As oil is the commodity of the industrialized world, carbon credits are the commodity of the net-zero world, and the industry needs the investment structures in place to support this asset class, experts believe.
“The problem is there’s no market; and the biggest mistake that people have made over the years is creating individual little pots of trading activity where there are no rational values, no fair market values,” Dr Scott Levy, the managing director of Al Waseelah, shared with IFN.
The solution? Introduce transparency and clarity by using data and technology.
“One price per metric ton and we use the capital markets — the mainstream stock exchanges — to say this is the value of your metric ton; then we have a fair market value in which people can act. That principle, along with things like education and awareness, then there is a rational way to participate in this market without emotion, where you can look the prices up clearly and see the value proposition.”
This was the idea behind developing XTCC, a Shariah compliant exchange-traded investment carbon credit-based proposition. The plan is to list the universal product on main market exchanges of Frankfurt, Bermuda and Vienna.
Another challenge to the mainstreaming of carbon credits is the lack of a common standard, according to Professor Lisa Wilson, the managing director of XTCC.
“There are many standards being used to validate and authenticate whether a credit is actually a high-integrity or high-quality credit,” Professor Lisa explained to IFN, adding that: “We need to create a common domain model of those standards that is truly democratizing and incorporating the very large number of projects coming from the Global South and emerging nations.”
This is an excerpt from a conversation with Dr Scott Levy and Professor Lisa Wilson from XTCC. To listen to the full discussion on how the Islamic finance industry can unlock the carbon credit market, log on to IFN Podcast.