COP29: Saudi Arabia launches carbon credit exchange to bolster decarbonization efforts

Saudi Arabia, the world's largest oil exporter, launched its first carbon trading exchange on Nov. 12, during the UN Climate Change Conference in Baku.

This comes as several emerging markets are looking to bolster their carbon pricing and trading capabilities to meet their net-zero goals.

The exchange platform, managed by Saudi Arabia's Regional Voluntary Carbon Market Company (RVCMC), is part of Saudi Arabia's strategy to scale up its voluntary carbon market.

"The message coming into COP is clear: to accelerate global decarbonization we must unlock financial flows to critical climate projects on an enormous scale," said Riham ElGizy, RVCMC's CEO, said.

"High integrity voluntary carbon markets can play an important role in bridging the climate finance gap this decade. 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 is backed by Saudi Arabia's sovereign Public Investment Fund (80%) and the Saudi Tadawul Group (20%). The PIF has largely driven Saudi Arabia's investment in renewables, including several solar projects, under the Vision 2030 plan to diversify its economy. However, Saudi Arabia remains heavily dependent on oil revenues and has committed to cutting carbon emissions to net-zero by 2060.

Auction, spot trades

As part of the opening, 22 Saudi and international companies will participate in an auction on Nov. 12 on the platform. The auction will offer 2.5 million high-integrity carbon credits from 17 projects certified by Verra, Gold Standard and Puro.earth, with a vintage of 2020 onwards. Most of the credits auctioned will be from projects in the Global South, including Bangladesh, Brazil, Ethiopia, Malaysia, Pakistan and Vietnam.

This will be RVCMC's third carbon credit auction after it held auctions in Nairobi and Riyadh previously. Last year, RVCMC sold 2.2 million mt of carbon credits on June 14 at its second auction in Kenya as the kingdom looks to expand its presence in the carbon sector.

Many countries in the Middle East, especially Saudi Arabia and the UAE, are looking to bolster their participation in the voluntary carbon market. The Intercontinental Exchange (ICE) recently said it wants to work with Middle Eastern companies to create a carbon market hub in the region.

This comes at a tricky time for the voluntary carbon market. A wide range of media and academic criticism focusing on the low quality of some carbon projects and credits has reduced liquidity and caused the price of offsets to steeply fall.

But with a suite of integrity initiatives in the pipeline, many are hopeful that the market confidence will return soon.

Platts, part of S&P Global Commodity Insights, assesses a wide range of high-quality voluntary carbon credit funding projects that demonstrate additionality, permanence, exclusive claim and co-benefits.

Commodity Insights Data showed Nov. 11 that the value of these credits can vary from CORSIA-eligible offsets (Platts CEC, $16.75/mtCO2e) to household device offsets ($3.85/mtCO2e) and tech carbon capture offsets ($125/mtCO2e).