Update on GCC and MENA Voluntary Carbon Markets under Article 6 of Paris Agreement 1

Recent developments in voluntary carbon markets under Article 6 in the GCC and MENA countries have
shown significant progress and initiatives aimed at enhancing regional carbon trading mechanisms and
supporting climate action goals. This article aims to provide an executive summary.

KSA

1. Regional Voluntary Carbon Market Company (RVCMC): Saudi Arabia established the RVCMC
to scale the voluntary carbon market and encourage sustainable business practices. This company
has been active in organizing carbon credit auctions, including
1. A significant auction in Nairobi in June 2023 where over 2 million tons of carbon credits
were sold to 15 buyers (Middle East Institute) (Carbon Herald), primarily from Saudi Arabia
and other international entities. Major buyers included Aramco, Saudi Electricity Company,
and ENOWA (a subsidiary of NEOM). The clearing price was $6.27 per metric ton of carbon
credits
2. In October 2022, RVCMC oversaw the sale of more than 1.4 million tons of carbon credits.
Key buyers included Olayan Financing Company, Aramco, and the Saudi Arabian Mining
Company (Ma'aden) (Middle East Institute).
2. Public Investment Fund (PIF): Saudi Arabia’s PIF, in collaboration with Tadawul, is developing a
voluntary carbon exchange in Riyadh. This initiative aims to trade high-quality carbon credits, and
it has already auctioned over 1 million carbon offsets compliant with international standards (Bain).
3. Saudi Top for Trading Co. signed MOU with Regional Voluntary Carbon Market (RVCMC), a
subsidiary of the Public Investment Fund (PIF), for trading high-integrity carbon credits. The MoU
is valid for 36 months from the signing date or when the parties execute a binding agreement
related to the MOU (Argaam).
4. In October 2023, Saudi Arabia launched the Greenhouse Crediting and Offsetting Mechanism
(GCOM) during the U.N.'s MENA Climate Week in Riyadh. The mechanism is promoted as a tool
to enable the deployment of emission reduction and removal activities at scale and to further
support the kingdom’s ambitious climate targets..

UAE

1. Abu Dhabi Global Market (ADGM): The UAE has announced the formation of a voluntary carbon
credit trading exchange and clearinghouse within ADGM. This initiative aims to facilitate the trading
of verified carbon credits, contributing to the region's carbon offset capabilities (Bain).
2. Mubadala Investment Company: Mubadala acquired a strategic stake in the AirCarbon Exchange
(ACX), further solidifying the UAE's commitment to developing a robust voluntary carbon market
(Bain).
3. In April 2023, the UAE Carbon Alliance, which includes a coalition of companies formed to develop
and grow a carbon market in the Emirates, pledged to purchase $450 million worth of African
carbon credits by 2030. The agreement is seen as a positive move to unlock Africa’s carbon credit
generation potential as well as support climate action on the continent, while helping the UAE meet
its climate pledges.

Oman

1. Net-Zero Pledges: Oman, like its GCC counterparts, has pledged to achieve net-zero emissions
by 2050. This commitment includes leveraging voluntary carbon markets to meet its climate goals,
although specific market mechanisms are still being developed (Bain).
2. Oman is likely to engage in bilateral agreements under Article 6.2 to trade carbon credits and
support local emission reduction projects.

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Key Regional Actions:

• Carbon Auctions and Trading: The region is focusing on establishing and expanding carbon
trading platforms to facilitate the sale and purchase of carbon credits. This includes organizing
auctions that attract regional and international buyers (Middle East Institute) (KAPSARC).
• International Cooperation: GCC countries are engaging in international carbon market
mechanisms, aligning their efforts with Article 6 to ensure the credibility and integrity of carbon
credits. This involves setting up corresponding adjustment mechanisms to prevent double-counting
of emissions reductions (Middle East Institute) (KAPSARC).

Morocco

1. The country is exploring participation in international carbon markets under Article 6 of the Paris
Agreement, which would allow it to trade carbon credits with other nations and private entities
(Carbon Direct)
2. Moroccan authorities are developing policies to support voluntary carbon market activities,
emphasizing the need for high-integrity projects that provide measurable and verifiable emission
reductions.
3. Morocco signed MOU with Norway to launch bilateral cooperation under Article 6 at COP28. The
MoU signing follows Norway’s successful engagements with Senegal and Indonesia under the
Designing Article 6 Policy Approaches (DAPA) program, illustrating the program’s progress and
commitment to achieving milestones (GGGI).

Egypt

1. On June 24th 2024, Egypt has secured a $700 million loan from the World Bank The facility will
help advance key reforms, including: strengthening the governance framework for state-owned
enterprises through the creation of a legal basis for the State Ownership Policy; empowerment of
the Egyptian Competition Authority in combatting non-competitive mergers and acquisitions;
enhancing domestic revenue mobilization by ensuring the accurate assessment of payroll taxes;
reducing electricity distribution system losses; improving capacity for climate adaptation and the
financial sustainability of the water and sanitation sectors; scaling up renewable energy; and
establishment of a voluntary carbon credit market regulatory framework.
2. The Egyptian government is enhancing its regulatory framework to support voluntary carbon
markets. This includes ensuring transparency and integrity in the creation and trading of carbon
credits.

