Dubai Financial Market (DFM) plans to move to the forefront of climate action as a regulated platform where project capital raising, carbon credit trading and safekeeping are explored by introducing a pilot programme for trading carbon credits.
The platform is scheduled to debut at COP28 and is in support of the UAE Government’s net zero by 2050 goal. The pilot programme for institutional investors with trading starting from December 4 to December 8, 2023, with the offsetting period ending on 10th January 2024.
The inaugural pilot will see the 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.
The transactions will be executed through five brokers – Al Ramz Capital, Arqaam Securities, BHM Capital, EFG Hermes and Emirates NBD Securities. Clearing and settlement processes will be handled in US dollars 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 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.
Hamed Ali, CEO of DFM and Nasdaq Dubai, commented: “Capital markets play a pivotal 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.”
Carbon credit market set to skyrocket
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.
The carbon credits traded on DFM will be supplied from DEWA and MyCarbon. These originate from internationally certified carbon projects across the globe that include carbon avoidance, reduction and removal initiatives. All projects have been verified by VERRA or the UN’s Clean Development Mechanism (CDM).
Saeed Mohammed Al Tayer, MD & CEO of DEWA, said: “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 to provide 100 percent of Dubai’s total power production capacity from clean energy sources by 2050.
“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.”
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.
“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 the Emirate’s position as a global hub for green economy innovations and opportunities.”
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