Opinion by: Nicholas Krapels, head of research and development at Mantra
By 2035, the real-world asset (RWA) market is projected to exceed $60 trillion, with green RWAs poised to emerge as a vital subsector in this global onchain movement.
Currently, tokenized green assets constitute less than 1% of total climate assets and a similarly trivial portion of RWAs, which are primarily tokenized treasuries.
Nevertheless, with the total value of green assets expected to rise and the rate of tokenization accelerating, the green RWA market presents an overlooked growth opportunity.
Platforms are emerging to tokenize billions in green credits
Upcoming stringent EU regulatory frameworks are anticipated to exponentially increase global carbon trading in the coming years. While issues like supply bottlenecks and verification remain—largely due to the nascent state of accepted tokenization practices—the potential for programmable green assets onchain has spurred numerous ambitious infrastructure projects, particularly in emerging markets.
A case in point is Dimitra, which employs blockchain and AI to assist smallholder farmers in enhancing productivity and establishing resilient agricultural systems. Their initiatives focus on cacao production in Brazil’s Amazon and carbon credit projects in Mexico, allowing direct investments in smallhold farms with projected annual returns between 10% and 30%.
In a different sector but still dedicated to creating a landscape for greater sustainable good is Liquidstar. Its waypoint stations recharge batteries, promote e-mobility, generate atmospheric water, provide internet connectivity, and host micro-data centers. For communities lacking power, it’s a crucial advancement into sustainable electronic ecosystems.
A Liquidstar waypoint set up last year in Jamaica. Source: Liquidstar
In the next decade, digital advancements driven by regulatory clarity will provide the global community with its best opportunity to harmonize the frequently conflicting objectives of sustainability and profitability.
Although green assets once deterred profit-driven investors, disillusioned by the perplexing environmental, social, and governance narrative, there are indications of “green shoots” in the formative green RWA movement.
In contrast to their Web2 equivalents, blockchain efficiencies enable tokenized green assets to capitalize on synergies that convert previously undesirable climate assets into a new class of lucrative opportunities.
Green RWA is a trillion-dollar addressable market
Beginning with the Kyoto Protocol in the late 1990s, carbon credits incentivize reductions in greenhouse gas emissions through initiatives such as reforestation, renewable energy, methane capture, and soil restoration.
Essentially, each credit denotes one ton of CO₂ reduced, avoided, or eliminated. Compliance frameworks like the EU Emissions Trading System initially propelled the market. This cap-and-trade system for environmental regulation may be familiar to many.
After gaining ground in the 2010s—thanks to escalating corporate sustainability objectives—the Voluntary Carbon Market (VCM) is on the rise, valued at $1.7 billion and projected to grow by 25% annually over the next decade. The carbon dioxide removal (CDR) market is anticipated to reach $1.2 trillion by 2050. According to S&P Global, “sustainable bonds” already account for 11% of the global bond market by 2024. “Climate bonds” are an older ESG term; however, the Climate Bonds Initiative projects the cumulative green component of its assets to hit $3.5 trillion by the end of 2024. Renewable energy certificates (RECs) and biodiversity credits further augment this market.
Initiatives like CarbonHood’s endeavor to tokenize $70 billion in carbon credits highlight that broad assimilation is still in its infancy. This sum reflects merely 3.5% of a greatly expanded $2-trillion asset portfolio.
Timing is critical
Why is timing crucial? While the frequently criticized ESG narrative significantly underperformed for capital allocators, the underlying thesis was not entirely misguided.
As soon as 2028, the Paris Agreement (signed in 2015) is fundamentally designed to enforce stricter climate regulations. These laws could dramatically increase demand for carbon credits and green energy assets. The worldwide aim is to restrict warming to 1.5°C, with nations submitting Nationally Determined Contributions (NDCs) to lower emissions.
Related: Carbon market receives much-needed support through blockchain technology
These commitments will tighten over time, with more stringent environmental targets being phased in from 2028 to 2030. A significant catalyst is Article 6 of the Paris Agreement, particularly Article 6.4, which establishes a global carbon trading market. Finalized at COP26, this mechanism enables countries and companies to trade credits to meet NDCs, with complete implementation anticipated by 2028.
