HomeCarbon CreditsSaudi Arabia's PIF Holds Largest Carbon Credits Auction to Date

Saudi Arabia’s PIF Holds Largest Carbon Credits Auction to Date

Saudi Arabia’s Public Investment Fund (PIF) auctioned off 1.4 million tons of CORSIA-compliant carbon credits, the largest-ever in the world, during the 6th edition of the Future Investment Initiative (FII) conference in Riyadh.

A total of 15 Saudi and regional firms took part in what has been considered as the biggest ever carbon credit auction as per a press statement.

Carbon credits allow entities to emit a certain amount of CO2 or other potent gases — with one credit equal one ton of emissions. They’re designed as a mechanism to reduce carbon emissions via a market where firms and individuals can trade their emissions permits.

Saudi Aramco Buys the Most Carbon Credits

The FII forum held the auction of 1.4 million tonnes of carbon credits registered under Verra and comply with the CORSIA.

CORSIA means “Carbon Offsetting and Reduction Scheme for International Aviation”. It is the first global market-based solution that entities can use as a major step to reach their climate goals. It first ran in 2021 and will be up until 2035.

The sale of the CORSIA-compliant carbon credits support companies from various industries in Saudi as they strive to reach net zero emissions.

Of all the participants in the sale, oil giant Saudi Aramco, mining firm Ma’aden, and Olayan Financing Company bought the largest number of carbon credits.

Other winning bidders included ENOWA (NEOM subsidiary), ACWA Power Co., Gulf International Bank, SABIC, Saudi National Bank, Saudi Motorsport Co., and Yanbu Cement Co.

Alongside the carbon credits auction is Aramco’s announcement of launching a $1.5 billion fund to support an inclusive global energy transition. The fund is under the management of Aramco Ventures.

Saudi officials said that the shift will take decades to happen. It will also need continued investment in conventional resources.

For Aramco’s CEO Amin Nasser:

“The current transition plan is flawed honestly. It is not really delivering. What we need is an optimal, realistic transition plan… We need to realise that today alternatives are not ready to shoulder a heavy load of the growing energy demand and therefore we need to work in parallel until alternatives are ready.”

The Aramco sustainability fund targets global investments in support of energy transition. It will initially focus on areas such as carbon capture and storage, GHG emissions, hydrogen, ammonia, and synthetic fuels.

Saudi Arabia and other Gulf Arab states have been boosting their green credentials.

Saudi Finance Minister Mohammed al-Jadaan told the FII gathering that the outlook for Gulf oil producers was “very good” and will remain so for the next 6 years.

He also added that they’re investing as much in conventional energy and are also doing the same in climate change initiatives in the region.

PIF’s New Voluntary Carbon Market

The carbon credit sale was part of the Voluntary Carbon Market (VCM) Initiative by the PIF and Saudi Tadawul Group in September 2021, an attempt to back Saudi Arabia’s green journey.

It also follows the Wealth Fund’s past announcements which include the $3 billion inaugural green bond. These are all part of PIF’s commitment to develop 70% of the Kingdom’s green energy capacity in line with the Vision 2030.

The new VCM company, headquartered in Riyadh, will facilitate the efforts of the auction. It will also offer guidance and resources to help firms and industry in the region as they move towards net zero.

  • PIF will hold 80% stake in the new company, while Saudi Tadawul Group will hold the remaining 20%. 

Yazeed A. Al-Humied, head of MENA investments at PIF, noted that the new regional VCM firm is a major milestone for the MENA region. He further said:

“We are passionate about the potential for voluntary carbon markets to deliver additional carbon reduction benefits throughout the region… thereby ensuring the MENA region is at the forefront of climate action and that Saudi Arabia is a leading force in solving the climate challenge.

The CEO of Saudi Tadawul Group, Khalid A. Al-Hussan, said that they are working towards encouraging the adoption of ESG disclosures in the Saudi capital market.

While for the VCM Initiative director, the auction represents the first step for the region to have a leading presence in the global VCM ecosystem.

Indeed, with over one million of CORSIA carbon credits to trade in Saudi, it will be the largest auction to date.

The purchase agreements will ensure that the offsetting that carbon credits offer go beyond meaningful emission reductions in companies’ value chains.

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