Opinion by: Nicholas Krapels, head of research and development at Mantra
By 2035, the real-world asset (RWA) market is expected to reach over $60 trillion, with green RWAs well-positioned to become a significant subsector in this global onchain movement.
Today, tokenized green assets still represent less than 1% of total climate assets and a similarly small percentage of RWAs, which currently are mostly tokenized treasuries.
However, with the total value of green assets set to soar and the rate of tokenization increasing, the green RWA market is an untapped growth opportunity.
Platforms are emerging to tokenize billions in green credits
Impending strict EU regulatory frameworks are set to exponentially ramp up global carbon trading in the next few years. And while supply bottlenecks and verification hurdles persist — primarily due to the infancy of accepted and regulated tokenization practices — the prospect of programmable green assets onchain has inspired many ambitious infrastructure projects, particularly in emerging markets.
For a proof-of-concept, just look at Dimitra, which uses blockchain and AI to help smallholder farmers boost productivity and build more resilient agricultural systems. Their focus is on cacao production in Brazil’s Amazon and carbon credit projects in Mexico. These are projects that will allow direct investment in smallhold farms, ultimately providing project funding and estimated returns between 10% and 30% every year.
Outside of agriculture, but still very much focused on creating a category poised for greater and greener good, sits Liquidstar. Its waypoint stations charge batteries, enable e-mobility, generate atmospheric water, provide internet connectivity and host micro-data centers. For powerless communities, it’s a leapfrog into wireless, sustainable electron ecosystems.
A Liquidstar waypoint set up last year in Jamaica. Source: Liquidstar
In the next decade, digital innovation fostered by regulatory clarity will offer global society its best chance to reconcile the all-too-often incompatible goals of sustainability and profitability.
While green assets used to be anathema to profit-driven investors, alienated by the confusing environmental, social and governmental narrative, there are signs of “green shoots” in the nascent green RWA movement.
Unlike their Web2 counterparts, blockchain efficiencies allow tokenized green assets to realize synergies that transform previously undesirable climate assets into a new breed of profitable ones.
Green RWA is a trillion-dollar addressable market
Originating with the Kyoto Protocol in the late 1990s, carbon credits incentivize greenhouse gas emission reductions through projects such as reforestation, renewable energy, methane capture and soil reconditioning.
In short, each credit represents one ton of CO₂ reduced, avoided or removed. Compliance schemes like the EU Emissions Trading System initially drove the market. It’s the cap-and-trade system for environmental regulation you may have heard about.
After gaining traction in the 2010s — owing to rising corporate sustainability goals — the Voluntary Carbon Market (VCM) is emerging. It’s $1.7 billion and expected to grow by 25% annually for the next 10 years. The carbon dioxide removal (CDR) market is expected to be $1.2 trillion by 2050. According to S&P Global, “sustainable bonds” already make up 11% of the global bond market in 2024. “Climate bonds” are an old ESG term; however, the Climate Bonds Initiative tagged the cumulative amount 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.
As shown by initiatives like CarbonHood’s effort to tokenize $70 billion in carbon credits, broad adoption is still in its early stages. This figure represents just 3.5% of a much larger $2-trillion asset book.
Timing is critical
Why now? While the commonly criticized ESG narrative massively underperformed for capital allocators, the thesis was not totally misinformed.
As early as 2028, the Paris Agreement (signed in 2015) is programmatically designed to introduce much more stringent climate regulations. These restrictions could spike demand for carbon credits and green energy assets. The global goal is to limit warming to 1.5°C, with countries submitting Nationally Determined Contributions (NDCs) to cut emissions.
Related: Carbon market gets a much-needed boost from blockchain technology
These commitments will tighten over time, with stricter environmental targets phasing in from 2028 to 2030. A key driver 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 companies to buy and sell credits to meet NDCs, with full implementation expected by 2028.
This could…
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