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In what has been hailed as the largest carbon credit sale worldwide, Saudi firms procure 2.2 million tons of carbon credits during an auction held in the Kenyan capital.
As companies increasingly strive to achieve their net-zero emissions goals, the demand for carbon offsets, which are generated through initiatives like tree planting and the adoption of cleaner cooking fuel, is anticipated to soar.
Saudi Arabia’s Aramco, Saudi Electricity Company, and 14 other firms participated in the auction, each paying 23.50 Saudi riyals ($6.27) per metric tonne of carbon credits. The auction was organized by the Regional Voluntary Carbon Market Company (RVCMC), which plans to launch a full-time exchange in Riyadh within the next six months. The Saudi Public Investment Fund and the Saudi Tawadul Group established the RVCMC.
The auctioned credits are certified and originate from projects that employ sustainable technologies or remove carbon from the atmosphere, as stated by RVCMC. In addition to these firms, Saudi Airlines also took part in the auction, as the credits’ certification covers offsets for airline emissions, according to RVCMC CEO Riham ElGizy.
RVCMC chose Kenya as the auction location to emphasize the importance of investing in climate projects. Despite being a minor contributor, accounting for less than 1% of global emissions annually, Kenya has suffered severe consequences from climate change in recent years, with devastating droughts causing widespread damage to crops, wildlife, and livestock.
“We are here to walk the talk,” ElGizy affirmed.
Voluntary carbon markets are increasingly viewed as vital by companies striving to achieve their environmental targets, as they allow investments in projects that sequester climate-warming emissions that cannot be eliminated from their own operations.
With more companies aiming for net-zero emissions by 2050, the demand for offsets is expected to rise. However, concerns regarding the quality of certain projects have deterred potential buyers and prompted calls from climate activists and industry leaders for stricter regulations.
Ecosystem Marketplace estimates that the global market for voluntary carbon credits, valued at approximately $2 billion in 2021, could reach $50 billion by 2030, according to consultants at McKinsey.
Critics of the carbon offset market have voiced concerns about its transparency, limited credit supply, and the quality of projects. In response, ElGizy dismissed these criticisms, stating that RVCMC collaborates with two separate and independent expert teams responsible for vetting projects before they are included in the auction. She emphasized that any projects raising red flags are immediately excluded.
Approximately 70% of the credits auctioned on Wednesday originated from projects in Africa, with contributions including the supply of improved clean cookstoves to communities in Kenya and Rwanda, as well as renewable energy projects in Egypt and South Africa, as reported by RVCMC.
In conclusion, the new green investment where Saudi firms procure tons of carbon credits in Kenya underscores the growing importance of voluntary carbon markets in helping companies achieve their environmental objectives. Despite criticisms, RVCMC remains committed to ensuring the credibility of the projects included in its auctions, with the aim of addressing concerns and driving the transition to a low-carbon future.