This could sharply elevate demand for carbon credits, as countries such as China (planning to peak emissions by 2030) and India (aiming for a 45% reduction in emissions intensity by 2030) rely on credits to bridge their gaps.
The EU’s 2030 Climate Target Plan, which aspires for a 55% reduction in emissions from 1990 levels, also intensifies pressure on compliance markets, driving significant demand for green energy assets well into the future.
However, to attain the 1.5°C goal, global emissions must decline by 7.6% annually from 2020 to 2030, demanding a surge in green investments. The massive anticipated growth of the VCM is contingent on compliance markets potentially reaching hundreds of billions, propelled by regulations such as the EU’s Carbon Border Adjustment Mechanism, which is set for 2026-2028 and taxes high-carbon imports.
Basic climate assets (consider bonds and thematic ETFs), already holding billions in assets under management, are likely to experience exponential growth as the investment landscape shifts. Supply constraints and verification challenges could hinder this market, yet streamlined blockchain-based tokenization and verification could enhance efficiency and transparency.
The Middle East is well-positioned to emerge as a powerhouse for green RWAs
The combination of EV policies, solar parks, and government-supported blockchain registries in these initiatives is accelerating adoption across the region.
With EV adoption and carbon credit initiatives, the UAE and Saudi Arabia are stimulating demand for green assets. The UAE’s EV policies aim for 50% electric vehicle adoption by 2050, with Dubai targeting 100% eco-friendly taxis by 2027. Their Net Zero by 2050 initiative promotes projects like solar parks, EV charging stations, and tokenized carbon credits to enhance sustainable investments and eco-friendly urban development. Vision 2030 includes plans for 50,000 EV charging stations by 2025.
Both nations are investing heavily in renewables. For instance, Dubai’s Mohammed bin Rashid Al Maktoum Solar Park has recently achieved a total capacity of 3.86 gigawatts with aims to reach 7.26 GW by the decade’s end, while Saudi Arabia is establishing an EV battery metals facility to further drive demand for green assets. Once again, blockchain technology facilitates these efforts through carbon credit registries and tokenization.
Dubai’s Mohammed bin Rashid Al Maktoum Solar Park has ambitious expansion plans. Source: Government of Dubai
The Road and Transport Authority (RTA) is at the forefront of many of these initiatives, particularly targeting delivery companies to encourage a transition to electric bikes, drastically reducing carbon emissions. This initiative is promoting Pyse, which is deploying delivery EVs to replace high-emission vehicles.
The UAE’s Ministry of Climate Change and Environment is developing a blockchain-assisted national carbon credit registry to enhance transparency, while hubs like Dubai’s DMCC Crypto Centre and the Abu Dhabi Global Market financial center are nurturing innovation in the tokenization of environmental assets.
The momentum is strong.
It’s still early in the tokenization game
Although blockchain technology could facilitate the shift towards modern climate-friendly infrastructure and supportive government initiatives are being implemented, adoption is lagging.
The United Nations’ Economic and Social Commission for Western Asia recently emphasized the growing interest in leveraging blockchain technology to enhance sustainable energy scaling, as well as carbon management technologies and carbon markets. Yet, only a handful of the UAE’s EV infrastructure projects and Saudi Arabia’s clean energy initiatives explicitly incorporate blockchain due to regulatory uncertainties and technical challenges. However, as governments aim to rapidly scale these initiatives, usage rates are expected to rise significantly in the coming years.
Projections indicate that the green asset market must grow from a peak of $2.1 trillion in 2024 to $5.6 trillion annually from 2025 to 2030 to align with global net-zero goals. These expenses are influenced by mechanisms such as Article 6.4 and increasing demand for transparent, fractional ownership of assets like carbon credits and biodiversity tokens.
The potential of blockchain to streamline verification and liquidity is apparent. Widespread acceptance depends on addressing regulatory fragmentation and infrastructure gaps. Furthermore, educating consumers is essential for introducing these products onto the blockchain and subsequently to the market.
While tokenization technology for green assets is ready for expansion, the market remains in “catch-up mode,” relying on policy alignment and private-sector cooperation to unlock its multitrillion-dollar potential.
Opinion by: Nicholas Krapels, head of research and development at Mantra.
This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
