Saudi Arabia Launches Carbon Exchange Platform to Accelerate Climate Action

A new carbon exchange platform was unveiled at the COP29 conference in Baku, designed to channel significant funding into global climate projects. Developed by Saudi Arabia’s Regional Voluntary Carbon Market Co. (RVCMC), the platform aims to accelerate emission reduction efforts and bolster the Kingdom’s position in the carbon credit market by 2030.

Riham El-Gizy, CEO of RVCMC, emphasized the platform’s potential to drive lasting change in global climate finance. She explained that such high-profile initiatives not only attract more buyers but also raise awareness in the market. “Auction after auction, awareness grows, and it’s not just about the event itself,” El-Gizy said. “We are launching advisory services to help buyers on their decarbonization journeys, supporting their climate sustainability and carbon neutrality goals.”

The launch brought together 22 Saudi and international firms, signaling strong market interest and a commitment to sustainable development initiatives. The inaugural auctions are aimed at directing substantial funding toward high-quality climate projects, with a particular focus on the Global South.

A Voluntary Carbon Market (VCM) is a platform where organizations and individuals can buy carbon credits to offset their emissions by funding projects that reduce or capture greenhouse gases. Unlike regulated markets, participation in VCMs is optional, allowing companies to support climate goals and compensate for emissions they cannot directly eliminate. VCMs play a vital role in financing environmental projects, especially in developing regions, and are seen as a key tool in achieving global net-zero targets.

El-Gizy highlighted Saudi Arabia’s unique advantage through Islamic finance mechanisms, noting the collaboration with the Islamic Corporation for the Development of the Private Sector to issue the first-ever fatwa allowing carbon credits as Shariah-compliant commodities. “Imagine if mortgages were backed by carbon credits rather than traditional commodities like rice or gold,” she said, emphasizing the potential for Islamic finance to funnel more capital into climate-positive projects.

The Islamic finance sector in Saudi Arabia, valued at $500 billion, offers immense potential to inject liquidity into the carbon market. The platform, which includes auction and block trade functionalities, plans to expand into spot markets by 2025.

RVCMC aims to bridge critical financing gaps in climate action through a robust carbon credit marketplace, especially in regions most affected by climate change. The platform ensures transparency using digitized infrastructure, including satellite imagery and AI for verification, to ensure carbon offsets deliver genuine environmental impact.

The inaugural auction will feature the trade of over 2.5 million tonnes of high-quality carbon credits, with companies like Aramco Trading Co., Ma’aden, and Gulf International Bank participating. These transactions will fund a diverse range of projects, including methane capture in waste management, forest reforestation in Ethiopia, and carbon storage technology in the U.S.

El-Gizy further emphasized the strict standards maintained by RVCMC, with only 10 percent of submitted projects being accepted after rigorous due diligence. A significant portion of the auction’s credits will focus on removal projects to enhance durability and environmental impact.

Founded by Saudi Arabia’s Public Investment Fund and the Saudi Tadawul Group, RVCMC was established to cultivate a thriving voluntary carbon market within Saudi Arabia and the broader Middle East and North Africa region. Since its inception in 2022, the company has facilitated record-breaking auctions, reinforcing the region’s growing role in global climate finance.

Reflecting on the broader significance of COP29, El-Gizy highlighted the essential role of voluntary carbon markets in supporting climate finance, particularly in underserved communities. “Conventional finance often fails to reach rural areas in Africa and Saudi Arabia,” she said. “The voluntary carbon market fills this gap, channeling much-needed resources where they are most needed.”

This latest launch reinforces Saudi Arabia’s commitment to becoming a central player in the voluntary carbon market, leveraging its resources and infrastructure to address global emissions challenges in line with COP29 goals.