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In October 2021, the United Arab Emirates announced a plan for net-zero emissions by 2050 and to oversee 600 billion dirhams ($163 billion) in investment in renewable energy. In doing so, it became the first country in the Gulf to pledge a net zero-carbon commitment.<\/p>\n
The UAE is, however, far from alone in joining the net-zero bandwagon. According to the United Nations, more than 130 countries have now set or are considering a target of reducing emissions to net zero by mid-century. The UAE\u2019s neighbor and important ally Saudi Arabia, the world\u2019s largest oil producer, has now also pledged to reach net zero by 2060.<\/p>\n
This newfound momentum in announcing net-zero pledges has reignited hope in the fight against climate change. This was complimented by a seemingly successful outcome at COP26, with the eventual adoption of the Paris Rulebook, now branded as the \u2018Glasgow Climate Pact.\u2019 The COP26 President Alok Sharma said<\/a>,<\/u> \u201cCOP26 kept the world’s 1.5C limit in reach,\u201d while\u00a0\u00a0\u00a0\u00a0 \u00a0International Energy Agency (IEA) analysis<\/a> shows that COP26 climate pledges, if achieved, could\u00a0\u00a0\u00a0\u00a0 \u00a0limit global warming to 1.8 \u00b0C \u2013\u2013 a milestone in international climate negotiations even if still not the 1.5 \u00b0C targets set at Paris.<\/p>\n But not everyone is as optimistic or hopeful. As much as the net-zero vision has gained traction since COP26, there is little common understanding of what net-zero means. Too often, critics observe, definitions of \u2018net-zero\u2019 are tweaked to fit the interests and priorities of individuals, companies, and countries, undermining the temperature goals of the Paris Agreement.\u00a0<\/p>\n Nevertheless, there is no doubt that carbon offsets will be at the heart of the shift towards net-zero emissions. And there are presently two markets for carbon offsets: voluntary carbon market and the compliance market.<\/p>\n The compliance market for carbon offsets is set under Article 6 of the Paris Agreement. There are two market-based mechanisms under Article 6: Article 6.2 is a bottom-up approach to market mechanisms that can be designed and agreed bilaterally or multilaterally. Article 6.4 is a top-down centrally-governed mechanism\u00a0through which public and private entities can support GHG emission reductions and sustainable development. Countries can also use non-market approaches that do not involve any transfer of ITMOs (Article 6.8).<\/p>\n The UAE can choose to engage in Article 6 for several reasons, including cost-effective\u00a0\u00a0\u00a0\u00a0 \u00a0NDC targets, revenue generation, sustainable development co-benefits, technology transfer, capacity building, and financing for expensive mitigation measures as well as adaptation action with mitigation co-benefits.<\/p>\n International carbon markets under Article 6 of the Paris Agreement can either lessen the annual cost<\/a> of overall mitigation and NDC compliance by more than $250 billion in 2030 or enable the removal of 50% more emissions (or approximately 5 gigatons of carbon dioxide per year in 2030), at no additional cost. Such potential is important to meeting the Paris Agreement goals.<\/p>\n The provisions establishing an international carbon market under the Paris Agreement were agreed at COP26 in Glasgow, finalizing the Paris Agreement Rulebook. These provisions are important since they clarify the role of accounting of carbon credits towards the nationally determined contributions (NDCs) of countries and the scope of international regulation.<\/p>\n