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  • SAUDI ARABIA BREAKING NEWS

Saudi Companies Buy 2.2 Million Tonnes Of Carbon Credits In Kenya Auction




In a bid to reduce their greenhouse gas emissions and met their net-zero targets, 16 companies from Saudi Arabia have brought more than 2.2 million tonnes of carbon credits in a voluntary auction held in Nairobi, Kenya, on Wednesday. The auction, organized by the Regional Voluntary Carbon Market Company (RVCMC), was the largest of its kind in the world, according to the organizers.



What are carbon credits and why are they important?


Carbon credits are certificates that represent a reduction or removal of one tonne of carbon dioxide equivalent (CO2e) from the atmosphere. They are generated by projects that use sustainable technologies or practices, such as renewable energy, energy efficiency, forest conservation, or clean cooking. Carbon credits can be sold or traded in voluntary or compliance markets, where buyers can use them to offset their own emissions or meet their environmental goals.


Carbon credits are important because they provide an incentive for companies and individuals to invest in climate-friendly projects and reduce their carbon-friendly projects and reduce their carbon footprint. They also help to finance low-carbon development in countries that host the projects, especially in Africa, which has a huge potential for generating carbon credits but faces challenges such as lack of awareness, funding, and technical capacity.


How hid the auction work and who participated?


The auction was conducted by RVCMC, a company founded by the Saudi Public Investment Fund and Saudi Tawadul Group, which aims to launch a full-time carbon exchange in Riyadh in the first half of next year. RVCMC said it chose Kenya as the venue of the auction to highlight the need for investments in climate projects in Africa, which is the most valuable continent to the impacts of climate change.


The auction offered 2.2. million tonnes of carbon credits from 12 certified projects in Kenya, Rwanda, Egypt, and South Africa. The projects included wind farms, solar plants, biogas digesters, cookstove distribution, and forest protection. The auction was open to any buyer who registered with RVCMC and met its eligibility criteria.


The auction attracted 16 bidders from Saudi Arabia, including Aramco, Saudi Electricity Companies, Saudi Airlines, and other major com corporations. The bidders paid 23.50 Saudi riyals ($6.27) per tonne of carbon credits, which was higher than the average price of voluntary carbon credits in 2021, which was $3.90 according to Ecosystem Marketplace. The total value of the auction was about $13.8 million.



What are the benefits and challenges of the voluntary carbon market?


The voluntary carbon market is a market where buyers and sellers can trade carbon credits without any mandatory regulations or standards. It is different from the compliance market, where buyers are required by law or policy to reduce their emissions or purchase carbon credits. The voluntary market is driven by corporate social responsibility, consumer demand, and environmental awareness.


The benefits of the voluntary carbon market are that it offers more flexibility, innovation, and diversity than the compliance market. It also allows buyers to choose projects that align with their values and preference, such as supporting local communities, biodiversity conservation, or gender empowerment. The voluntary market also creates opportunities for project developers and host countries to access finance and technology for low-carbon development.


The challenges of the voluntary market are that it faces issues such as a lack of transparency, quality assurance, and supply-demand balance. Some critics have questioned the credibility and effectiveness of some projects that generate carbon credits, arguing that they may not deliver real and additional emission reductions or may cause negative social or environmental impacts. Some buyers have also expressed concerns about the reliability and traceability of the carbon credits they purchase. To address these challenges, there have been calls for more robust standards, verification systems, and reporting mechanisms for the voluntary market.



What is the future outlook for the voluntary carbon market?


The voluntary carbon market is expected to grow significantly in the coming years as more companies set net-zero targets and seek to use carbon credits to achieve them. According to a report by McKinsey & Company, the annual global market for voluntary carbon credits could reach $50 billion by 2030, up from $2 billion in 2021.


However, this growth will depend on several factors, such as the availability and quality of carbon credits, the demand and willingness to pay by buyers, the development and harmonization of standards and regulations, and the integration with other climate policies and initiatives. The voluntary market will also need to ensure that it complements rather and that it supports rather than undermines the efforts of host countries to reduce their own emissions.


The auction in Kenya was a milestone for the voluntary carbon market as it showcased its potential to mobilise finance and technology for climate action in Africa and beyond. It also demonstrated the commitment and leadership of Saudi Arabia, which is the world's largest oil exporter, to diversify its economy and transition to a low-carbon future. The auction was a win-win situation for both buyers and sellers, as well as for the planet and its people.

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