How the UAE’s Carbon Credit Market is Shaping Sustainability and Business Compliance

The UAE’s carbon credit market, established under Cabinet Resolution No. 67 of 2024, aligns with the country’s Net Zero by 2050 strategy and offers businesses opportunities in carbon credit trading. Entities must comply with strict monitoring, reporting, and verification requirements to participate in this regulated market.

By Sudhanshu Singh

The United Arab Emirates stands at the frontier of climate innovation with the introduction of Cabinet Resolution No. 67 of 2024, establishing the National Register for Carbon Credits (NRCC). This initiative aligns with the UAE’s Net Zero by 2050 strategy and its commitments under the Paris Agreement and the UAE Green Agenda 2030.

The resolution, which took effect on December 28, 2024, mandates compliance from entities by June 28, 2025. The framework defines a structured, regulated market for carbon credits, ensuring transparency in emissions reduction and trading mechanisms. The Ministry of Climate Change and Environment (MOCCAE) oversees the implementation, with regulatory oversight from the Securities and Commodities Authority (SCA) for carbon trading platforms.

Scope of the regulation

The NRCC applies to public and private sector entities emitting 0.5 million metric tons (MMT) or more of carbon dioxide equivalent (CO₂e) annually. Entities below this threshold may voluntarily participate in carbon credit trading. The UAE government has also granted regulatory authority to SCA-approved carbon trading platforms, ensuring seamless integration into global carbon markets.

The UAE government retains the authority to expand the scope of the resolution, incorporating additional sectors or lowering the emission threshold in the future.

Compliance requirements for entities

Entities covered under the resolution must meet strict monitoring, reporting, and verification (MRV) requirements.

Registration with the NRCC

Entities that exceed the 0.5 MMT CO₂e threshold must register with the NRCC. Voluntary participation is allowed for entities below this limit. The registration process requires submission of emission reduction plans, periodic reports, and supporting documentation detailing carbon credit transactions.

Monitoring, reporting, and verification (MRV) obligations

Companies must establish a comprehensive MRV system to track emissions and carbon credit utilization. The framework mandates the use of Intergovernmental Panel on Climate Change (IPCC) methodologies and ISO standards to ensure compliance. Each registered entity must:

• Maintain an annual emissions inventory, detailing emissions from direct and indirect sources;
• Submit verified emissions reports to MOCCAE and relevant authorities;
• Undergo independent audits by MOCCAE-approved verifiers to validate reported emissions; and
• Provide data on carbon dioxide (CO₂), methane (CH₄), and nitrous oxide (N₂O) emissions, ensuring full transparency in reporting.

Carbon credit trading and transaction reporting

Entities involved in carbon credit trading must adhere to strict transaction reporting regulations, including:

• Comprehensive transaction records for all purchases, sales, and transfers of carbon credits;
• Disclosure of carbon credit disposal statements, including the volume traded, buyer details, and sale price; and
• Trading platform licensing requirements, restricting transactions to MOCCAE-approved carbon trading platforms regulated by the SCA.

Carbon credit trading framework

The UAE’s NRCC treats carbon credits as financial instruments, allowing regulated trading. The system follows a structured approach:

• Issuance of verified carbon credits – the NRCC assigns credits based on emissions reductions verified by independent auditors.
• Trading mechanisms – companies can buy and sell carbon credits domestically and internationally through SCA-approved trading platforms.
• Global credit pricing – This table provides an overview of carbon credit prices across key global markets as of February 2025:

• Carbon retirement obligations – high-emission entities must retire a portion of their carbon credits to meet regulatory requirements and contribute to actual emissions reductions.

Regulatory enforcement and penalties

Failure to comply with Cabinet Resolution No. 67 of 2024 can result in severe penalties:

• Fines up to AED 1 million (US$272,279) for repeated violations;
• Suspension of trading privileges for non-compliant entities; and
• Revocation of trading platform licenses for unauthorized operations.

The SCA and MOCCAE will conduct regular audits, compliance reviews, and on-site inspections to enforce the regulation effectively.

Opportunities for businesses under the UAE’s carbon credit system

While the regulatory framework introduces compliance costs, it also presents several opportunities for businesses:

• Revenue generation through carbon trading – companies with surplus carbon credits can sell them in regulated markets.
• Incentives for emissions reduction – firms investing in renewable energy, carbon capture, and sustainability initiatives can earn valuable carbon credits.
• Alignment with global carbon markets – the UAE’s system is designed to integrate with international trading mechanisms, making it easier for businesses to participate in global sustainability initiatives.
• Competitive advantages in ESG compliance – organizations that incorporate carbon neutrality strategies can strengthen their ESG ratings and attract environmentally conscious investors.

Challenges in implementation

Despite the benefits, businesses face multiple challenges in adopting the UAE’s carbon credit regulations:

• High compliance costs – Implementing MRV systems and obtaining independent verification requires substantial investment.
• Regulatory uncertainties – MOCCAE and SCA are refining the framework, and evolving guidelines may impact long-term compliance strategies.
• Market volatility – Carbon credit prices fluctuate pronouncedly, impacting cost projections for emission-intensive industries.
• Limited expertise – Many businesses lack experience in carbon credit trading and regulatory compliance, necessitating extensive training and advisory support.

Recommended actions for businesses

The UAE’s NRCC represents a pivotal moment in climate regulation, positioning the country as a regional leader in carbon trading and emissions reduction. Its long-term success will depend on:

• Strengthening compliance frameworks – Establishing standardized verification procedures and clear reporting guidelines.
• Enhancing stakeholder engagement – Encouraging businesses to participate through financial incentives and training programs.
• Integrating with global carbon markets – Aligning the UAE’s framework with international emissions trading systems to facilitate cross-border transactions.

To ensure compliance and leverage growth opportunities, companies should:

• Conduct emissions assessments to determine regulatory obligations under the NRCC;
• Develop robust MRV systems to enhance transparency and streamline compliance processes;
• Integrate carbon credit trading into sustainability strategies to improve ESG performance; and
• Engage with compliance consultants to navigate evolving regulatory requirements effectively.

Outlook

By fostering market transparency, regulatory compliance, and investment in carbon reduction projects, the UAE is establishing itself as a global hub for carbon credit trading. Businesses that proactively align with these regulations will not only meet compliance requirements but also unlock new revenue streams and competitive advantages in the evolving carbon economy.

(US$1 = AED 3.67)

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