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, positioning green RWAs as a crucial subsector in the global onchain movement.
Currently, tokenized green assets account for less than 1% of total climate assets and a similarly negligible portion of RWAs, which are predominantly tokenized treasuries.
However, as the value of green assets is set to surge and tokenization rates increase, the green RWA market presents a significant growth opportunity.
Emerging platforms are tokenizing billions in green credits
Upcoming stringent EU regulatory frameworks are expected to significantly accelerate global carbon trading in the coming years. While supply bottlenecks and verification challenges remain—mainly due to the early stages of regulated tokenization practices—the promise of programmable green assets onchain has encouraged numerous ambitious infrastructure projects, especially in emerging markets.
A case in point is Dimitra, which leverages blockchain and AI to aid smallholder farmers in enhancing productivity and building resilient agricultural systems, focusing on cacao production in Brazil’s Amazon and carbon credit projects in Mexico. These initiatives facilitate direct investment in small farms, potentially yielding annual returns between 10% and 30%.
In a different sector but still dedicated to generating greater environmental benefits, Liquidstar develops waypoint stations that charge batteries, foster e-mobility, produce atmospheric water, offer internet connectivity, and host micro-data centers. For communities lacking reliable power, it represents a leap into sustainable wireless ecosystems.
A Liquidstar waypoint established last year in Jamaica. Source: Liquidstar
Over the next decade, digital innovation fueled by regulatory clarity will provide society with its best opportunity to reconcile the frequently conflicting goals of sustainability and profitability.
Once viewed as incompatible with profit-driven investors due to a confusing environmental, social, and governance narrative, the early signs of revitalization are apparent within the green RWA movement.
Unlike their Web2 predecessors, blockchain efficiencies enable tokenized green assets to create synergies that turn previously undesirable climate assets into new, profitable ventures.
Green RWA represents a trillion-dollar market opportunity
Originating from the Kyoto Protocol in the late 1990s, carbon credits incentivize greenhouse gas reduction via projects like reforestation, renewable energy, methane capture, and soil restoration.
Essentially, each credit corresponds to one ton of CO₂ reduced, avoided, or sequestered. The EU Emissions Trading System, a cap-and-trade framework you may recognize, initially spurred market growth.
After gaining momentum during the 2010s, thanks to increasing corporate sustainability targets, the Voluntary Carbon Market (VCM) is now emerging, valued at $1.7 billion and forecasted to grow by 25% annually over the next decade. The carbon dioxide removal (CDR) sector is projected to reach $1.2 trillion by 2050. According to S&P Global, “sustainable bonds” are anticipated to constitute 11% of the global bond market by 2024. The Climate Bonds Initiative forecasts that the cumulative value of green assets will reach $3.5 trillion by the close of 2024. Renewable energy certificates (RECs) and biodiversity credits will further enrich this economy.
As evidenced by efforts like CarbonHood’s initiative to tokenize $70 billion in carbon credits, widespread adoption remains in its infancy. This amount represents only 3.5% of a more extensive $2-trillion asset pool.
Critical timing
Why act now? Despite the often-criticized ESG narrative performing poorly for investors, the underlying thesis was not entirely flawed.
The Paris Agreement (signed in 2015) is set to implement much stricter climate regulations by 2028, which could drive up demand for carbon credits and green energy assets. The goal is to limit global warming to 1.5°C, with nations submitting Nationally Determined Contributions (NDCs) to reduce emissions.
Related: Carbon market gets a substantial boost from blockchain technology
These commitments will tighten progressively, with stricter environmental targets being phased in from 2028 to 2030. A crucial element is Article 6 of the Paris Agreement, particularly Article 6.4, which creates a global carbon credit trading market. This framework, finalized at COP26, allows nations and companies to trade credits to meet their NDCs, with full implementation expected by 2028.
This could greatly increase carbon credit demand, as countries like China (planning to peak emissions by 2030) and India (aiming for a 45% reduction in emissions intensity by 2030) rely on credits as a bridge.
The EU’s 2030 Climate Target Plan, which seeks a 55% emissions reduction from 1990 levels, also increases pressure on cap-and-trade compliance markets, establishing robust demand for green energy assets into the foreseeable future.
Nevertheless, to reach the 1.5°C target, global emissions must fall by 7.6% annually from 2020 to 2030, necessitating a significant increase in green investments. The expected massive growth of VCM is predicated on compliance markets potentially ballooning to hundreds of billions, stimulated by regulations like the EU’s Carbon Border Adjustment Mechanism, set for 2026-2028, which will impose taxes on high-carbon imports.
Basic climate assets (such as bonds and thematic exchange-traded funds), already boasting billions in assets, are likely to experience exponential growth as the investment landscape evolves. Although supply constraints and verification issues may hinder this market, blockchain-based tokenization and verification could enhance efficiency and transparency.
The Middle East is poised to become a leader in green RWAs
The combination of EV policies, solar power projects, and government-supported blockchain registries is accelerating adoption across the region.
Through EV adoption and carbon credit initiatives, the UAE and Saudi Arabia are driving demand for green assets. The UAE has set a goal of having 50% electric vehicles by 2050, with Dubai aiming for 100% eco-friendly taxis by 2027. Their Net Zero by 2050 initiative promotes projects like solar parks, EV charging networks, and tokenized carbon credits to enhance sustainable investments and eco-friendly urban growth. Vision 2030 includes establishing 50,000 EV charging stations by 2025.
Both nations are heavily investing in renewable energy. Notable projects include Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, which recently achieved a total capacity of 3.86 gigawatts and aims for 7.26 GW by the end of the decade, and Saudi Arabia’s EV battery metals facility, further propelling green asset demand. Once again, blockchain technology underpins these endeavors through carbon credit registries and tokenization.
The Road and Transport Authority (RTA) is spearheading numerous initiatives in this regard, specifically targeting delivery companies to transition to electric bikes, which would significantly lower carbon emissions. This initiative is propelling Pyse, an organization dedicated to deploying electric delivery vehicles to replace high-emission alternatives.
The UAE’s Ministry of Climate Change and Environment is establishing a blockchain-based 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.
It’s a favorable trend.
We’re still in the early stages of tokenization
While blockchain technology has the potential to facilitate the transition to modern climate-friendly infrastructure, and progressive government initiatives are being implemented, adoption still lags behind.
The United Nations’ Economic and Social Commission for Western Asia recently drew attention to the growing interest in utilizing blockchain for scaling sustainable energy, as well as carbon management technologies and markets. However, very few of the UAE’s EV infrastructure projects and Saudi Arabia’s clean energy efforts currently integrate blockchain due to regulatory ambiguities and technical challenges. Nonetheless, as governments intensify their focus on rapidly expanding these initiatives, utilization rates should substantially improve over the coming years.
Projections indicate that the green asset market will need to grow from a peak of $2.1 trillion in 2024 to $5.6 trillion annually from 2025 to 2030 to meet the critical requirements for achieving global net zero. These costs are driven by mechanisms such as Article 6.4 and the rising demand for transparent, fractional ownership of assets like carbon credits and biodiversity tokens.
The potential of blockchain to streamline verification and enhance liquidity is evident. Widespread adoption will rely on overcoming regulatory fragmentation and infrastructure shortfalls. Additionally, consumer education will be vital for bringing these products to the onchain market.
While tokenization technology for green assets is positioned for expansion, the market continues to be in “catch-up mode,” awaiting policy alignment and collaboration from the private sector to unlock its multitrillion-dollar capabilities.
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.
