Carbon Pricing in Saudi Arabia: A Practical, High-integrity Market Blueprint

A domestic carbon market can still be practical if it starts with what already exists and adds structure. One workable pathway is to treat the voluntary crediting scheme as the supply engine, then build transparent demand through predictable procurement. The Voluntary Carbon Market Company, established by the PIF, already facilitates auctions of high-integrity carbon credits that are largely sourced from global projects, allowing domestic companies to offset emissions, according to the Green Economy Tracker. A domestic market could expand this model by adding Saudi-specific crediting rules and a central registry that clearly labels who can claim what, and when. The goal is to keep voluntary activity credible while creating a foundation that could later support more binding approaches, without presenting offsets as a substitute for emissions cuts.

How a High-Integrity Domestic Market Could Be Designed

Integrity depends on measurement, reporting, and verification capacity. Grand View Research projects that the Saudi Arabia carbon credit validation, verification, and certification market generated USD 3.8 million in 2024 and is expected to reach USD 14.4 million by 2030, with a 24.9% CAGR from 2025 to 2030. This growth signal supports a market design that requires independent validation and verification for domestic credits, plus clear certification standards before credits can be auctioned or retired. Clear MRV requirements also help address the Green Economy Tracker’s double-counting concern by ensuring that credits have unique identifiers, transparent ownership, and explicit rules for whether the same credit can be used by companies and also counted toward national targets.

A second design choice is where pricing pressure will land first. Saudi Arabia’s carbon capture and storage market segmentation indicates that power generation was the largest application segment, with a 74.22% revenue share in 2024, according to Grand View Research. A domestic carbon market could reflect this reality by prioritizing large, measurable sources with centralized data and oversight, and by linking price signals to practical abatement options. Coverage could be phased, with early participation focused on segments where MRV is straightforward and where operational choices can be tracked. That approach keeps compliance manageable and helps regulators learn by doing, while the crediting system matures.

Finally, revenue use can determine whether pricing supports growth or slows it. A ScienceDirect study on Saudi Arabia finds that implementing early carbon pricing without long-term renewable energy financing achieves emissions reduction but dampens economic growth. The same study finds that channeling carbon price revenues into renewable financing brings even moderate economic growth while deepening decarbonization. That insight can be translated into a domestic market rule: earmark auction proceeds and other pricing revenues for long-term renewable financing rather than treating revenues as general income. In practice, this would align carbon-market incentives with investment pathways and provide a clearer political and economic rationale for scaling the system over time, while keeping integrity safeguards central to the market’s credibility.