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Perspective by: Nicholas Krapels, leader of research and development at Mantra
By 2035, the real-world asset (RWA) market is anticipated to exceed $60 trillion, with sustainable RWAs positioned to evolve into a crucial subsector within this international on-chain movement.
Currently, tokenized sustainable assets represent less than 1% of the total climate assets and a comparably limited proportion of RWAs, which predominantly consist of tokenized treasuries.
Nevertheless, with the overall value of sustainable assets poised to skyrocket and the pace of tokenization accelerating, the green RWA market presents an unexplored growth opportunity.
Platforms are rising to tokenize billions in ecological credits
Upcoming stringent EU regulatory frameworks are projected to significantly enhance global carbon trading in the coming years. While supply bottlenecks and verification challenges remain—mainly due to the nascent state of accepted and regulated tokenization methods—the potential for programmable green assets on-chain has fueled various ambitious infrastructure initiatives, especially in developing markets.
As a proof-of-concept, consider Dimitra, which utilizes blockchain and AI to assist smallholder farmers in enhancing productivity and developing more robust agricultural systems. Their focus centers on cacao farming in Brazil’s Amazon and carbon credit initiatives in Mexico. These endeavors will facilitate direct investments in small farms, ultimately yielding estimated annual returns between 10% and 30%.
Beyond agriculture, yet still concentrated on creating a category aimed at enhancing both economic and ecological benefits, lies Liquidstar. Its waypoint stations recharge batteries, facilitate e-mobility, generate atmospheric water, provide internet access, and house micro-data centers. For underserved communities, it represents a significant advancement into wireless, sustainable electron ecosystems.
A Liquidstar waypoint established last year in Jamaica. Source: Liquidstar
In the forthcoming decade, digital advancements propelled by regulatory clarity will provide global society its greatest opportunity to reconcile the frequently conflicting objectives of sustainability and profitability.
While sustainable assets used to be unappealing to profit-oriented investors, deterred by the perplexing environmental, social, and governance narrative, signs of “green shoots” in the emerging green RWA movement are becoming evident.
In contrast to their Web2 counterparts, blockchain efficiencies facilitate tokenized green assets to achieve synergies that convert previously unattractive climate assets into a new category of lucrative ones.
Green RWA is a trillion-dollar potential market
Originating with the Kyoto Protocol in the late 1990s, carbon credits motivate greenhouse gas emission reductions through initiatives such as reforestation, renewable energy, methane capture, and soil rehabilitation.
In essence, each credit signifies one ton of CO₂ reduced, avoided, or eliminated. Compliance frameworks such as the EU Emissions Trading System initially propelled the market. This is the cap-and-trade system for regulatory measures you may have heard about.
Following momentum in the 2010s—due to escalating corporate sustainability objectives—the Voluntary Carbon Market (VCM) is coming to the forefront. It stands at $1.7 billion and is projected to grow by 25% annually over the next decade. The carbon dioxide removal (CDR) market is expected to reach $1.2 trillion by 2050. According to S&P Global, “sustainable bonds” already constitute 11% of the global bond market in 2024. “Climate bonds” are an older ESG term; however, the Climate Bonds Initiative projects the cumulative value of the green portion of its assets to reach $3.5 trillion by the close of 2024. Renewable energy certificates (RECs) and biodiversity credits further broaden this economy.
As illustrated by initiatives like CarbonHood’s endeavor to tokenize $70 billion in carbon credits, widespread adoption is still in its formative stages. This figure represents merely 3.5% of a significantly larger $2-trillion asset portfolio.
Timing is essential
Why is now the right moment? While the often-criticized ESG narrative underperformed significantly for capital allocators, the underlying thesis was not entirely misguided.
As soon as 2028, the Paris Agreement (signed in 2015) is strategically intended to implement far stricter climate regulations. These restrictions could escalate demand for carbon credits and green energy assets. The global aim is to limit warming to 1.5°C, with nations submitting Nationally Determined Contributions (NDCs) to minimize emissions.
Related: Carbon market receives an essential boost from blockchain technology
These commitments will grow stricter over time, with heightened environmental targets being phased in from 2028 to 2030. A primary catalyst 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 corporations to purchase and sell credits to satisfy NDCs, with complete implementation anticipated by 2028.
