With huge hydrocarbon reserves and production and a rising population, the UAE and other GCC countries have the potential to be a global hub of carbon trade.
However, the potential is not being realised.
Data from the UNEP Risoe Centre on Energy, Climate and Sustainable Development and UNFCC (United Nations Framework Convention on Climate Change) said that a country like the UAE, which emitted 116 million tonnes of carbon dioxide in 2005, could manage to reduce just 0.6 million tonnes of carbon dioxide every year until the end of 2009.
There are just four registered CDM projects in the UAE. Five more are currently in the 'validation' stage.
In Kuwait, the other major carbon dioxide emitter, there are no registered CDM projects so far, even though the country emitted 77 million tonnes of carbon dioxide five years ago.
The track of all the GCC countries has been below the mark with the UAE emerging the best performer.
The Energy Intelligence Agency put the per capita emission of carbon dioxide in the UAE at 38.46 metric tonnes per person in 2007. It increased by 67.49 per cent in the period 1992-2007, according to the EIA report.
According to the World Bank, particulate matter concentration in air in the UAE in 2006 was 127 microgrammes per cubic metre.
Tarek El Sayed, a Principal with Booz & Company, blamed the lack of institutions to certify CDM projects, lack of awareness and lack of capabilities for the below par state of carbon trade in the region.
"The institutional settings required to enable CDM Designated National Authorities and Designated Operational Entities is either not in place or functional in GCC countries, thus posing significant hurdles in the approval and registration of CDM projects and issuance of credits," he said in an e-mail.
"The development of CDM projects requires specialised capabilities to go through the steps of the CDM project cycle for the development of project documentation such as Project Design Documents (PDDs). These capabilities, either in-house or offered as advisory services, are still under development in the region."
There is "a lack of awareness of the potential benefits that the CDM may provide", El Sayed said.
Companies in the UAE are delaying their investments into technologies that help cap carbon dioxide emissions by three years – until the end of 2012, the Emirates Business had earlier reported.
Though yet to take off, the Middle East carbon trade potential is estimated to be worth $ 5 billion (Dh18.3bn) annually.
Carbon trade market in Europe is estimated to be worth €100bn (Dh493.1bn) and is expected to grow to €800bn by 2020. An uncertainty over the regime that would replace the Kyoto Protocol – the rather loose UN framework which dictates carbon trade – is forcing these companies to delay their decisions, industry insiders said earlier.
"There are concerns regarding the long-term future of the CDM initiative should international negotiations on climate change fail to deliver a binding treaty post-2012 after expiry of the first commitment period of the Kyoto Protocol," El Sayed said.
However, the prevailing expectation is that CER's from projects under the CDM will remain valid post-2012, either under a reformed CDM or new flexibility mechanisms to be introduced, El Sayed said.
"Further, should no binding treaty be established, the EU has already proposed that its member states be able to use Certified Emission Reductions (CERs) issued before the end of 2012. The global interest in CDM remains robust as companies in other regions keep investing in CDM projects and seek accreditation to reap the benefits," he said.