Green RWAs: Unlocking Trillions in Profitable Climate Assets Through Blockchain

The global real-world asset (RWA) market is experiencing significant growth. Projections indicate it will exceed $60 trillion by 2035. Within this expansive market, **Green RWAs** are emerging as a pivotal subsector. These blockchain-based assets represent a groundbreaking shift. They transform traditional climate-focused initiatives into profitable investment opportunities. This innovation captures the attention of investors seeking both financial returns and environmental impact. Therefore, understanding this evolving landscape is crucial for anyone interested in the future of finance and sustainability.

The Emergence of Green RWAs and Tokenization

Currently, tokenized green assets constitute a small fraction of both total climate assets and the broader RWA market. Most RWAs today involve tokenized treasuries. However, the trajectory for green assets is sharply upward. The rate of asset **tokenization** is also accelerating. This combination creates an immense, untapped growth opportunity within the **Green RWAs** sector. Consequently, new platforms are actively developing to facilitate the tokenization of billions in green credits.

Impending strict regulatory frameworks, particularly from the EU, will significantly boost global carbon trading. This expansion is expected within the next few years. While supply bottlenecks and verification hurdles persist, primarily due to nascent tokenization practices, the potential is clear. Programmable green assets on-chain inspire numerous ambitious infrastructure projects. Many of these projects are taking root in emerging markets. For example, Dimitra leverages blockchain and AI to enhance smallholder farmers’ productivity. They also build resilient agricultural systems. Their work focuses on cacao production in Brazil’s Amazon and carbon credit projects in Mexico. These initiatives enable direct investment in small farms, offering project funding and estimated annual returns between 10% and 30%. Outside agriculture, Liquidstar focuses on creating a greater good. Its waypoint stations charge batteries, enable e-mobility, generate atmospheric water, provide internet connectivity, and host micro-data centers. For communities lacking power, this offers a leapfrog into wireless, sustainable electron ecosystems.

A Liquidstar waypoint set up last year in Jamaica. Source: Liquidstar

In the coming decade, digital innovation will reconcile sustainability and profitability. Regulatory clarity will foster this progress. Previously, profit-driven investors often avoided green assets due to confusing environmental, social, and governmental (ESG) narratives. However, the nascent **Green RWAs** movement shows promising ‘green shoots.’ Unlike their Web2 counterparts, blockchain efficiencies allow tokenized green assets to realize powerful synergies. This transforms previously undesirable **climate assets** into a new breed of profitable ones.

Unlocking Value Through Carbon Credits and Climate Assets

The concept of **carbon credits** originated with the Kyoto Protocol in the late 1990s. These credits incentivize greenhouse gas emission reductions. Projects include reforestation, renewable energy, methane capture, and soil reconditioning. Specifically, each credit represents one ton of CO₂ reduced, avoided, or removed. Compliance schemes, such as the EU Emissions Trading System (EU ETS), initially drove this market. This cap-and-trade system governs environmental regulation.

The Voluntary Carbon Market (VCM) gained traction in the 2010s. This was due to rising corporate sustainability goals. The VCM currently stands at $1.7 billion. Experts project it will grow by 25% annually for the next decade. Furthermore, 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. The Climate Bonds Initiative anticipates the cumulative value 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. Initiatives like CarbonHood’s effort to tokenize $70 billion in carbon credits demonstrate early-stage broad adoption. This figure represents just 3.5% of a much larger $2-trillion asset book.

Regulatory Tailwinds and Global Demand for Sustainable Investments

The timing for this shift is critical. While the ESG narrative often underperformed for capital allocators, its underlying thesis was not entirely misinformed. The Paris Agreement, signed in 2015, is programmatically designed to introduce much more stringent climate regulations as early as 2028. These restrictions could significantly spike demand for **carbon credits** and green energy assets. The global goal is to limit warming to 1.5°C. Countries submit Nationally Determined Contributions (NDCs) to achieve emission cuts. These commitments will tighten over time. Stricter environmental targets will phase in from 2028 to 2030.

