Opinion
Carbon is the next cyber: Why Israel must enter the global carbon market now
"If Israel managed to turn technological innovation into global industries in cyber and fintech, there is no reason it cannot do the same in carbon, especially when the initial infrastructure already exists," writes Dr. Ruth Dagan, Head of the Climate Practice at Herzog Fox & Neeman.
Two decades ago, Israel recognized the cyber revolution just in time and turned it into one of its most significant growth engines. Today, a new, large-scale, profitable, and equally influential industry is emerging before our eyes, and once again, we face a narrow window of opportunity: the global carbon market. This is not a “soft” environmental niche; it is a new economic-technological category with enormous value-creation potential. Just as cybersecurity was born out of an urgent need that evolved into a global market, the carbon market is rapidly becoming a financial, regulatory, and commercial infrastructure designed to redefine the economics of emissions.
The signs of this shift are clear. The European Union has begun collecting carbon tariffs on imports under the CBAM framework, a move shaking manufacturers and heavy industries worldwide and posing a significant risk to Israeli exporters who have yet to prepare. Carbon prices in the EU trading system rebounded sharply during 2024-2025 after a period of decline, returning to the €70-per-ton range, a sign of stabilization and renewed upward momentum. At the same time, global tech giants such as Microsoft, Stripe, and OpenAI have committed billions of dollars to purchase credits from carbon removal projects, signaling a transition from an environmental mindset to a distinctly business-driven approach. China, Japan, and South Korea have expanded their national carbon markets, while other countries are building trading platforms and regulatory frameworks to attract international capital.
The data confirms this growth trend: over 33 million tons of carbon credits were traded in Q3 2024, a 15% increase year-over-year. Global government revenues from carbon markets have surpassed $100 billion annually, and 28% of global emissions are now covered by pricing mechanisms. One of the most striking figures is the surge in demand for credits from carbon removal projects, which jumped 25%, alongside a price increase to $15.5 per ton, four times higher than credits based on renewable energy. The market is sending a clear message: the big money lies in technologies that not only reduce emissions but also repair the damage already done.
Today, the carbon market is at the same stage cybersecurity was in the early 2000s: young, underregulated, with enormous potential, and almost no Israeli presence. If Israel managed to turn technological innovation into global industries in cyber and fintech, there is no reason it cannot do the same in carbon, especially when the initial infrastructure already exists. Israel holds significant advantages: technological excellence in water, precision agriculture, renewable energy, and measurement systems; relatively flexible regulation that is not locked into cumbersome mechanisms like those in Europe; and unique legal-regulatory expertise enabling contractual infrastructure, international deal-making, and dispute resolution. These are precisely the “starting conditions” that made Israel a global leader in cybersecurity.
Yet Israel has not established a national framework to incentivize companies to generate carbon credits domestically, does not recognize projects for credit creation, and has not appointed a governmental body to manage the transition to the global market. The result: Israeli companies with winning climate technologies have little incentive to develop credit-generating projects locally and prefer to operate from countries that already have national carbon policies and active global market participation.
To avoid missing an entire industry as it takes shape, Israel must build policy and legal infrastructure for both local and international carbon markets, establish a dedicated authority to coordinate market entry, and invest in climate-tech development, including carbon removal technologies, measurement and verification systems, and trading platforms. History teaches us that industries built in one decade define the economy for decades to come. The question is whether Israel will be among those shaping this new market, or among those arriving late, forced to play by rules set by others.
Dr. Ruth Dagan is Head of the Climate Practice at Herzog Fox & Neeman.
