Baku, Azerbaijan — As Saudi Arabia’s Regional Voluntary Carbon Market Company (RVCMC) launched its first carbon credit trading platform during the UN Climate Change Conference (COP29), a successful auction that brought in 22 companies helped to provide backing for the platform’s launch with 2.5 million certified carbon credits, marking an important step for the country in the advancement of Vision 2030 plan, which will help diversify the economy.
While being the biggest oil exporter in the world, Saudi Arabia is now shifting strategically into investment in renewable sources of energy as well as participation in the carbon market. This platform is expected to promote private sector involvement in the carbon credit market through certified projects in developing countries.
A Milestone for Saudi Arabia in Environmental Strategy
This move is part of Saudi Arabia’s Vision 2030, which is meant to diversify the kingdom away from oil revenue and at the same time increase investments in renewable energy sources. Launching the carbon credit trading platform is part of the country’s strategy to pursue economic goals without compromising environmental commitments, especially in achieving net-zero carbon emissions by 2060.
The Saudi Tadawul Group in partnership with the Public Investment Fund of Saudi Arabia, designed RVCMC to facilitate international-standard carbon credits sale and buybacks. The platform targets verified carbon credits focusing on the overall task of establishing confidence in the market while building an infrastructure that would enable a full extent of participation in carbon offset activities.
Boosting the Carbon Market in the Middle East
Saudi Arabia even established a carbon credit exchange as part of the growing interest in voluntary carbon markets in the region. In the past, investments in carbon offset markets grew in the region as all parties together looked forward to reducing carbon emissions and building more resilient markets under criticisms of quality of voluntary carbon credits.
RVCMC CEO Riham ElGizy explained that the platform is to attract large-scale climate finance for projects worldwide. “Our message at COP is clear: accelerating global decarbonization requires unlocking financial flows for climate projects at scale. High-integrity voluntary carbon markets can play an important role in reducing the climate finance gap this decade. However, realizing the market’s potential requires institutional infrastructure that will enable greater private sector participation,” ElGizy said.
With regard to the auctions that the RVCMC has successfully hosted, two carbon credit auctions in Nairobi and Riyadh have been conducted. In Kenya, 2023 is a year that RVCMC sold 2.2 million metric tons of carbon credits, thus reiterating its leadership position in carbon markets and carbon finance within the region.
Launch Auction Details and Global South Partnerships
On November 12, 22 companies took part in the first auction. More than half of them came from Saudi Arabia and other countries. The sale of 2.5 million carbon credits featured projects certified by prominent organizations, including Verra, Gold Standard, and Puro.earth. Carbon credits, which would come from Bangladesh, Brazil, Ethiopia, Malaysia, Pakistan, and Vietnam, include sources in renewable energy and reforestation, as well as those of the greatest impact.
By providing credits issued by reputable organizations, RVCMC addresses the usual concerns of low quality and untrusted carbon credits. The presence of various companies at the auction demonstrates the growing interest in carbon credits that are associated with concrete impacts on climate change, most notably in countries that are highly exposed to climate change but contribute highly to reductions.
Combating Issues Regarding the Voluntary Carbon Market
Contrary to the promise of voluntary carbon markets, the platforms face challenges of market liquidity, pricing, and project quality. For some of the carbon credits, there have been legitimacy issues, which have created hesitation in the market. Variability of offset values ranges depending on the nature and credibility of the project. According to Platts of S&P Global, the price of carbon credits can be as low as $3.85 per metric ton for offsets in household devices while others may reach a high of $125 for technological carbon capture offsets.
More positive in this end are market analysts. They believe that with higher integrity measures implemented, more confidence would be instilled into the voluntary carbon market. RVCMC has strict standards for carbon credits to improve its strengths of market transparency and maintain an efficient structure for pricing. The company believes that high-integrity projects will attract more investments and drive additional resources into climate initiatives.
Creation of Market Infrastructure towards Sustainable Development
Saudi Arabia’s investments in carbon credit trading and other renewable energy projects show an indication of long-term commitment of sustainable economic growth. RVCMC is working towards the targets of the so-called renewables investments made by Saudi Arabia mainly in solar energy investment but also in the low-carbon technology arena. The kingdom is to become a flagship of environmental initiatives globally and regionally.
Launching the trading platform of the RVCMC thus unlocks another avenue under Saudi Arabia’s work at developing the ability of developing countries to access carbon markets and enjoy fair shots at an environment that makes them attractive to global climate finance. These are important initiatives, not only for areas like the Global South but also for regions where climate resilience projects are considered too expensive to implement significant emissions reductions.
The Future of Saudi Arabia’s Carbon Market
RVCMC recently launched its carbon credit trading platform at COP29. Under Saudi Arabia’s ambition to play a leading role in the global carbon market despite the remaining challenges for the establishment of quality standards and the stabilization of carbon credit price determination, such a platform is an upward move both for Saudi Vision 2030 and for the broader voluntary carbon market.
The course of Saudi Arabia’s evolving approach to carbon credit trading should continue to have the platform for the RVCMC evolve further towards internationally accepted standards to further cement the kingdom as a strong player in the carbon credit market. Further auctions and increased market involvement will therefore provide still even more momentum for the growth of sustainable financing for climate projects across the region and global markets.
Source
Contents For Use Based on Statement by Saudi Arabia’s Regional Voluntary Carbon Market Company at COP29 Regarding Launching of Carbon Credit Trading Platform and Information about Debut Auction of Emitted Carbon Credits.