A Blockchain-Based Financial Instrument for the Decarbonization of Irrigated Agriculture

Julio Pombo-Romero and Oliver Rúas-Barrosa
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Julio Pombo-Romero: Deparment of Financial Economics and Accounting, Universidade de Vigo, 36310 Vigo, Spain
Oliver Rúas-Barrosa: Instituto de Energía Solar, Universidad Politécnica de Madrid, 28040 Madrid, Spain

Sustainability, 2022, vol. 14, issue 14, 1-22

Abstract: Farming and food production sustainability increasingly depends on the availability of a clean energy model for irrigated agriculture. This can be achieved by massively introducing photovoltaic irrigation systems (PVI) with sufficient quality and reliability. Nevertheless, such PVI projects require high upfront investment and long payback times, so access to long-term, low-cost capital is essential to ensure their competitiveness. In this regard, decentralized financial (DeFi) solutions based on blockchain (BC) technology present a number of features that can be applied to produce financial instruments (FI) well suited to attract investors to PVI projects and to reduce the cost of clean energy for irrigators. In order to assess such a possibility, a DeFi FI tailored for PVI has been produced and implemented in BC. We demonstrate that a single smart contract executed in a distributed ledger can execute the different tasks related to the securitization of PVI assets. The impact on the cost of capital for PVI projects is significant, leading to an estimated reduction in the cost of clean energy for irrigators of 22%. Nevertheless, decentralization also introduces a number of specific risks that must be considered and mitigated.

Keywords: blockchain securitization; decentralized finance; green bonds; photovoltaic irrigation; power purchase agreement; financial instrument; energy model of agriculture; on-farm renewable energy (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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