Blockchain-based tokenization of climate assets could unlock trillions in green investments as regulatory frameworks drive carbon trading growth.
Opinion
Opinion by: Nicholas Krapels, head of research and development at Mantra
By 2035, the real-world asset (RWA) market is expected to reach over $60 trillion, with green well-positioned to become a significant subsector in this global onchain movement.
Today, tokenized green assets still represent less than 1% of total climate assets and a similarly small percentage of RWAs, which currently are mostly tokenized treasuries.
However, with the total value of green assets set to soar and the rate of tokenization increasing, the green RWA market is an untapped growth opportunity.
Platforms are emerging to tokenize billions in green credits
Impending strict EU regulatory frameworks are set to exponentially ramp up global carbon trading in the next few years. And while supply bottlenecks and verification hurdles persist — primarily due to the infancy of accepted and regulated tokenization practices — the prospect of programmable green assets onchain has inspired many ambitious infrastructure projects, particularly in emerging markets.
For a proof-of-concept, just look at Dimitra, which uses blockchain and AI to help smallholder farmers boost productivity and build more resilient agricultural systems. Their focus is on cacao production in Brazil’s Amazon and carbon credit projects in Mexico. These are projects that will allow direct investment in smallhold farms, ultimately providing project funding and estimated returns between 10% and 30% every year.
Outside of agriculture, but still very much focused on creating a category poised for greater and greener good, sits Liquidstar. Its waypoint stations charge batteries, enable e-mobility, generate atmospheric water, provide internet connectivity and host micro-data centers. For powerless communities, it’s a leapfrog into wireless, sustainable electron ecosystems.
A Liquidstar waypoint set up last year in Jamaica. Source:
In the next decade, digital innovation fostered by regulatory clarity will offer global society its best chance to reconcile the all-too-often incompatible goals of sustainability and profitability.
While green assets used to be anathema to profit-driven investors, alienated by the confusing environmental, social and governmental narrative, there are signs of “green shoots” in the nascent green RWA movement.
Unlike their Web2 counterparts, blockchain efficiencies allow tokenized green assets to realize synergies that transform previously undesirable climate assets into a new breed of profitable ones.
Green RWA is a trillion-dollar addressable market
Originating with the Kyoto Protocol in the late 1990s, carbon credits incentivize greenhouse gas emission reductions through projects such as reforestation, renewable energy, methane capture and soil reconditioning.
In short, each credit represents one ton of CO₂ reduced, avoided or removed. Compliance schemes like the EU Emissions Trading System initially drove the market. It’s the cap-and-trade system for environmental regulation you may have heard about.
After gaining traction in the 2010s — owing to rising corporate sustainability goals — the Voluntary Carbon Market (VCM) is emerging. It’s $1.7 billion and expected to grow by 25% annually for the next 10 years. The carbon dioxide removal (CDR) market is expected to be $1.2 trillion by 2050. According to S&P Global, “sustainable bonds” already of the global bond market in 2024. “Climate bonds” are an old ESG term; however, the Climate Bonds Initiative tagged the cumulative amount of the green component of its assets to reach $3.5 trillion by the end of 2024. Renewable energy certificates (RECs) and biodiversity credits further expand this economy.
As shown by initiatives like CarbonHood’s effort to tokenize $70 billion in carbon credits, broad adoption is still in its early stages. This figure represents just 3.5% of a much larger $2-trillion asset book.
Timing is critical
Why now? While the commonly criticized ESG narrative massively underperformed for capital allocators, the thesis was not totally misinformed.
As early as 2028, the Paris Agreement (signed in 2015) is programmatically designed to introduce much more stringent climate regulations. These restrictions could spike demand for carbon credits and green energy assets. The global goal is to limit warming to 1.5°C, with countries submitting Nationally Determined Contributions (NDCs) to cut emissions.
