Beyond Oil: The Gulf’s Race to Define Carbon Value

The Middle East’s position as a global energy powerhouse can no longer be defined solely by the scale of its hydrocarbon reserves. In today’s markets, where carbon performance increasingly shapes trade flows and price structures, Gulf states are confronting a new reality. Long-term competitiveness will depend not only on the production of energy, but on how cleanly and credibly that energy is delivered.

Landmark policy shifts in key import markets are already changing the rules. The European Union’s Carbon Border Adjustment Mechanism (CBAM) (MEES, 27 October 2023), along with Asia’s rising demand for cargo-level certification, is turning carbon value into a defining factor for market access. The time to act is now.

In 2025, the EU expanded CBAM coverage to include hydrogen, and discussions are already underway regarding its future application to liquefied natural gas and possibly crude oil. At the same time, Japan and South Korea have begun requesting emissions disclosures and origin verification for LNG shipments. The Gulf, once protected by low-cost production, now faces a far more complex and constrained competitive landscape.

Exporters in the region have started to adapt. The United Arab Emirates’ Adnoc shipped its first cargo of certified blue ammonia to Japan in 2024 (MEES, 17 May 2024). Saudi Aramco’s low-carbon crude pilot and QatarEnergy’s integration of carbon capture into its under-development LNG expansion projects mark early efforts to embed decarbonization into the region’s export offerings. However, these moves risk being overtaken by external standards unless Gulf countries play a more active role in shaping the rules.

Carbon certification has become a question of strategic sovereignty. In past decades, influence in global energy markets was defined by spare production capacity and pricing power. Today, leadership depends on defining the metrics and methodologies that underpin carbon intensity assessments. Gulf states have responded by launching parallel initiatives to build regulatory and institutional frameworks for carbon markets. Saudi Arabia’s Regional Voluntary Carbon Market Company, a joint venture with the Public Investment Fund, held its third auction in April 2025 and is working toward a compliance-grade trading platform. The UAE’s Abu Dhabi Global Market continues to establish itself as a regional hub for sustainable finance and carbon-related disclosures, particularly in hydrogen and ammonia exports.

Despite these advances, fragmentation of global carbon standards poses significant risk. There is still no universally accepted definition of “low-carbon LNG,” nor any clear consensus on what qualifies as “clean hydrogen.” Without a regional framework that sets and enforces its own standards, Gulf exporters may be viewed by default as high-carbon producers. This perception could weaken their negotiating leverage and pricing power, particularly as major importers such as Germany, Japan, and Singapore require robust and transparent certification mechanisms for clean hydrogen.

Alongside this global regulatory contest, Gulf states must also reform their domestic energy systems. Power grids across the region were originally built for baseload oil and gas generation and are not yet suited for high levels of intermittent renewable energy. The integration of solar and wind remains limited due to technical constraints and inflexible pricing models. Yet progress is underway. Oman recently launched operations at its first utility-scale battery storage pilot. The UAE is investing in a fleet of fast-ramping gas turbines to support renewable integration (MEES, 1 August). Cross-border electricity trade, once confined to diplomatic statements, is to be operationalised through the GCC Interconnection Authority’s planned links with Iraq (MEES, 1 August) and potential connections to Jordan and Egypt.

Carbon capture, utilisation, and storage (CCUS) underpins the region’s long-term decarbonisation agenda. As of mid-2025, the Gulf hosts approximately 3.7 million tons per year of CO₂ capture capacity, close to 10 % of the global total. Saudi Arabia’s project in the Jubail industrial zone is expected to scale to 44 million tons annually by 2035, a leap from demonstration to permanent infrastructure. Similar ambitions are evident in Adnoc’s ammonia and hydrogen production strategy and in Qatar’s CCS integration within its LNG portfolio. Still, questions persist. The economic viability of blue hydrogen remains uncertain, especially as scrutiny intensifies over upstream methane emissions. Although most Gulf producers signed the Global Methane Pledge in 2021, the International Energy Agency noted in its most recent methane report that few have released credible plans for emissions reductions, and even fewer provide third-party verified data.

Meanwhile, the hydrogen sector continues to evolve. Blue hydrogen dominates the pipeline of announced projects, but investment in green hydrogen is growing as a hedge against future regulatory risks. Neom’s $8.4 billion green hydrogen facility, due to enter production by end 2026 and start exports in 2027, is the most visible symbol of this shift (MEES, 1 August). Oman’s smaller-scale Hydrom initiative (MEES, 7 March), designed as a state-led offtake and coordination platform, may prove to be a more regionally replicable model. These projects are not only about exporting clean fuels but also about catalyzing domestic industrial growth in sectors such as green steel, clean fertilizers, and electrolyzer manufacturing.

Beyond infrastructure, the region must now focus on the institutional foundations of energy transition. Governance reform will be necessary to enable dynamic electricity pricing, real-time grid balancing, carbon accounting, and the creation of certification schemes that meet compliance-grade standards. Currently, policy architecture across the Gulf remains fragmented and reactive. Persistent subsidies, rigid procurement practices, and a lack of emissions transparency hamper the deployment of advanced technologies and deter long-term investment from global partners seeking trusted carbon abatement pathways.

Another critical challenge is public engagement. Technologies such as CCUS and green hydrogen require more than technical capacity and capital investment. They also demand social acceptance. International experience shows that public trust hinges on early community engagement, transparent safety and performance data, and credible third-party oversight. These elements have so far received limited attention in Gulf decarbonization planning but will be essential to scaling the infrastructure now being developed.

The Gulf’s low-carbon future will not emerge by default. It must be designed, negotiated, and implemented with strategic intent. In the new energy landscape, sovereignty will be determined not by the volume of energy produced but by who defines the standards for what qualifies as clean. If Gulf states take the lead in carbon certification, modernize domestic systems, and build institutions that inspire global trust through clear standards, independent verification, and full transparency, they will not simply compete in future markets. They will help shape them.

This is not just a regulatory obligation. It is a chance to reposition the Gulf as a global leader in the rules-based energy economy. The contest to define carbon value has already begun. Those who act decisively and build credibility will set the terms of trade for decades to come.

*Christopher Gooding is an energy transition analyst at Cornucopia Capital, where he focuses on global decarbonization strategy, investment opportunities in clean infrastructure, emerging climate technologies.