Humanity stands at pivotal crossroads, and the IPCC’s (Intergovernmental Panel on Climate Change) findings make it crystal clear: we should cut global CO₂ emissions by around 45% by 2030, and reach net zero by the early 2050s, to hold warming to 1.5 °C .
Why the urgency? Emissions that remain today continue to heat the planet for decades to come: so early, drastic action dramatically reduces risk, while delay compounds it. The longer emissions stay high, the higher the chance we'll trigger irreversible tipping points: melting ice sheets, permafrost thaw, collapse of ocean currents — changes that could spiral beyond human control. For everyday people, the consequences are profound: worsened storms, food shortages, heatwaves, rising seas, and growing inequality, especially hitting hardest in vulnerable communities.
That’s where decarbonization becomes a strategic opportunity. It calls for bold investments in energy efficiency, clean technologies, and high-integrity carbon markets. Designed for institutional participation, the Article 6 of the Paris Agreement facilitates decarbonization in industry by enabling international cooperation on emissions reductions through carbon markets and non-market approaches. This cooperation can significantly reduce the cost of achieving climate targets and encourage greater ambition in emissions reduction efforts.
Fig 1. Global emissions trajectory vs. net zero pathways
Together, the science and the structure form a powerful narrative: decarbonization is urgent and achievable: and high integrity carbon markets are the financially robust avenue for investors seeking measurable, long-term climate impact. This article will help to explore how this potential is unfolding in practice in various industries and sectors.
Decarbonization refers to the systematic reduction of greenhouse gas (GHG) emissions (primarily CO₂ — carbon emissions reduction) across the energy, industrial, transport, and land sectors. The IPCC outlines that global CO₂ emissions must decline by approximately 45 % by 2030, reaching net zero around 2045–2055.
Reaching net zero emissions — where residual greenhouse gas emissions are balanced by credible removal methods — depends on deep system transformation. This includes sustainable energy‑demand efficiency, electrification, and renewable generation, coupled with carbon dioxide removal (CDR) via nature-based or engineered solutions.
In practical terms, decarbonization means setting science-based targets (SBTi), deploying reduction pathways, and integrating high‑integrity carbon credits only to address residual emissions needing to be offset.
The IPCC Science Summary details how CDR (whether nature-based — afforestation, soil carbon enhancement, or engineered — direct air capture, BECCS (Bioenergy with Carbon Capture and Storage)) plays a critical role in limiting warming.
That is to say, alongside removal methods, avoidance and reduction provide the immediate basis for impact: electrification of transportation and buildings, wind/solar adoption, and industrial efficiency all reduce emissions at scale.
Viewed together, these elements create net zero trajectories that are both credible and verifiable: essential for institutional portfolios and climate-aligned finance.
Nature-based solutions (NbS), including afforestation, improved forest management, soil carbon enhancement, and agroforestry, provide scalable, co-benefit-rich carbon removal. These are recognized under Article 6 and enable high-integrity offsetting, but must adhere to rigorous due-diligence and permanence standards.
Projects in Africa and Southeast Asia, for example, can deliver both carbon sequestration and sustainable development outcomes. Thoughtful integration of ARR (Afforestation, Reforestation, and Revegetation) form part of Offset8’s impact portfolio, including such projects as Sawa (Indonesia's largest biochar carbon removal project), iRise (Malawi's largest reforestation and clean cooking program) and others.Alternate Wetting and Drying (AWD) offers a precision-focused climate solution. This innovative rice irrigation technique suppresses methane emissions by cycling fields through controlled drying and re-flooding. The methodology was approved under Japan’s JCM in 2025 under its Philippines framework.Another approach is REDD+ (Reducing Emissions from Deforestation and Forest Degradation). Designed mainly for developing countries, REDD+ and J-REDD+ incentivizes forest conservation, sustainable management, and enhancement of forest carbon stocks through results‑based payments.
| Solution Type | Climate Change Mitigation Potential | Key Benefits |
| AWD – Alternate Wetting and Drying | Cuts methane emissions up to 48%, and saves ~30% water. | Low-cost, yield-neutral mitigation for rice fields |
| ARR – Afforestation / Reforestation / Revegetation | Adds new carbon sinks, planting trees on cleared or degraded land. | Scalable removal; enhances biodiversity and ecosystem resilience |
| REDD+ – Forest Conservation | Prevents emissions from deforestation and improves forest carbon stocks. | Supports sustainable forest management via results-based incentives |
Table 1: Climate Change Mitigation Potential
Carbon markets bridge ambition and action, turning emissions reductions into investable assets. Whether for compliance or voluntary pledges, carbon credits allow organizations to support decarbonization while achieving institutional-grade accountability.