Overall, the GCC and MENA countries are actively developing voluntary carbon markets as part of their
broader climate strategies, with significant investments in infrastructure, regulatory frameworks, and
international cooperation to ensure the success and integrity of these markets.

COP 28 Summary of Developments on Voluntary Carbon Markets under Article 6 of Paris Agreement

At COP28, significant developments were made regarding Article 6 of the Paris Agreement, focusing on
the framework for voluntary carbon markets. Here are the key achievements and actions:

Article 6.2: Bilateral Trading and Voluntary Standards

1. Disagreement on Rules: The main contention revolved around the stringency of rules for bilateral
trading. The US advocated for more flexible, voluntary standards, while the EU and other countries
pushed for stricter regulations (Carbon Brief).

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 2. Transparency and Reporting: Negotiations highlighted the need for clarity in reporting and
authorization processes. The lack of consensus on these issues led to a postponement of final
decisions to COP29 (Smith School of Enterprise) (Baker McKenzie).
3. ITMO Transfers: Despite the stalemate, the first transfer of Internationally Transferred Mitigation
Outcomes (ITMOs) was successfully completed between Switzerland and Thailand, marking a
significant step in the operationalization of Article 6.2 (KPMG).

Article 6.4: Centralized Carbon Market Mechanism

1. Framework Agreement: The supervisory body for Article 6.4 agreed on a framework for project
methodologies and carbon removals, which is set to be adopted at COP28. This framework
includes guidelines for generating carbon credits and ensuring alignment with host country climate
pledges (S&P Global).
2. Challenges and Delays: Key issues such as the monitoring and verification of carbon removals,
and the establishment of a grievance mechanism, remain unresolved. This has delayed the
operationalization of the Sustainable Development Mechanism under Article 6.4 until at least 2025
(Smith School of Enterprise) (S&P Global).

Voluntary Carbon Markets (VCMs)

1. Collaborations and Standards: Major carbon crediting standards announced collaborations to

improve transparency, accounting, and the durability of carbon sinks. This effort aligns with the
ICVCM's Core Carbon Principles (CCPs) (KPMG).
2. Endorsements and Initiatives: Prominent leaders endorsed the role of VCMs in driving climate
action. New initiatives, such as the Coal to Clean Credit Initiative, aim to phase out coal-fired power
plants using carbon finance (KPMG).

Key Outcomes and Future Steps

1. Deferred Decisions: Several contentious issues, including the protection of Indigenous rights and
the sequencing of mitigation outcomes, were deferred to future sessions. These will be
reconsidered at SBSTA 60 in June 2024 and COP29 in November 2024 (Smith School of
Enterprise) (KPMG).
2. Capacity Building under Article 6.8: Efforts continued to establish a platform for non-market
approaches, focusing on capacity building and the development of sustainable practices (Smith
School of Enterprise).

These achievements and ongoing challenges highlight the complex dynamics of international carbon
markets and the critical role of Article 6 in facilitating global climate action.

Summary of global bilateral agreements, activities, and project under Voluntary Carbon Markets
(VCMs) related to Article 6 of the Paris Agreement

Switzerland and Thailand concluded the first Article 6.2 deal in landmark move for voluntary carbon
markets. It was the first ever issuance of 1,916 ITMOs. The Swiss-based KliK Foundation said on 8th Jan
2024 that it purchased the first 1,916 ITMOs from the Thai company Energy Absolute Public Co. Ltd. for
the Bangkok E-Bus Program. The ITMOs were credited to the KliK Foundation's account in the Swiss
Emissions Trading Registry (S&P Global).

The United Nations Environment Program Copenhagen Climate Centre (UNEP-CCC) has set up a global
database for Article 6 activities. The aim is to provide insights on the development of Article 6 projects, their
contribution to countries’ NDC implementation and SDG achievement at the national and global level.

As of 3rd of June 2024, there are 82 bilateral agreements between 10 different buyers and 46 host countries.
A total of 140 pilot projects have been recorded.

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Out of 140 pilot projects, 5 have Authorization Statements. The involved countries are Ghana (3x),
Switzerland (4x), Thailand and Vanuatu. The total expected amount of Mitigation Outcomes from these
projects are:

• Promotion of climate smart agriculture practices for sustainable rice cultivation in Ghana (Ghana-
Switzerland | Authorized Reductions: 1,126 ktCO2e)
• Bangkok E-Bus Program (Thailand-Switzerland | 500)
• Electrification of Vanuatu’s Inhabited Islands through Solar Power ITMO Programme (Vanuatu-
Switzerland | 97)
• Integrated waste recycling and composting for methane reduction in Ghana (Ghana-Switzerland |
1,589)
• Transformative Cookstove Activity in Rural Ghana (Ghana-Switzerland | 3,231)

The UNEP-CCC global database for activities of Article 6 of the Paris Agreement is publicly available at
this web link: https://unepccc.org/article-6-pipeline/

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