated with the logical mechanism which is used by the ledger to confirm the claims of users. While Bitcoin uses a 'proof-of-work' logic, the efficiency of DLTs can improve considerably once alternative 'proofof-stake' or 'proof-of-authority' mechanisms are introduced (for more information, see Chen, 2018). Yet, since the number of digital devices and the amount of data that is created on a daily basis are steadily increasing, together with a rising demand for computational power, it should be kept in mind that the Internet itself, as a key driver of digitalization, will require more and more energy over time. As Chen (2018: 76) points out, "the Internet consumed 200e300 TWh of electricity in 2017 [ …] To put this into a broader perspective, the Internet is now comparable to aviation as a source of carbon emissions." As long as relevant innovations such as quantum computing are still under development, and as long as related promises of exponentially higher computational power and technological sustainability have not materialized, the key question remains how the energy demand of digitalization processes can be met sustainably. This does not mean to imply that energy demand should be a reason to stop the development of DLTs altogether, or that DLTs are an unsustainable technology per se. DLTs are simply one aspect of digitization processes on a global scale, and hold significant potential to increase energy efficiency, to accelerate climate action, and to support transitions toward sustainable energy systems (Marke, 2018).
If and how this potential can be realized will crucially depend on the design of specific DLT systems and the political choices that are made along the way. This also includes the effective adaptation of institutional structures and organizational processes to minimize potentially harmful effects. Due to the inherent dynamism of innovation, it is still difficult to predict how exactly DLTs will affect, or even disrupt existing institutional structures and processes, since DLT systems differ considerably with regard to their legal, technical, and governance implications. In public and permissionless systems, decision making power may shift away from centralized institutions such as governments, or for example in the case of community-based and decentralized energy systems, from large energy providers and corporations. In proprietary and commercially oriented systems, there might be strong economic incentives to focus on DLT applications that are less relevant for climate finance. Other types of DLT systems that combine public or private with permissioned or permissionless infrastructures may strengthen the role and capacity of public institutions. All of these use cases certainly imply a power shift to DLT developers and specialists. Policy incentives and system design will also play a crucial role for further GCF capitalization. One of the main benefits of DLT for climate finance is that the technology can reduce the overall costs of developing new green finance products, reduce information asymmetry between actors, and improve certification systems (EIT Climate-KIC, 2018). Nonetheless, there are a number of obstacles for the uptake of DLTs in climate finance, especially for private sector entities, such as the general uncertainty attributed to climate finance business models and the related prospect of minimal riskadjusted returns, especially in adaptation finance. The reluctance among decision makers in the private sector to engage with DLT solutions may also stem from a negative image of DLT as an immature technology, together with a general lack of industryspecific knowledge (trends, problems, rules of the game) among developers or project partners to create real value-adding solutions (EIT Climate-KIC, 2018).
Deploying DLTs to reduce the need for conventional accountability measures in climate finance is another promising field of application, but deploying the technology to this end might be problematic for several reasons. Since DLTs can be used to disintermediate processes, to create transparency in interactions, and to facilitate 'trust-free' interactions between participants based on immutable records, DLTs have been heralded as tools to address problems related to trust, accountability, and ultimately legitimacy under the GCF (Reutemann, 2018). This means that the need for control which countries represented at the board currently exert through conventional means and board oversight would be reduced. However, countries would likely be reluctant to give up that control, particularly if they consider engagement with the GCF to be in their strategic interest. For example, at the GCF's 14th board meeting in 2016, political tensions unrelated to climate finance prompted the Indian delegate to oppose the approval of US$ 37 million for reducing the risk of glacial lake outburst floods (GCF, 2016;Climate Home News, 2016). The project in question was to be carried out in Gilgit-Baltistan, which is administrated by Pakistan, but, as part of the Kashmir region, claimed by both India and Pakistan. Although the Indian delegate ultimately relented, it is likely that reducing the need for conventional oversight and control though technical solutions such as DLTs could, simultaneously, impede such conventional ways of exerting political influence. Hence, quite ironically, some of the most significant benefits of DLTs may also constitute political obstacles for their implementation.
Moreover, governments and organizations may not only be reluctant to implement DLT systems because of oversight issues or cost-benefit calculations, depending on the outcome of such analyses for specific use cases. Implementing DLTs also raises ethical and legal issues, as well as issues of data security. Creating an immutable record of activities and collecting large amounts of sensitive data might provide incentives for criminal behavior and requires precautionary measures, especially since the immutability of ledgers makes it extremely difficult to retrospectively alter or remove (false) information once it has been entered into the system. Within the European Union, there is an ongoing discussion among legal scholars whether a decentralized DLT system can in principle be compliant with regulations such as the 2016 General Data Protection Regulation, especially when considering an individual right to erasure ('right to be forgotten') enshrined in Article 17 (Finck, 2018). Creating transparency and accountability also means constraining the scope for the pursuit of vested interests, and may thus be resisted under certain circumstances (Aggarwal and Floridi, 2019).
Despite promises of decentralization, disintermediation and democratization, there is also the real possibility that DLTs may support a push towards centralized control, depending on the design of the system and the political context for its implementation. The deployment of DLTs thus requires clear ethical and design principles to ensure the security, inclusivity, and legal compatibility of the system. This includes the complex question of whether it would be desirable to disintermediate traditional processes related to, for example legal oversight, standardization or public administration, provided there are choices involved at all, and the process is not disruptive.
