Saudi Arabia has launched a voluntary carbon market exchange platform as the kingdom transitions to a low-carbon economy.
The Regional Voluntary Carbon Market Company (RVCMC), backed by the kingdom’s sovereign wealth fund, Public Investment Fund (PIF), will auction more than 2.5 million tonnes of “high-quality” carbon credits on the exchange platform on Tuesday, it said in a statement.
The basket of credits connects buyers to a diverse range of 17 climate projects worldwide, most in developing countries in the Global South such as Bangladesh, Brazil, Ethiopia, Malaysia, Pakistan and Vietnam.
The basket also includes credits tied to a US-based project that focuses on capturing carbon dioxide and embedding it into fresh concrete.
RVCMC said 22 Saudi and international businesses are participating in the platform launch, including some subsidiaries of Saudi Aramco, petrochemicals company Sabic and Red Sea Global.
The announcement comes a day after countries at the Cop29 climate summit in Baku, Azerbaijan approved new carbon-credit quality standards, crucial for launching a UN-backed global carbon market.
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Participants at the Cop29 venue in Baku, Azerbaijan. Reuters -
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“High-integrity, voluntary carbon markets can play an important role in bridging the climate finance gap this decade,” said Riham ElGizy, RVCMC’s chief executive.
“But institutional grade infrastructure must be put in place to help buyers and sellers scale up private sector participation and achieve the market’s potential."
RVCMC launched its first voluntary carbon market auction in 2022 in Riyadh, selling 1.4 million tonnes of credits. It later broke its own record by auctioning off 2.2 million tonnes last year in Nairobi, Kenya.
Saudi Arabia, which has set a net-zero target for 2060, aims to become one of the largest voluntary carbon markets in the world by 2030.
Morgan Stanley has estimated the value of the voluntary carbon-offset market to grow from $2 billion in 2020 to $250 billion by 2050.
However, the industry has faced criticism over lack of transparency and the quality of some projects. Some argue carbon offsets allow certain sectors to continue with polluting the environment.
Saudi Arabia is also setting up an emissions compliance system at national level. The kingdom is following a phased approach in setting up a carbon market, to “ensure readiness” and avoid the pitfalls experienced by the EU and other regions, Energy Minister Prince Abdulaziz bin Salman said at the Future Investment Initiative conference in Riyadh last month.
The road map for an emissions compliance system will include a pilot phase for the next “two to three years” to ensure the regulations suit the kingdom’s economy, Prince Abdulaziz said at the time.
The EU Emissions Trading System, launched in 2005, is the world’s first carbon market and is still among the largest globally.
It covers emissions from electricity and heat generation, industrial manufacturing and aviation – sectors that account for about 40 per cent of greenhouse emissions in the bloc.
The EU’s Carbon Border Adjustment Mechanism will come into effect in 2026. It will impose a carbon price on imports of carbon-intensive products such as steel, cement and hydrogen, ensuring fair competition for European industries.
