As we countdown to COP28 in the United Arab Emirates at the end of the year, the country continues to endorse and roll out programs aimed at prioritising sustainability solutions. Abu Dhabi has initiated its first carbon-credit exchange and is adopting a stricter stance on ESG disclosure. This is a part of the region’s continued effort to strive to become carbon neutral by 2050. Abu Dhabi Global Market has partnered with Air Carbon to create the world’s first fully regulated carbon trading exchange and carbon clearing house which will be established in Abu Dhabi, the capital of the United Arab Emirates (UAE). To partially offset the emissions they generate, businesses can purchase credits on exchanges. In recent years, the worldwide voluntary carbon market has expanded quickly, but so has scepticism that the credits actually reduce or eliminate carbon emissions.

Blockchain Technology

The Exchange has a traditional trading architecture and uses distributed ledger technology (DLT) to securitize (taking an asset and turning it into a security that can be traded) carbon credits into digital receipts. By doing so, it creates a clear line of ownership between the carbon credits held in the Trust and their owners. The use of DLT provides a few benefits, many of which provide solutions to some of the issues we identified in our previous article identifying the issues with Carbon Credits. First, it allows for a more transparent and secure system for tracking ownership of carbon credits. Because the records are immutable, it is very difficult to tamper with them or manipulate the ownership of the carbon credits. Second, it allows for more efficient trading because the records of ownership are stored in a distributed network, meaning that multiple parties can access them simultaneously. This reduces the need for intermediaries and can lead to faster and cheaper trades. Finally, it allows for greater accessibility to carbon credits, as they can be traded in smaller denominations and with a wider range of buyers and sellers, potentially increasing liquidity in the market. Because the Air Carbon Exchange is blockchain-based, it enables the creation of a hybrid, decentralized platform, which mirrors commodity markets. The use of blockchain simplifies and automates the laborious manual processes that are usually involved with OTC carbon trading. Through the use of Smart Contracts, it is easier for users to trade and settle with a clear and immutable record on the system. William Pazos, Managing Director and Co-Founder of ACX & Kevin Iwanaga, COO MENA Region, said: “Abu Dhabi and by extension ADGM, are an integral part of ACX’s global expansion. Our recent partnership with the Deutsche Börse Group, expansion into Brazil and our already well-advanced full exchange and clearing application in ADGM complement each other to deliver a truly global marketplace from the heart of the MENA region. We are excited to work within a dynamic and forward-thinking ecosystem such as ADGM.” This partnership & project underpins ADGM’s commitment to building a progressive and more sustainable economy. It was the world’s first international financial centre to become carbon neutral. If you wish to find out more about Abu Dhabi Partner with Air Carbon Exchange (ACX) to Create Carbon-Offset Trading Exchange, please feel free to reach out to us for support at admin@bankslegal.co