The Islamic Globe has learned that the Middle East is poised for its first foray into the lucrative world of Shari'ah compliant carbon trading.
London-based Advanced Global Trading (AGT) is hashing out a deal that would see it become the first carbon brokerage to offer Islamic services in the region. If all goes to plan by the start of November Muslim investors could tap into what is now the fastest growing traded commodity.
Carbon credits are traded around the world by corporate and private investors looking to profit from the carbon market boom. In the Middle East, the market is young but growing quickly, in part because of increasing efforts by firms to improve their corporate social responsibility.
"Launching Shari'ah compliant carbon credits opens a myriad of doors," Charles Stephenson a partner at AGT told The Islamic Globe. AGT opened its regional headquarters in Dubai earlier this year.
The idea is that each Shari'ah carbon credit purchased finances a project that claims it will reduce greenhouse gas emissions. In recent years, the Middle East has witnessed growing demand despite there being few homegrown carbon- credit producing projects.
Part of the pressure to introduce carbon trading in the region has been political, as the states of the GCC have some of the highest per capita carbon footprints in the world. Investors would buy and sell carbon credits to companies who need to comply with global targets, or to individuals who wish to profit from predicted price increases. Once AGT's new venture goes live Takaful firms will be able to offer clients the opportunity to offset their emissions, while Islamic banks will look to structure Shari'ah carbon trading investment products.
Barclays estimates the regional market is limited to 111 projects currently, compared to over 5,000 globally. Still, there is certainly room to grow in a carbon trading market that is now worth $144bn globally, and is forecast to expand to over $1tr by 2025, according to the World Bank.
© The Islamic Globe 2011
