As one of the largest producers of hydrocarbons in the world, the UAE is also one of the highest per capita emitters of carbon dioxide, pumping out 20 tonnes per person per year.
Last year, the UAE updated its pledge under the Paris Agreement and raised its emission reduction target from 31 percent to 40 percent by 2030.
How can such an ambitious target be met? Part of the solution surely lies with carbon credits, which have become a critical instrument in mitigating greenhouse gas emissions.
The UAE has already demonstrated its commitment to these credits via Abu Dhabi Global Market’s partnership with AirCarbon Exchange (ACX) to create the world’s first fully regulated carbon trading exchange and carbon clearing house. ACX allows companies to trade carbon credits like conventional financial assets.
Carbon credits could become a $4 billion global asset class within the next half-decade, Thomas McMahon, ACX’s co-founder told AGBI last year.
Blockchain and artificial intelligence are central to developing the market. These technologies enhance transparency, prevent double counting and facilitate the creation of high-quality carbon credits, ensuring real environmental impact.
Carbon credits are designed to provide economic incentives to reduce emissions. One carbon credit represents the reduction of one tonne of carbon dioxide or its equivalent in other greenhouse gases.
Entities that cut their emissions below their set targets can sell surplus reductions as credits, while those that exceed their targets can buy credits to compensate.
This market mechanism helps to put a price on carbon emissions, promoting investment in renewable energy and other emission-reducing initiatives.
Carbon credit challenges
The global scheme is not without its issues. For example, “double counting” can occur when a single carbon credit is claimed by multiple parties, undermining the credibility of the entire system.
Transparency issues arise when there is insufficient information about the origin and legitimacy of traded credits.
Overestimation of benefits also poses a problem, as companies may exaggerate the positive impact of their offset projects to create an appearance of environmental responsibility.
These challenges have compromised the effectiveness of carbon credits in mitigating climate change and have eroded trust. The UAE’s reliance on carbon credits makes addressing these challenges critical to realising its environmental goals.
This is where blockchain and AI come in. Blockchain, a decentralised digital ledger technology, and AI are emerging as powerful tools to address these challenges and strengthen the carbon credit market.
Blockchain can ensure that transactions are transparent, secure and immutable. By recording every transaction on a public ledger, blockchain provides a clear and verifiable record of the creation, ownership and transfer of carbon credits.
This transparency is essential for building trust and ensuring that credits are not double-counted.
In addition, blockchain can integrate geotagging to enhance the transparency and accuracy of carbon credit verification. By attaching geotags to carbon credits, the exact location of carbon sequestration projects can be recorded and monitored in real time.
Advanced AI algorithms, combined with satellite imagery and sensors, can track and verify emission reductions with high precision.
For instance, AI can analyse satellite data to monitor deforestation or reforestation projects, ensuring that the claimed carbon reductions are real and measurable.
- Carbon credit schemes are not a straight road to zero
- Adnoc secures $3bn to advance decarbonisation plan
- Middle East needs stronger policies to expand carbon capture
In recent years, the evolution of AI and satellite data technology combined has significantly improved the accuracy of environmental monitoring.
Traditionally, satellite data for carbon accuracy hovered around 80 to 90 percent accurate because of limitations in image resolution and data-processing capabilities. However, advancements in AI algorithms and satellite technology have now pushed this accuracy to an impressive 97 to 100 percent.
AI-driven enhancements enable more precise analysis of satellite imagery, providing detailed insights into land use changes, vegetation health and carbon sequestration activities.
This should be particularly beneficial for the UAE, as it can enable the continuous monitoring of overseas carbon credit investments and ensure effectiveness.
Blockchain technology can also be instrumental in ensuring that landowners, including indigenous tribes and smallholder farmers, are actually paid for their carbon credits.
Historically, these groups have often been overlooked or underpaid for their contributions to carbon sequestration projects. By using blockchain, all transactions involving carbon credits can be transparently recorded and traced. This ensures that payments are made directly to the rightful owners, providing an immutable record of compensation.
The integration of blockchain and AI into the carbon credit market represents a significant advancement in the fight against climate change. For countries like the UAE, which need to balance economic development with environmental sustainability, these innovations are not just beneficial but essential.
By ensuring that every carbon credit is real and accounted for, AI and blockchain technologies can help drive the transition to a low-carbon future.
Erin Grover is based in Dubai and advises on emerging technologies for climate impact, food security and supply chain transparency