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FAB says it has traded $84m of carbon credits since May

Carbon credits are intended to offset emissions Unsplash/Andreas Felske
Trading carbon credits allows companies to offset their emissions by reducing them elsewhere, but some observers are not convinced they are effective
  • Carbon trading reduces climate impact
  • Agreements signed with Masdar
  • Climate finance is priority for Cop28

First Abu Dhabi Bank (FAB), one of the UAE’s largest lenders, has traded around €80 million ($84 million) of carbon credits since launching its carbon trading desk five months ago.  

The bank told AGBI it wants to develop the carbon trading market in the Middle East and North Africa (Mena).

This is an emerging type of financial system whose purpose is to reduce climate change impacts by creating a market to trade limited emissions allowances. 

FAB’s desk provides carbon trading and financing options for corporate and investment banking clients. The tradeable carbon credits are related to projects or organisations that work to reduce or remove emissions. 

The idea is that companies can offset their environmental impact by reducing emissions elsewhere.  

European Union Allowances (EUAs), for example, are a type of carbon allowance that allows companies covered by the EU Emissions Trading System to emit a certain amount of carbon dioxide. The price reflects the cost of reducing emissions in a specified scenario. 

FAB said it had executed about 1,000 lots of EUA trades since launching the desk in May. This is equivalent to 1 million tonnes of CO2, worth €80 million, it said. 

The bank has trading capacities in UK Allowances, too. It was also the first in Mena to trade on Abu Dhabi’s Air Carbon Exchange, a stock exchange equivalent for carbon credits that is registered at financial free zone Abu Dhabi Global Market.

The Abu Dhabi exchange has partnerships with eight carbon offset registries including Verra, Gold Standard and Corsia – the Carbon Offsetting and Reduction Scheme for International Aviation.

Its co-founder and co-chief executive Thomas McMahon said carbon credits could become a $4 billion global asset class within the next half-decade. 

FAB said this week it has signed early-stage agreements with Abu Dhabi state clean energy company Masdar and Blue Carbon “for the supply of high-quality carbon credits”. Blue Carbon is a UAE organisation that creates environmental assets and registers carbon removal projects for offsetting. 

The bank is in discussions with other industry players to further expand the local carbon trading market, it added. 

The Cop28 presidency has placed climate finance as a key pillar of this year’s climate change summit. Last month, the UAE government pledged $450 million to buy African carbon credits by 2030. 

Carbon trading sceptics, however, have questioned whether offsetting is an effective and meaningful way of reducing emissions globally.