In decarbonization finance, three high-integrity frameworks are shaping global ambition and market clarity:
EU’s Carbon Border Adjustment Mechanism (CBAM) adds carbon cost to imports, incentivizing low-carbon global supply chains. High-integrity credits like Article 6 offsets may offer cost-competitiveness for compliant producers.
| Mechanism | Scope | Core Purpose |
| Article 6.2 | International transfers | Enables tradeable, accountable mitigation (ITMOs) |
| CORSIA | Aviation | Ensures emission offsets meet rigorous global standards |
| JCM | Japan-partner nations | Promotes tech transfer and NDC implementation |
| CBAM | EU imports | Disciplines carbon leakage and aligns market incentives |
Table 2: Comparison of decarbonization frameworks
Setting a credible decarbonization plan starts with rigorous baseline assessment and ambition aligned to science. The Science Based Targets initiative (SBTi) is leading this effort: as of 2025, over 10,000 companies have committed to or set net zero GHG targets grounded in climate science.
SBTi is now advancing its Corporate Net-Zero Standard V2, guiding companies to define Scope 1, 2, and 3 targets separately and focus on operational carbon emissions reduction before leveraging residual emissions strategies like carbon removal or Beyond Value Chain Mitigation (BVCM) .
Here’s a streamlined 7-step Decarbonization Strategy roadmap:
Fig 2. 7-Step Decarbonization Strategy Roadmap
To drive climate impact through capital, institutional investors and asset managers must align with reputable carbon fund managers offering due diligence, transparency, and strategic impact. Credible partners ensure projects meet standards like SBTi's and deliver measurable outcomes.
Key criteria for selecting carbon investment partners include:
Coupling a robust decarbonization roadmap with disciplined carbon finance strategies enables organizations to deliver both environmental integrity and scalable value.
Scaling to net zero demands investment ramp-up on a dramatic scale. The IPCC (Intergovernmental Panel on Climate Change) has made it clear: global climate investment needs to grow three to six times current levels to meet decarbonization goals: even though sufficient capital exists in the world today.
Yet carbon markets help bridge this gap, by channeling funds into verified, high‑integrity projects, reducing investment risk and enabling institutional participation. Investors gain comfort from due diligence tools, transparent governance, and impact measurement capabilities.
Fig 3. Key business actions for decarbonization
Forward-looking corporate leaders are increasingly embracing science-based targets aligned with 1.5 °C pathways, largely championed by the Science Based Targets initiative (SBTi). As of 2025, over 6,000+ companies have set or committed to such targets, reflecting a rapidly expanding movement grounded in climate science and transparency.
These strategies typically follow a pragmatic progression:
| Stage | Description | Timeframe (varies by sector) |
Baseline & Target Setting | Measure current emissions, set SBTi-aligned science-based targets to ensure alignment with 1.5 °C pathways | Year 0–1 |
Energy Transition & Efficiency | Maximize internal reductions via renewable energy transition, operational efficiencies, and low-carbon processes | Years 1–5(longer for heavy industries) |
Residual Emissions Addressed | Neutralize unavoidable emissions using high-integrity carbon credits (CORSIA, Article 6, or nature-based) | Years 5+ |
Table 3: Decarbonization Strategies
The first phase focuses on setting clear, science-based targets, followed by efforts to reduce emissions through energy transitions and efficiency improvements. The final phase involves addressing remaining emissions through high-quality carbon credits. This structured timeline ensures that businesses can gradually reduce their carbon footprint while relying on carbon offsetting only for the emissions they cannot eliminate.
Decarbonization begins with renewables and energy efficiency. IPCC 1.5 °C pathways project that renewables will supply 70–85 % of electricity by 2050, with annual low-carbon energy investment scaled sixfold by then.
This transition drives capital flows into solar, wind, green hydrogen, improved building standards, and electrified fleets: all of which can be financed and accelerated through carbon market-linked project finance.
Hydrogen offers the prospect of helping to decarbonise the transport, heat and industrial sectors while providing a use for surplus renewable power. IRENA estimates that it could supply 14% of final energy consumption by 2050. Decarbonizing hydrogen production is challenging because while electrolysis using renewable energy is clean but costly and energy-intensive, steam methane reforming is cheaper and scalable but emits significant carbon
Engineered CDR (Carbon Dioxide Removal) methods, such as Direct Air Capture (DAC), Bioenergy with Carbon Capture and Storage (BECCS), and enhanced geological sequestration — feature in IPCC pathways. While more capital-intensive, they are essential for balancing residual emissions from industry.
CCUS (Carbon Capture, Utilization, and Storage) is one of the few technology suites capable of both directly reducing emissions from existing industrial infrastructure and removing CO₂ from the atmosphere — positioning it as a cornerstone of the global clean-energy transition.
Fig 4. Carbon removal technology comparison
These decarbonization technologies often generate premium carbon credits, attracting institutional investors seeking credible climate finance instruments. Though Afforestation, Reforestation, and Revegetation (ARR) and Biochar are currently the most attractive options for institutional investors seeking credible, scalable, and cost-effective carbon credits.
DAC, while promising in theory, has not yet proven viable at scale due to its high costs and slow deployment curve. Relying solely on Direct Air Capture (DAC) at this stage is not advisable for companies aiming for near-term climate impact.
