Carbon Market of the Persian Gulf Countries: Current Status and Development Prospects

The countries of the Persian Gulf, including Oman, the United Arab Emirates (UAE), Saudi Arabia, Qatar, Bahrain, Kuwait, Iraq, and Iran, are just at the beginning of developing the infrastructure necessary to participate in the global carbon market. Notably, Qatar ranks first globally in per capita greenhouse gas emissions, with Bahrain ranked third, Kuwait fourth, the UAE seventh, Oman eighth, and Saudi Arabia ninth. Despite these high emissions, the involvement of these countries in the carbon market remains minimal, and several factors contribute to this.

First, there is no national regulatory framework in these countries, such as carbon taxes or emissions trading systems, that could, under certain conditions, create demand for carbon credits. Currently, only one Persian Gulf country, Saudi Arabia, has established a national carbon market. In 2024, Riyadh launched the Greenhouse Gas Crediting and Offsetting Mechanism (GCOM). However, as of the writing of this article, no projects have been registered in the official registry.

Second, the countries in the region lack incentives to expand their participation in the carbon market under Article 6.2 of the Paris Agreement. Kuwait and the UAE act as buyers of carbon credits under Article 6.2, known as Internationally Transferred Mitigation Outcomes (ITMOs). Kuwait has signed a bilateral agreement with Rwanda, while the UAE has an agreement with Paraguay. However, no projects have been declared as of the time of writing. Additionally, the UAE and Saudi Arabia have signed agreements with Japan under its Joint Crediting Mechanism (JCM), but so far, only one project has been announced in Saudi Arabia.

Third, on the voluntary carbon market, there is low demand for carbon credits from the corporate sector of these countries and other market participants due to the tense geopolitical situation. Only 23 climate projects have been listed in independent registries such as Verra, Gold Standard, American Carbon Registry, and Global Carbon Council across the countries under consideration. Of all the Persian Gulf nations, Iran and Kuwait have not implemented any climate projects. Only three projects in the UAE, Oman, and Iraq have issued carbon credits, and all credits from the Omani project were fully purchased to offset the carbon footprint of the 2022 FIFA World Cup.

Thus, the countries of the Persian Gulf are just beginning to develop their carbon markets. To enhance their participation, there is a need to stimulate demand for carbon credits in the region through the introduction of national carbon regulations, the conclusion of bilateral agreements with countries from other regions under Article 6.2 of the Paris Agreement, and the provision of various incentives and subsidies for the corporate sector.