Lastly, it is evident that the aforementioned technical and political challenges will directly affect the scalability of DLTs. Generic predictions about the scalability of DLT solutions are nevertheless hard to make. Prospects depend on specific cost-benefit calculations as well as a number of other factors such as the technical aspects of the system model, contextual factors such as the political and cultural preferences of users, or the concrete effects of existing digital divides, especially between developed and developing countries. 7

Conclusion
In this paper, we discuss how the Green Climate Fund (GCF) may leverage emerging distributed ledger technologies (DLTs) for innovative climate finance and service provision. On the one hand, our findings show that digital technologies offer great potential to support the work of the GCF in key areas such as MRV, international standard setting, and multi-stakeholder coordination. On the other hand, we illustrate why emerging digital technologies do not provide a silver-bullet solution for existing GCF governance challenges. In their current state of development, DLTs should rather be seen as digital multi-purpose tools that can be used to address some of the organizational and operational challenges the GCF is currently facing. First, the capability of DLTs to facilitate secure, immutable and standardized transactions speaks to the need to ensure transparency and accountability for GCF funding. Second, in the same wake, DLTs could reduce the need for administratively burdensome processes to access funds, which directly addresses the problem of limited institutional capacity, especially in developing countries. Third, DLTs could enhance country ownership by giving recipient countries more direct control over funding. Fourth, DLTs can provide a decentralized and transparent register that holds great potential for MRV or impact assessment. Finally, improved information and ease of accessibility might ultimately incentivize more private investment, thereby allowing the GCF to scale-up more easily.
However, based on our analysis of existing use cases and system models, we find that DLTs do not necessarily solve pertinent governance issues. Many problems in international climate finance are normative or political. These problems cannot simply be done away with through technical solutions. Especially the frequent claim that blockchain is a 'trustless' technology is questionable and warrants further investigation. DLTs can certainly be used to facilitate trust between actors in climate finance, but emerging technologies neither generate trust out of thin air, nor do they solve existing problems of resource allocation. Depending on the design of the digital system, DLTs could even disrupt established relations of trust and negatively affect the capacity of governments and governance regimes to regulate economic activities. This means that DLTs are not entirely 'trust-free' technologies. They remain connected to existing governance arrangements, and may either facilitate or disrupt institutional processes.
Harnessing the positive effects of DLTs will thus require targeted economic and policy incentives to support digital innovation in line with the recommendation of the UN Secretary-General's High-level Panel on Digital Cooperation, namely to test new approaches "on a small scale before being rolled out widelydthrough, for example, pilot zones, regulatory sandboxes or trial periods" (United Nations, 2019a: 14). The identification of transdisciplinary research and development projects which can be brought to scale and contribute to finding solutions for clearly defined problems should be made a priority in this regard. Careful anticipation and foresight will be needed, together with the development of clear ethical, legal and design principles to avoid situations where DLTs may endanger social cohesion. Disintermediation has complex consequences across multiple domains (social, legal, political, financial, economic) and should not be regarded as an end in itself. Additional research will be necessary to better understand the context specific consequences of disintermediation for climate finance and governance systems.
Our analysis further shows that technical infrastructure and skill requirements present noteworthy challenges for DLT deployment, particularly in developing countries, and that the carbon footprint and energy consumption of DLTs can be considerable. While this might present a challenge, DLTs will reach maturity within the next five to ten years, and it is expected that technological sustainability will improve as a result of ongoing innovation. DLTs are simply one facet of global digitization, and are equally capable of increasing energy efficiency, accelerating climate action, and supporting transitions toward sustainable and more decentralized energy systems. Thus, considering the current state of technology development, and depending on the concrete design and governance of the digital system, the most promising and realistic applications of DLT in the context of the GCF include: (a) enabling secure, immutable and standardized transactions that increase transparency, accountability and country ownership by giving recipient countries more control over assets and data; as well as (b) increasing trust between parties by improving multi-stakeholder coordination and the exchange of relevant data and information. This can be achieved, for example, through the automation and standardization of multi-level MRV processes. On the one hand, DLTs allow for the automated and standardized collection of data. On the other hand, DLTs can enable advanced progress-tracking by creating a decentralized database of high interoperability ('meta-registry') that would link data from various sources such as national registries or non-state emission accounting systems. However, answering the question of whether DLTs also have the potential to improve how climate finance is accessed and allocated today is considerably more difficult, since much depends on the normative or political context in which these technologies are designed and applied.
Lastly, it should be emphasized that DLTs develop in a highly dynamic fashion. DLTs are hardly an isolated technological trend, and it will be crucial to monitor their increased maturation together with other technological developments in fields such as artificial intelligence, the emerging internet of things and services, or big data analytics. As pointed out by digital innovation experts, international organizations or businesses may "ignore the trend at their peril," and thus risk being disrupted, for better or worse, with yet unforeseen consequences for global sustainability and 7 For a more in-depth discussion of DLT scalability, see for example EIT Climate-KIC 2018. What can be said in more general terms is that different DLT solutions might involve trade-offs between decentralization, security, and scalability. environmental governance (Gartner 2018b). What might be needed at this point, beyond inflated expectations and pessimistic scenarios, is a more analytical approach to DLTs in both the public and private sector, together with structured research and development informed by deliberate experimentation.
CRediT authorship contribution statement Karsten Schulz: Conceptualization, Funding acquisition, Formal analysis, Writing -original draft, Writing -review & editing, Conception and design of study; acquisition of the data; analysis and/or interpretation of data; Drafting the manuscript; revising the manuscript critically for important intellectual content; Approval of the version of the manuscript to be published. Marian Feist: Conceptualization, Funding acquisition, Formal analysis, Writingoriginal draft, Writing -review & editing, Conception and design of study; acquisition of the data; analysis and/or interpretation of data; Drafting the manuscript; revising the manuscript critically for important intellectual content; Approval of the version of the manuscript to be published.

Declaration of competing interest
The authors declare that they have no known competing financial interests or personal relationships that could have appeared to influence the work reported in this paper.