EDITORIAL: Will carbon crediting work for major oil producers to bring about lasting change to their economies?
Quantum Commodity Intelligence – The world's second largest oil producer, Saudi Arabia, unveiled a domestic carbon crediting mechanism this week aimed at helping the country meet its climate change goals under the Paris Agreement.
The launch of the Greenhouse Gas Crediting & Offsetting Mechanism (GCOM) was not unexpected, having been first mooted by Saudi Minister of Energy Abdulaziz bin Salman bin Abdulaziz at COP27 in Egypt late last year, and is not even Saudi Arabia's first carbon market venture this year.
The Regional Voluntary Carbon Market Company – set up by the country's sovereign wealth fund, Public Investment Fund, and Saudi Tadawul Group Holding Company last October – auctioned 2.2 million carbon credits in June, the largest such auction in the voluntary carbon market.
Many of the details of the new Saudi offset scheme, such as what methodologies will be used for projects, are still to come to light, but officials were vocal at its launch to say GCOM is a tool to put the country on a pathway to net zero by 2060.
This announcement came less than a week after Kingdom had re-affirmed its plans for an additional cut in crude oil production until the end of the year of 1 million barrels per day – cuts that have nothing to do with greenhouse gas emissions and climate change.
It is perhaps unfair to single out Saudi Arabia in this regard, and scrutinise a new offset scheme that has only just been launched without any projects to assess, particularly when one of its neighbours, the UAE, is hosting this year's UN climate talks (COP28) in just over a month's time.
Sultan Al Jaber, UAE Minister of Industry and Advanced Technology and head of the national oil company will also be the president of COP28, tasked with the job of holding together the negotiating process over two weeks in late November and early December.
In an interview, with The Guardian newspaper last weekend Al Jaber said he will promote "inclusivity" at the talks and that it is important for the oil and gas industry to be 'at the table' for the climate negotiations. Sentiments that can't really be argued with, although what is brought to that table is key and at this stage remains to be seen.
The UAE is also delving into carbon markets – the country's largest bank, First Abu Dhabi Bank, has set up a carbon trading desk and has already carried out trades, while the ACX carbon exchange is co-hosted in UAE and Singapore.
Add to that the recent announcement by oil company Adnoc and US oil company Occidental of a feasibility study to look into the potential for a 1 gigaton direct air capture and storage plant in the country, and the UAE can be viewed to be 'pushing' its climate credentials on the world stage.
Last week also saw Adnoc reach a final investment decision and award billion dollar contracts for the offshore Hail and Ghasha gas concession that will produce over 1.5 billion standard cubic feet a day by 2030. Production the UAE says will be net-zero carbon dioxide emissions. However, it's also another sign that countries will not be weaning their economies off hydrocarbon production anytime soon.
Only time will tell whether the carbon credit initiatives mentioned above contribute to lasting change or whether they will just become more 'announcements' made ahead of UN climate talks in the region hosting the event.
As this issue reports, several ex-oil and gas execs in the US have turned to carbon finance in an attempt to encourage companies with marginal wells – low producing and nearing their end – to keep the oil or gas in the ground by rewarding them with carbon credits, among initiatives dealing with methane emissions from the sector.
Could something like this be expanded to the Middle East and elsewhere? Rather initiatives trying to achieve something concrete than climate change platitudes ahead of major talks, which become distant memories once the officials head off home.
Photo credit: Well Done Foundation