Skip to content Skip to Search
Skip navigation

World’s first carbon credit exchange boosts green projects

ADGM will regulate the exchange ADGM
Abu Dhabi's financial centre and free zone ADGM will regulate the carbon credit exchange

Abu Dhabi Global Market pioneers the milestone exchange allowing companies to trade carbon credits like conventional financial assets

The launch of the world’s first regulated carbon credit exchange and clearing house to regulate carbon credits will help mobilise capital for renewable energy projects in the MENA region. It will also help companies reach their decarbonisation goals, experts have said.

The announcement by the financial centre and free zone Abu Dhabi Global Market (ADGM) means corporations will be able to trade and finance carbon credits like conventional financial assets when the AirCarbon Exchange (ACX) launches in the emirate this year.

“Carbon markets exist because other structures have not solved the problem of mobilising capital towards [renewable energy] projects,” Ruchir Punjabi, co-founder of Distributed Energy and renewables.org, told AGBI. 

“Western capital, for example, does not understand the risk profile of putting solar in emerging markets. The only capital available to companies in emerging markets is the banks and that doesn’t align with the return profile of solar [projects].”

ADGM’s exchange will help UAE control existing and future carbon markets in the MENA region

Joel Michael, founder and CEO at Oceans & Us

According to Punjabi, carbon credits have primarily been traded through marketplaces not exchanges.

He said: “The difference is that, in a marketplace, the market defines the price – and every carbon credit – based on its source, how it was issued, where it comes from, and who the buyer is. What an exchange does is that it basically removes the subjectivity from the carbon credit market. It’s made more fungible.” 

Carbon credit is a specific financial term for a tradable environmental certificate or license recognising the right to emit a certain tons of carbon monoxide or the corresponding amount of another greenhouse gas.

The global carbon credit market is estimated to account for $2.407 billion in terms of value by the end of 2027, according to a 2021 report by Coherent Market Insights.

The regulatory framework will allow corporations to trade and finance carbon credits like conventional financial assets, thus increasing participation and investment in global carbon reduction and offset programmes, ADGM said in a statement.

The exchange will be established as a recognised investment exchange (RIE) regulated by ADGM. There will also be a recognised clearing house (RCH) known as ACX Clearing Corporation to custodise, clear and settle commodities in commodity derivatives.

Carbon credits are issued based on the quantity of carbon produced during the year.

“This is an important development, given the UAE’s focus on climate action, as the first country in the Gulf to commit to net zero by 2050,” Joel Michael, founder and CEO at Oceans & Us and sustainability advisor to the New Zealand Trade and Enterprise in Dubai, said.

“It will help UAE to control existing and future carbon markets in the MENA region and support more companies to reach their decarbonisation goals.”

Vivek Tripathi, founder and CEO at Dubai startup and carbon offset platform Olive Gaea, said: “Businesses and industries in this part of the world have limited opportunities to reduce [their] emissions in a cost-effective way – and, in that context, this trading exchange definitely helps. 

“It boils down to the basic economics of demand and supply. You have a cap requirement as a business, you’d look out to see how best can you mitigate that emissions level. With every incremental dollar that you spend on abating or financing any scheme to reduce emissions, you’d try to find the minimal cost. Trade exchanges establish that minimal cost, which businesses can internalise while they put their project costs together.”

He added however that an overall regulation or cap on the emissions is still missing in the region. 

The UAE is aiming to attract inflows from global capital markets as investors increasingly seek ESG-compliant investments through the Net Zero by 2050 Strategic Initiative, ADGM said.

Earlier this year, ADGM also became the world’s first international financial centre to become carbon neutral.

Latest articles

Flooding in Dubai affected many people's homes. Emaar has promised .free repairs for its residents, and an upgraded sewerage system is planned

Emaar promises free repairs as Dubai launches sewerage system

Emaar Properties is offering free repairs to residents whose homes were damaged during this week’s extreme flooding, as Dubai also announced an AED80 billion ($22 billion) sewerage system. The developer announced on Friday that it would repair all homes in its communities affected by the historic levels of rain, “at no cost to residents”. Emaar’s […]

Construction work in Kuwait. Nurseries, schools and shops are being built for the new residential district of Al Metlaa

Kuwait signs $140m contracts for Al Metlaa development

Kuwait’s Public Authority for Housing Welfare (PAHW) has signed two contracts worth KD42 million ($140 million) to construct public buildings in Al Metlaa, a new residential district north of Kuwait City. Nurseries, stores, schools and shops will be included, state news agency Kuna reported. Electricity connections have been provided for 109 buildings in the district, […]

Iraq gas oil

Iraq to auction 30 oil and gas projects this month

Iraq will auction 30 new oil and gas projects in two licensing rounds before the end of April. The bidding round will be held on April 27, Reuters reported, citing an oil ministry statement. Last October Iraq passed a long-awaited oil and gas law, which will help the country attract more international investments into the hydrocarbon industry and boost government revenues.  Ali Metwally, an […]

Workers at Cano Limon oil field in eastern Colombia. Oil is one of the country's largest exports

UAE strikes Colombia deal to strengthen Latin American links

The UAE has strengthened trade relations with Latin America after signing a comprehensive economic partnership agreement with Colombia, just days after a Cepa deal was struck with Costa Rica. Officials from the UAE and Colombia put pen to paper on an agreement that will cut tariffs and remove trade barriers between the two countries. UAE […]