The Dubai Financial Market (DFM) has announced the introduction of a pilot programme for trading carbon credits, scheduled to debut at COP28. 

 

This move positions the financial market at the forefront of climate action as a regulated platform where project capital raising, carbon credit trading and safekeeping are explored in support of the UAE Government’s net zero by 2050 goal. 

 

The pilot will be an integrated platform to explore the trading and use of carbon credits, providing a mechanism to help companies manage unavoidable and residual carbon emissions while pursuing direct decarbonisation strategies. Each carbon credit symbolises a tangible reduction in carbon emissions, with one credit offsetting one ton of CO2 equivalent emissions. 

 

Institutional investors

DFM will commence the pilot programme for institutional investors who can buy and sell with trading starting from December 4 to 8, 2023, with the offsetting period ending on January 10, 2024.  The inaugural pilot will see the active participation of more than 17 UAE companies, including Dubai Electricity and Water Authority (Dewa), DP World, Dubai Municipality, Dubai International Financial Centre (DIFC), Emirates NBD, Majid Al Futtaim, SHUUA Capital, Al Ansari Financial Services, Emaar, Salik, SEE Holding, FIVE Holdings, Gulf Cryo and Tabreed among others. DFM has worked closely with Dubai Future Foundation as a partner for the pilot. 

 

The transactions will be executed through 5 DFM brokers, namely Al Ramz Capital, Arqaam Securities, BHM Capital, EFG Hermes and Emirates NBD Securities. Clearing and settlement processes will be handled in USD by Dubai Clear and the Dubai Central Securities Depository (DCSD), with global daily price reference provided by leading pricing agencies such as OPIS, a Dow Jones company.

 

The carbon credits traded on DFM will be supplied from Dewa and MyCarbon, coming from internationally certified carbon projects around the world that include carbon avoidance, reduction and removal initiatives. All projects have been verified by widely recognised standard setters such as VERRA or the UN’s Clean Development Mechanism (CDM). DFM is pleased to bring quality carbon credits from local Dewa projects for admission to the pilot. 

 

Pivotal role

Saeed Mohammed Al Tayer, MD & CEO of Dewa, said: "Dewa is leading in this aspect, and we're delighted to play a pivotal role in DFM's pioneering carbon pilot initiative, set to launch during COP28. Our active participation aligns with the vision of our wise leadership, in building a green economy in UAE, and achieving the goals of the UAE Net Zero by 2050 strategic initiative, the Dubai Clean Energy Strategy 2050, and the Dubai Net Zero Carbon Emissions Strategy 2050 to provide 100% of Dubai’s total power production capacity from clean energy sources by 2050.

 

“This initiative is a true testament of our commitment to climate change mitigation and the Dubai Carbon Abatement Strategy 2030 to reduce carbon emissions by 30% by 2030.  To achieve these goals, we have launched many initiatives and projects, most notably the Mohammed bin Rashid Al Maktoum Solar Park, which is the largest single-site solar energy project in the world based on the IPP model with a capacity of 5,000 megawatts by 2030.

 

“This collaborative effort led by DFM not only brings together issuers and key market participants, but also offers a strategic exploration of the effectiveness of carbon credit trading and its catalytic contribution to the UAE prosperous green future."

 

Project capital raising

Hamed Ali, CEO of DFM and Nasdaq Dubai, said: "Capital markets play a key role in driving the development of a low carbon economy by facilitating project capital raising, enhancing price discovery and transparency, and centralising liquidity. The launch of carbon credit trading represents a logical progression for DFM as a platform for ESG-focused themes and building on our existing track record. As the global economy accelerates its decarbonisation, the demand for carbon project financing is poised to surge and the necessity to trade credits will grow in tandem.  We invite other Dubai businesses and project developers to join us in this pilot endeavor.”

 

Eng Dawood Abdulrahman AlHajri, Director General Dubai Municipality, said: "Dubai and the UAE continue to solidify their position as regional leaders in climate action through adopting international practices to cement sustainable development and protect resources for future generations. Dubai Municipality’s partnership with DFM on carbon emissions reduction reflects our commitment to sustainable practices and responsible urban development. This commitment extends to reducing greenhouse gas emissions and carbon footprints across various sectors. It also covers pioneering environmental initiatives, sustainable environmental ecosystems, comprehensive sewage treatment and waste management. 

 

“Our commitment helps strengthen Dubai's position as a global laboratory for the latest leading sustainability practices, while providing the necessary elements to achieve Dubai’s goal of 100% clean energy by 2050. We believe that Dubai’s carbon credits trading platform can play a vital role in achieving climate neutrality by 2050, unlocking new opportunities for sustainable development and consolidating Dubai’s position as a global hub for green economy innovations and opportunities.”

 

According to the Taskforce on Scaling Voluntary Carbon Markets (TSVCM), the demand for carbon credits could multiply by a factor of 15 or more by 2030 and up to 100 by 2050. In aggregate, the carbon credit market is projected to surpass $50 billion in value by 2030.--TradeArabia News Service