Carbon Credit Certificates and the Ruling on Their Trading

Abstract

Abstract:

The primary purpose behind issuing carbon certificates and establishing markets and exchanges for their trading was to reduce levels of climate pollution caused by carbon emissions. However, it has become evident that they can also serve as an opportunity to enhance various financial indicators for institutions and states and act as a source of financial income. If it is scientifically established that these emissions have significant harmful effects on the earth and its inhabitants, then it is permissible to enact regulations and laws aimed at mitigating these harms—even if such measures restrict the freedom of companies and states in their activities. In fact, one might argue that it is obligatory. Legally, carbon certificates grant their holders a right that entitles them to receive financial compensation. The juristic classification does not differ from the legal one: these certificates represent a right owned by the holder. The prevailing opinion is that such rights fall within the scope of property (māl) and that rights with financial value may be the subject of exchange. This view has been adopted by most Islamic juristic councils and bodies. Accordingly, it is permissible to trade carbon certificates in carbon markets and exchanges, and banks and financial institutions may finance their clients through tawarruq contracts using carbon certificates. It is not a condition for the validity of ownership that the certificate holder personally benefits from it