Saudi Arabia launches greenhouse gas-crediting and offsetting project

New scheme announced on sidelines of UN Mena Climate Week in Riyadh

Saudi Energy Minister Prince Abdulaziz bin Salman addresses the opening session of Mena Climate Week in Riyadh. AFP

Saudi Arabia has announced the launch of a greenhouse gas-crediting and offsetting scheme, as the kingdom seeks to tackle climate change and intensifies efforts to achieve net-zero emissions by 2060, the Saudi Press Agency reported on Monday.

The Greenhouse Gas Crediting and Offsetting Mechanism (GCOM) was launched during the UN's Mena Climate Week in Riyadh. The event was attended by Prince Abdulaziz bin Salman, Saudi Arabia’s Minister of Energy.

The new domestic market mechanism will help "advance the kingdom’s climate ambitions" and "enable entities across the kingdom to meet their goals to reduce and remove emissions, ensuring collective action in our journey towards a sustainable and low-emission future", the state-run news agency said.

Last October, Saudi Arabia's Public Investment Fund (PIF) and Saudi Tadawul Group, the holding company that runs the kingdom's stock exchange, said they would establish the Regional Voluntary Carbon Market Company (RVCMC).

In June, the RVCMC said it had successfully auctioned off 2.2 million tonnes of carbon credits in Nairobi.

Oil giant Saudi Aramco, Saudi Electricity Company and Enowa (a subsidiary of Neom) were the main buyers at the auction.

The carbon credits comply with Corsia, a programme run by the International Civil Aviation Organisation, and are registered with Verra, operator of the world's largest registry of carbon credits, the RVCMC said.

Saudi Arabia, the world's biggest crude exporter and the Arab world's biggest economy, has set ambitious targets to fight climate change and cut carbon emissions to overhaul its economy and reduce its reliance on oil.

It has set a target of achieving net-zero carbon emissions by 2060.

In February, the PIF raised $5.5 billion through the sale of a green bond to secure funding for green investment.

In July, the RVCMC said it plans to launch a carbon credit-trading exchange in early 2024 and establish a fund to invest in climate projects.

Carbon credits, also known as carbon offsets, are permits that allow companies to emit a certain amount of carbon dioxide or other greenhouse gases. The funds from the sale of the credits are used to finance climate-action projects that would not otherwise get off the ground.

The market for the financial instrument could be worth more than $50 billion by 2030, according to consultancy firm McKinsey.