In the Middle East, Egypt has established the region’s first regulated voluntary carbon market, overseen by the Financial Regulatory Authority (FRA) and operated via the Egyptian Climate Exchange (EGCX). The platform facilitates the registration, issuance, listing, and trading of carbon emission reduction certificates as financial instruments.
Meanwhile, Saudi Arabia has introduced the Greenhouse Gas Crediting and Offsetting Mechanism (GCOM), a national framework designed to scale high-integrity emission reduction activities and support both voluntary and compliance markets. In the UAE, the Dubai Financial Market (DFM) has launched a pilot program for carbon credit trading, and Offset8 Capital has introduced the region’s first regulated carbon credit fund focused on nature-based solutions. The UAE also previously hosted the Abu Dhabi Global Market’s AGX, the world’s first regulated carbon credit trading exchange.
A notable example is Japan’s Joint Crediting Mechanism (JCM). As of August 15, since its launch in 2013, Japan has established partnerships with 30 countries. Under the JCM, Japan contributes to projects through measures such as financial support and technology transfer, which are implemented in partner countries. The resulting emission reductions are shared between Japan and its partner countries. The Japanese government aims to achieve cumulative reductions and removals of approximately 100 million tCO₂ by fiscal year 2030. JCM credits are planned to be eligible under Japan’s GX-ETS, potentially allowing businesses to use them to meet climate targets.
This signals the region’s growing commitment to transparent and high-integrity carbon markets, with Oman, Morocco, Iraq, and Bahrain also beginning to establish policies and frameworks for the carbon credit market.
In the Asia-Pacific region, 17 carbon pricing systems are already in operation, and APEC is preparing a pilot project for a voluntary market with international integration.
Fig 5. Regional Carbon Market Initiatives (Middle East & Asia Pacific)
For institutional investors interested in market access and regulatory alignment, these regions offer both climate impact and portfolio diversification benefits.
Fig 6. Key industries in decarbonization
Heavy industry — steel, cement, chemicals — remains decarbonization’s greatest challenge. Let’s take a look at the case studies that demonstrate how combined measures (sustainable energy efficiency, CCUS, green feedstocks, premium offsets) can shape credible pathways.
Steel Industry
Japan’s largest steelmaker, Nippon Steel’s hydrogen-based “Super COURSE50” technology began trials in May 2022, achieving 22% CO₂ reduction in 2022, 33% in 2023, and a world-first 43% in 2024. Building on this, the company aims to scale the technology to large blast furnaces with a target of 50% or greater reduction, with a full-scale demonstration starting in fiscal 2026 at the No. 2 blast furnace — approximately 400 times larger than the test furnace.
Aluminum industry
Aluminum producers, including Rio Tinto, Novelis, and Egyptalum, collectively executed PPAs for around 3.4 GW of renewable electricity, marking a major step toward decarbonizing aluminum refinements. For example, Novelis signed a 10-year PPA (Power Purchase Agreement) with Statkraft in early 2024 to power 40% of its German rolling plants with wind and solar, reducing annual emissions by over 17,000 t CO₂e.
Cement industry
Material Evolution, a UK startup, has developed a low-carbon cement alternative using slag, reducing emissions by up to 85%. With £15 million in funding, the company aims to scale production and collaborate with major cement producers. Innovations like Brimstone and Sublime Systems are also working on decarbonizing cement.
Aviation and Shipping
The aviation sector’s CORSIA mechanism requires regulated carbon offsets for international flights, highlighting the need for high-quality credits. Similarly, shipping decarbonization is pressured by evolving IMO regulations and emerging voluntary offset schemes.
These hard-to-abate sectors rely on transparency and alignment with Article 6 transfers, where corresponding adjustments ensure integrity. In both, investors and institutional buyers demand premium carbon credits that support additional climate action, making regulated funds especially relevant.
As we can see, these industrial leaders prove that in hard‑to‑abate sectors it is not only feasible to decarbonize — but already underway.
It’s clear that corporate decarbonization is rapidly advancing: aligning perfectly with how Offset8 Capital’s regulated carbon fund enables institutions to translate ambition into meaningful, measurable climate impact.
Disclaimer
*Disclaimer: This commentary is for informational purposes only and should not be considered financial, investment, or regulatory advice. Offset8 Capital Limited is regulated by the ADGM FSRA (FSP No. 220178). No assurances or guarantees are made regarding its accuracy or completeness. Views expressed are our own and subject to change
Decarbonization focuses on reducing emissions at source. Carbon neutrality requires offsetting residual emissions through credible removal — only acceptable if the carbon emissions reduction pathway aligns with net zero timelines. The IPCC defines net zero around 2050.
They enable organizations to address residual emissions after aggressive internal reductions, provided they meet additionality, permanence, and audit standards and are integrated into compliance systems.
It allows for ITMO (Internationally Transferred Mitigation Outcome) transfers between countries, with corresponding adjustments to national accounts. When well governed, Article 6.2 facilitates private finance into high-integrity carbon projects aligned with national decarbonization goals.