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These commitments will tighten over time, with stricter environmental targets phasing in from 2028 to 2030. A key driver is Article 6 of the Paris Agreement, particularly Article 6.4, which establishes a global carbon credit trading market. This mechanism, finalized at COP26, allows countries and companies to buy and sell credits to meet NDCs, with full implementation expected by 2028.
This could massively boost demand for carbon credits, as nations such as China (aiming to peak emissions by 2030) and India (targeting a 45% reduction in emissions intensity by 2030) lean on credits to bridge gaps.
The EU’s 2030 Climate Target Plan, aiming for a 55% emissions cut from 1990 levels, also ramps up pressure on the cap-and-trade compliance markets, driving robust demand for green energy assets well into the future.
However, to hit the 1.5°C target, global emissions must drop 7.6% annually from 2020 to 2030, requiring a surge in green investments. VCM’s massive expected growth is predicated upon compliance markets potentially reaching hundreds of billions, fueled by regulations like the EU’s Carbon Border Adjustment Mechanism, set for 2026-2028, which taxes high-carbon imports.
Basic climate assets (think bonds and thematic exchange-traded funds), already with billions in assets under management, will likely see exponential growth as the investment mix shifts. Supply constraints and verification issues could bottleneck this market. However, through blockchain-based tokenization and verification, efficiency and transparency could be improved.
The Middle East is well-positioned to emerge as a powerhouse for green RWAs
The package of EV policies, solar parks and government-backed blockchain registries in these programs is accelerating adoption across the region.
Through EV adoption and carbon credit initiatives, the UAE and Saudi Arabia are advancing demand for green assets. The UAE’s EV policies aim for 50% electric vehicles by 2050, with Dubai targeting 100% eco-friendly taxis by 2027. Their Net Zero by 2050 initiative encourages projects like solar parks, EV charging networks and tokenized carbon credits to boost sustainable investments and eco-friendly urban development. Vision 2030 includes 50,000 EV charging stations by 2025.
Both countries are investing in renewables. Look to Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, which recently reached 3.86 gigawatts total capacity and is aiming for 7.26 GW by the end of the decade, and Saudi Arabia’s EV battery metals plant to further drive green asset demand. Again, blockchain technology supports these efforts via carbon credit registries and tokenization.
The Road and Transport Authority (RTA) itself is leading many of these efforts. Specifically, the RTA has targeted delivery companies, encouraging a switch to electric bikes, which would massively reduce carbon emissions. It’s an initiative driving Pyse, which is putting delivery EVs on the road to replace high-emission delivery vehicles.
The UAE’s Ministry of Climate Change and Environment is developing a blockchain-based national carbon credit registry to bolster transparency, and hubs like Dubai’s DMCC Crypto Centre and the Abu Dhabi Global Market financial center are fostering innovation in tokenizing environmental assets.
It’s a strong tailwind.
It’s still early in the tokenization game
While blockchain technology could help ease the transition to modern climate-friendly infrastructure and progressive government initiatives have been put in place, adoption still lags.
The United Nations’ Economic and Social Commission for Western Asia recently the growing interest in using blockchain technology to scale up sustainable energy, as well as carbon management technologies and carbon markets. Very few of the UAE’s EV infrastructure projects and Saudi Arabia’s clean energy ventures explicitly use blockchain because they’re hampered by regulatory ambiguity and technical barriers. However, as governments focus on hyperscaling these initiatives, such utilization rates should rapidly improve over the next few years.
Projections suggest the green asset market would need to expand from a peak of $2.1 trillion in 2024 to $5.6 trillion per year from 2025 to 2030 just to stay on track to meet the minimum requirements for global net zero. These costs are driven by mechanisms like Article 6.4 and growing demand for transparent, fractional ownership of assets like carbon credits and biodiversity tokens.
Blockchain’s potential to streamline verification and liquidity is clear. Widespread adoption hinges on resolving regulatory fragmentation and infrastructure gaps. In addition, consumer education is necessary to bring these products onchain and then to market.
Tokenization technology for is primed for growth, but the market remains in “catch-up mode,” relying on policy alignment and private-sector collaboration 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.
