Today's Edition
MAYS IBRAHIM (ABU DHABI)
The recent Cabinet Resolution No. (67) of 2024 establishes a comprehensive and transparent framework for the UAE's carbon market, advancing its journey towards climate neutrality by 2050 and positioning it as a leader in the rapidly growing global carbon market, according to environmentalists.
The resolution, effective from December 28, 2024, requires public and private entities emitting over 0.5 million metric tonnes of carbon dioxide annually to join a newly established National Register for Carbon Credits, managed by the Ministry of Climate Change and Environment.
A Regulatory Shift for Large Emitters
Amro Zakaria, CEO and founder of Kyoto Network and Madarik Ventures, views the resolution as a "pivotal step" towards aligning the UAE's economic development with its sustainability goals.
"For emitters, this resolution is an opportunity to evaluate their operations, adopt cleaner technologies, and actively engage in carbon reduction strategies. It's a clear signal that the UAE is moving further down the road where sustainability is or will no longer be optional but integral to business operations," the global financial markets strategist told Aletihad in a recent interview.
Dr. Rahaf Ajaj, Assistant Professor of Environmental Health and Safety at Abu Dhabi University, echoed these sentiments, highlighting the resolution's role in furthering the UAE's long-term climate goals.
"This landmark progressive resolution creates a transparent and regulated market for carbon credits, incentivizing emissions reductions and fostering accountability among businesses," Dr Ajaj explained in an interview with Aletihad.
She also pointed out that penalties for non-compliance, including fines up to Dh1 million, underline the seriousness with which the UAE is pursuing its climate objectives.
Dr. Ajaj views that this resolution places the UAE as a regional leader in climate action, reiterating its commitment to its Nationally Determined Contributions under the Paris Agreement.
"The UAE's leadership in carbon credit trading will no doubt set an example for other countries, especially in the Middle East region, to do the same. This could accelerate the transition toward a low-carbon economy and amplify international cooperation on climate action," she said.
UAE's Growing Leadership in Carbon Markets
Zakaria estimates that carbon credits and offsets could become the next trillion-dollar asset class, as they are among the few economically viable ways to incentivise corporations to reduce pollution.
"Given that the UAE is a significant financial centre, the new Cabinet Resolution on carbon credits will ensure its strategic position as a leading player in this market, particularly within the Global South. As a result, the UAE could become a regional hub for carbon trading, attracting investments, fostering partnerships, and boosting its profile as a leader in climate solutions," he said.
A key feature of the new carbon credit system is the National Register, which, according to Dr. Ajaj, uses advanced technologies like blockchain to enhance the traceability and security of carbon credits, reducing the risks of double counting and fraud.
Dr. Ajaj said the measures align with international standards like the Paris Agreement and the Kyoto Protocol, ensuring global recognition of the UAE's emissions cuts and supporting accurate reports on progress toward its Nationally Determined Contributions (NDCs). It also provides the necessary oversight to ensure a trustworthy carbon credit market, with real, measurable, and verifiable reductions in emissions, Dr. Ajaj added.
Zakaria shared similar views, deeming the National Register a "game-changer" when it comes to policymaking.
Both environmentalists affirmed that these factors reflect positively on the UAE's credibility and competitiveness in the global carbon market, making its carbon credits more attractive to international buyers.
"This places the UAE at a vantage position as the global carbon credit market is at its growth, thereby winning investments and forging partnerships dealing with this system at the international level. This will go a long way in boosting its economy and reinforcing its status as a pioneer in climate action," Dr. Ajaj said.
What Are Carbon Credits?
Carbon credits are certificates that represent a reduction or removal of one metric tonne of CO₂ or its equivalent in other greenhouse gases (GHGs). They are generated by projects like renewable energy or reforestation and can be traded, enabling companies to offset excess emissions by purchasing credits from those who exceed reduction targets.
According to Dr. Ajaj, carbon credits are important because of their ability to provide a "flexible" and "scalable" solution for reducing greenhouse gas emissions.
"They enable countries and companies to meet their climate targets while promoting sustainable development and clean technology transfer, particularly in developing nations."
Zakaria pointed out that the UAE's carbon credits system aligns seamlessly with the global shift toward market-based mechanisms for addressing climate change.
"Carbon markets, both compliance and voluntary, are critical for achieving net-zero emissions by leveraging private capital and encouraging innovation."
Voluntary Participation
Although the resolution mainly targets large-scale emitters, smaller entities whose emissions fall below the 0.5 million metric tonnes threshold can voluntarily participate, helping to improve their sustainability profiles while contributing to the broader environmental vision of the UAE, Dr. Ajaj explained.
Zakaria noted that businesses that adopt proactive carbon management stand to benefit in terms of reputation, operational efficiency, and access to sustainable financing, which is "one of the fastest-growing sources of project funding currently."
"While the system is currently voluntary in terms of purchasing carbon credits, the mandatory monitoring and reporting of emissions create an implicit incentive to act," he added.
