Saudi Araia's Public Investment Fund (PIF) has announced that five leading Saudi Arabian businesses have each signed separate non-binding memoranda of understanding (MoU) to become the first potential partners of the MENA regional Voluntary Carbon Market (VCM).
The partners are Aramco, Saudia, ACWA Power, Ma’aden, and Enowa, a subsidiary of NEOM.
The news follows the announcement of the VCM initiative by PIF and Tadawul in September 2021, where His Royal Highness Prince Mohammed bin Salman bin Abdulaziz Al Saud, Crown Prince, Deputy Prime Minister, Chairman of the Council of Economic and Development Affairs and Chairman of Board of Directors of PIF, highlighted Saudi Arabia’s leading role in contributing to the reduction of the impact of climate change, said a Saudi Press Agency report.
HRH the Crown Prince has also announced during the Saudi Green Initiative Forum Saudi Arabia’s aim to reach Net Zero by 2060 through the Carbon Circular Economy approach, in line with its development plans and enabling its economic diversification.
What will Voluntary Carbon Market do?
As part of the agreement, the partners will support PIF in the development of the VCM through the supply, purchase and trading of carbon credits as the market is expected to be established in 2023. Additional partners will be announced in the coming months ahead of an initial round of auctions expected in the final quarter of this year.
The VCM will connect the supply of carbon credits with demand from investors, corporates and institutions wanting to reduce their carbon footprint by offsetting carbon emissions they generate. While corporates’ internal decarburisation targets should remain the priority, the VCM can effectively complement their efforts until and when they reach net zero. The VCM will seek out carbon credits possessing the highest integrity and quality.
Saudi Arabia’s companies and institutions are uniquely positioned to be carbon credit suppliers of choice as well as buyers of high quality, certified carbon credits. By connecting buyers and suppliers, the establishment of a VCM will enable investors and companies across the region to meet their ambitions to reduce and potentially neutralize their carbon footprint, said a statement.
Support demonstrates potential
Yasir Al-Rumayyan, Governor of PIF, said: “We would like to thank our partners for their commitment to the Voluntary Carbon Market, the first of its kind in the MENA region. The support of Saudi businesses, which are world leaders in their fields, is a strong demonstration of the exciting potential of this market.
“PIF contributes to the Kingdom of Saudi Arabia’s efforts through driving the investment and innovation required to address the impact of climate change and achieve net zero carbon emissions by 2060.”
President & CEO of Aramco Amin H Nasser said: “We are excited to be part of this groundbreaking initiative by PIF to establish a regional carbon market, which aligns with our net-zero ambition. Carbon credits complement our wider emissions reduction strategy and represent an important tool in the energy transition, as we continue to play our part in meeting the world's need for secure, affordable and ever more sustainable energy."
Director General of the Saudi Arabian Airlines Corporation Eng. Ibrahim Al-Omar, said: “Saudi Arabia’s national flag carrier, Saudi Arabian Airlines (Saudia) has a pivotal role in carbon off-setting and contributing to environmental sustainability.
"The participation in the voluntary carbon market for the Middle East North Africa region is a landmark occasion in the national airline’s history. With great anticipation, we look forward to collaborating on the Voluntary Carbon Market, an innovative future-forward new initiative created by PIF.”
ACWA Power Mohammed Abunayyan said: “To meet global net-zero targets, considerable action must be taken in order to reduce carbon emissions. The launch of the MENA Voluntary Carbon Market will play a critical role in achieving this target and solving climate change challenges while allowing private investors, businesses, and NGOs to offset their emissions and ultimately position Saudi Arabia as a global hub for carbon trading. As a company that is driving the energy transition through the expansion of renewable energy, desalination, and green hydrogen, we have an important role to play. As such, we are privileged to be one of the first partners to be driving this visionary roadmap forward and help the Kingdom in realizing its ambitious efforts to achieve net-zero carbon emissions by 2060.”
Helping to solve climate change challenges
CEO of Ma’aden Robert Wilt said: “The plan to establish the MENA region carbon market is an important step toward enabling Saudi Arabia and the region to contribute to solving global climate change challenges. As the Kingdom of Saudi Arabia’s national mining champion, Ma’Aden will actively cooperate with PIF and support the Voluntary Carbon Market by supplying carbon credits in support of Saudi Arabia’s broader climate ambitions and purchasing carbon credits to deliver on our goal to achieve net zero emissions from Ma’aden operations by 2050.”
Peter Terium, CEO of Enowa, said, “NEOM was established with the promise to follow principles of environmental sustainability that promote regenerative and sustainable practices. Using today's technologies to reduce emissions has a high price tag, especially where certain sources of emissions cannot be fully eliminated in the near term, so a medium-term solution is needed. At NEOM, we are working to accelerate the progress of carbon reduction and removal technologies and support the Kingdom’s transition to a more carbon-conscious market with limited to no impact on the environment.
"NEOM's recently announced its subsidiary, Energy & Water company Enowa, which is taking the lead here. Today's announcement of the first Voluntary Carbon Market partnership in the MENA region is a natural fit with our business and sustainability objectives. We look forward to seeing how this pioneering initiative will inspire other regional leaders to support our efforts.”
Carbon markets have grown rapidly in recent years across the world, with a CAGR of 30% to reach a value of more than $1 billion of traded value as of November 2021, and could grow another 15x by 2030 according to the Taskforce on Scaling Voluntary Carbon Markets.