This could greatly accelerate demand for carbon credits, as nations like China (aiming for peak emissions by 2030) and India (seeking a 45% reduction in emissions intensity by 2030) rely on credits to bridge gaps.
The EU’s 2030 Climate Target Plan, targeting a 55% emissions cut from 1990 levels, also intensifies pressure on compliance markets, stimulating strong demand for green energy assets well into the future.
Nonetheless, to achieve the 1.5°C objective, global emissions must decrease by 7.6% annually from 2020 to 2030, which necessitates a dramatic increase in sustainable investments. The VCM’s substantial expected expansion is based on compliance markets potentially reaching hundreds of billions, driven by regulations like the EU’s Carbon Border Adjustment Mechanism, slated for 2026-2028, which taxes high-carbon imports.
Basic climate assets (such as bonds and thematic exchange-traded funds), which already manage billions in assets, will likely experience exponential growth as the investment landscape evolves. Supply limitations and verification challenges could hinder this market. However, through blockchain-based tokenization and verification, efficiency and transparency could be enhanced.
The Middle East is strategically positioned to become a leader in green RWAs
The combination of EV policies, solar energy parks, and government-supported blockchain registries within these initiatives is accelerating adoption throughout the region.
Through EV widespread adoption and carbon credit initiatives, the UAE and Saudi Arabia are boosting the demand for sustainable assets. The UAE’s EV policies target 50% electric vehicles by 2050, with Dubai aiming for 100% eco-friendly taxis by 2027. Their Net Zero by 2050 initiative fosters projects like solar parks, EV charging infrastructures, and tokenized carbon credits to amplify sustainable investments.
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and sustainable urban advancement. Vision 2030 incorporates 50,000 EV charging points by 2025.
Both nations are channeling funds into renewable energy. Consider Dubai’s Mohammed bin Rashid Al Maktoum Solar Park, which has recently achieved a total capacity of 3.86 gigawatts and aspires to reach 7.26 GW by the decade’s end, alongside Saudi Arabia’s EV battery materials facility to further stimulate demand for green assets. Once again, blockchain technology underpins these endeavors through carbon credit registries and tokenization.
The Road and Transport Authority (RTA) is spearheading many of these initiatives. In particular, the RTA has focused on delivery firms, promoting a transition to electric bicycles, which would significantly decrease carbon emissions. This initiative is powering Pyse, which is deploying delivery EVs to substitute high-emission delivery vehicles.
The UAE’s Ministry of Climate Change and Environment is creating a blockchain-driven national carbon credit registry to enhance transparency, and centers like Dubai’s DMCC Crypto Centre and the Abu Dhabi Global Market financial district are nurturing innovation in tokenizing ecological assets.
It’s a robust momentum.
It’s still the early stages of tokenization
While blockchain technology could facilitate the shift to contemporary eco-friendly infrastructure and progressive governmental actions have been established, uptake still trails behind.
The United Nations’ Economic and Social Commission for Western Asia recently underscored the rising interest in employing blockchain technology to amplify sustainable energy, as well as carbon management solutions and carbon markets. A small number of the UAE’s EV infrastructure projects and Saudi Arabia’s renewable energy initiatives explicitly incorporate blockchain due to obstacles like regulatory uncertainty and technical challenges. Nevertheless, as governments concentrate on rapidly scaling these efforts, utilization rates should improve swiftly in the coming years.
Forecasts 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 merely to remain on course for achieving the essential targets for global net-zero emissions. These expenditures are driven by frameworks like Article 6.4 and the increasing need for transparent, fractional ownership of assets such as carbon credits and biodiversity tokens.
The capability of blockchain to simplify verification and liquidity is evident. Widespread acceptance relies on addressing regulatory fragmentation and infrastructure deficiencies. Furthermore, educating consumers is vital to transition these products on-chain and into the market.
Tokenization technology for sustainable assets is poised for expansion, but the market remains in “catch-up mode,” depending on policy synchronization and private-sector partnerships to unlock its multitrillion-dollar potential.
Opinion by: Nicholas Krapels, head of research and development at Mantra.
This article is intended for informational purposes only and should not be construed as legal or investment advice. The views, thoughts, and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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