A key driver is Article 6 of the Paris Agreement, particularly Article 6.4. This establishes a global carbon credit trading market. This mechanism, finalized at COP26, allows countries and companies to buy and sell credits. This helps them meet NDCs. Full implementation is expected by 2028. Consequently, this could massively boost demand for carbon credits. Nations like China, aiming to peak emissions by 2030, and India, targeting a 45% reduction in emissions intensity by 2030, will rely on credits to bridge gaps. The EU’s 2030 Climate Target Plan, targeting a 55% emissions cut from 1990 levels, also increases pressure on cap-and-trade compliance markets. This drives robust demand for green energy assets well into the future.

To hit the 1.5°C target, global emissions must drop 7.6% annually from 2020 to 2030. This necessitates a surge in **sustainable investments**. The VCM’s massive expected growth depends on compliance markets potentially reaching hundreds of billions. Regulations like the EU’s Carbon Border Adjustment Mechanism (CBAM), set for 2026-2028, which taxes high-carbon imports, further fuel this. Basic **climate assets**, such as bonds and thematic exchange-traded funds, already manage billions. They will likely see exponential growth as the investment mix shifts. Supply constraints and verification issues could bottleneck this market. However, blockchain-based **tokenization** and verification could significantly improve efficiency and transparency.

The Middle East’s Pivotal Role in Green RWA Adoption

The Middle East is strategically positioned to become a powerhouse for **Green RWAs**. A combination of EV policies, solar parks, and government-backed blockchain registries accelerates 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. Dubai specifically targets 100% eco-friendly taxis by 2027. Their Net Zero by 2050 initiative encourages projects like solar parks, EV charging networks, and tokenized carbon credits. This boosts sustainable investments and eco-friendly urban development. Saudi Arabia’s Vision 2030 includes plans for 50,000 EV charging stations by 2025.

Both countries are investing heavily in renewables. Consider Dubai’s Mohammed bin Rashid Al Maktoum Solar Park. It recently reached 3.86 gigawatts total capacity. It aims for 7.26 GW by the end of the decade. Saudi Arabia’s EV battery metals plant will further drive green asset demand. Again, blockchain technology supports these efforts via carbon credit registries and **tokenization**. The Road and Transport Authority (RTA) in Dubai leads many of these efforts. Specifically, the RTA targets delivery companies. It encourages a switch to electric bikes. This would massively reduce carbon emissions. This initiative drives Pyse, which is deploying delivery EVs to replace high-emission delivery vehicles.

The UAE’s Ministry of Climate Change and Environment is developing a blockchain-based national carbon credit registry. This will bolster transparency. Hubs like Dubai’s DMCC Crypto Centre and the Abu Dhabi Global Market financial center foster innovation in tokenizing environmental assets. This represents a strong tailwind for the sector.

Navigating Challenges and Future Potential of Tokenized Climate Assets

While blockchain technology could ease the transition to modern climate-friendly infrastructure, adoption still lags. Progressive government initiatives are in place. The United Nations’ Economic and Social Commission for Western Asia recently highlighted growing interest. They noted blockchain technology’s potential to scale up sustainable energy, 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. They are hampered by regulatory ambiguity and technical barriers. However, as governments focus on hyperscaling these initiatives, utilization rates should rapidly improve over the next few years.

Projections suggest the green asset market needs significant expansion. It must grow from a peak of $2.1 trillion in 2024 to $5.6 trillion per year from 2025 to 2030. This is necessary to stay on track to meet minimum global net zero requirements. Mechanisms like Article 6.4 drive these costs. Growing demand for transparent, fractional ownership of assets like **carbon credits** and biodiversity tokens also contributes. 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 on-chain and then to market. **Tokenization** technology for green assets is primed for growth. However, the market remains in ‘catch-up mode.’ It relies on policy alignment and private-sector collaboration to unlock its multitrillion-dollar potential for **sustainable investments** and **climate assets**.