This article was first published on LinkedIn in October 2022.
We need to be in the right side of history… and the future belongs to the climate.
This quote from Riham ElGizy, Director of PIF’s Voluntary Carbon Exchange, perfectly sums up the sentiment at FII6 in Riyadh this week.
But how can the GCC countries ensure they too fall on the right side of history and cut emissions in time? We explored this and more in a report we released earlier this year, together with the World Government Summit.
I’ll explain that in more detail below, but first I want to revisit some of the most promising announcements made at FII this week. As the Kingdom’s energy minister himself, Prince Abdulaziz bin Salman said at the event, Saudi Arabia is “putting its money where its mouth is”.
Firstly, Aramco CEO Amin Nasser announced the launch of a $1.5 billion sustainability fund – one of the largest of its kind. He said it will “be directed towards breakthrough technologies and startups that will help us to address climate change”, both in Saudi and abroad.
I was also incredibly heartened to see the response to the first ever Voluntary Carbon Market auction, driven by PIF, which saw 15 regional companies bid live at FII to buy a total of 1.4 million tons of high-quality CORSIA-complaint carbon credits.
Critically, these credits will be used to provide finance for critical climate action projects right across the “global south”.
Next month’s COP27 is certainly top of my agenda, and Prince Abdulaziz bin Salman said he is “extremely excited” about the event because it’s being held in Egypt, but also because it will be all about “implementation”. The latter is key if we’re going to see real progress.
He hinted that the Kingdom will have “lots of things to showcase” at COP27, including on-the-ground developments, surprises and forward plans.
Drilling Into The Data: A Five-point Action Plan
Saudi Arabia and Bahrain have both committed to achieving net zero by 2060, and the UAE by 2050. Saudi Arabia has also set an ambitious target to reduce CO2 emissions by 278 MTA by 2030
The GCC’s net-zero pledges are particularly notable because of the region’s traditional reliance on oil production for economic growth. Done well, it’s now clear that a transition to net-zero will stimulate economic diversification – but, if the changes are done strategically, I believe these nations may also be able to leapfrog older industrial economies in some areas.
Here’s a tool we’ve built to help in the process: launched in 2021, the Oliver Wyman Climate Action Navigator lays out research-backed pathways to steer global policy- and decision-makers in achieving net zero goals. Regionally, we drilled into the data to suggest five paths to emission reductions in the Middle East.
In collaboration with the World Government Summit, the Oliver Wyman Forum conducted an analysis of the Middle East and determined that to meet the 2030 goal of limiting global warming to 1.5 degrees Celsius, the region needs to reduce its emissions by 42%, or approximately 1,325 MTCO2. We call the difference between this goal and the currently projected number the emissions gap.
Our analysis of the region also reveals that four sectors account for 85% of this emissions gap: energy, industrial, residential and public use and transportation. Because of this, we recommend five high-impact actions across these four sectors in the GCC.
Apply Carbon Capture Utilization and Storage technologies across the energy and industrial sectors: this could lead to a 24% reduction in emissions in the Middle East.
The region is already making commitments in this area: KSA has announced a fund for investing in carbon capture technologies and ADNOC’s Al Reyadah complex has invested in a carbon capture facility and the company plans to generate blue hydrogen (the process of making this uses carbon that would otherwise result in emissions).
While the technology is being tested at scale, investments here need to grow in orders of magnitude to achieve meaningful impact by 2050.
Reduce emissions in heating and cooling buildings: this could lead to a 22% reduction in emissions in the Middle East.
According to OW’s Climate Action Navigator, emissions from buildings due to heating, cooling, lighting and appliances account for 12% of global emissions. Fossil fuel-based equipment and inefficient conventional electric equipment still accounts for 80% of all global heating equipment sales. That will change, and it needs to change.
There has been progress regionally: district cooling systems are becoming commonplace in the UAE and Bahrain, and solar cooling systems are being installed on rooftops of existing buildings across the Emirates.
Scale up low-emissions power generation: this could lead to a 12% reduction in emissions in the Middle East.
In 2021, fossil fuels accounted for 94% of electricity generation in the Middle East, but the Sudair Solar Independent Power Producer Project in Saudi Arabia is a fantastic example of change in action. With a $910 million investment, the project will have the second lowest PV solar tariff in the world and will offset 2.9 million tons of carbon emissions each year.
The technology is ready: solar energy, offshore and onshore wind power, nuclear power, hydropower and bioenergy technologies are all suitable for wide-scale deployment.
Target emissions in logistics and transport: this could lead to a 12% reduction in emissions in the Middle East.
Transport emissions account for 15% of emissions globally – great strides have already been made in the fuel efficiency of fossil fuel powered vehicles and the introduction of electric vehicles.
Other pathways to action include the use of ammonia as a lower-carbon alternative to fuel ships and the incentivising of the purchase of EVs.
Increase the energy efficiency of industrial processes: this could lead to an 8% reduction in emissions in the Middle East
Energy is typically the highest operating cost in industrial production, and industrial processes accounted for about 30% of total global greenhouse gas emissions in 2020.
Stimulants for change here include upgrading existing equipment, improving production processes and regulation. In the region, ARAMCO, ADNOC and Qatar Energy are all investing to reduce emissions in this area.
When put together, these five actions could close the Middle East’s emissions gap by 80%: read the full report here.
I look forward to hearing about further plans, pivots and developments at COP27 in Sharm Al Sheikh in November.