DUBAI — The GCC countries are at the forefront of pioneering sustainability initiatives in response to global environmental challenges. Led by ambitious goals and innovative strategies, the GCC is poised to address its carbon footprint and embrace cleaner, more sustainable practices. At the same time, the GCC countries have notable carbon emissions, primarily from our oil and gas industries.
According to Kishor Rajhansa, the Chief Operating Officer of the Global Carbon Council (GCC), upstream activities such as extraction and refining contribute significantly. Additionally, sectors like transportation and construction play a role due to our reliance on individual vehicles and the energy-intensive nature of our building sector.
Carbon Emissions Landscape Rajhansa highlights the unique challenges GCC countries face regarding carbon emissions. Despite having relatively small populations, these nations exhibit significant per capita emissions due to their carbon-intensive economies, primarily driven by oil and gas production.
The hot and arid climate also necessitates extensive cooling needs, contributing to emissions in sectors like construction and transportation. In an interview with TRENDS, Rajhansa mentioned that renewable energy, particularly solar and wind, holds promise for transitioning to cleaner energy sources in the GCC.
While progress is being made, substantial support is also needed to accelerate this transition. Carbon finance can be pivotal in funding renewable energy projects, aligning with our carbon reduction objectives.
Carbon Markets
Carbon markets offer organizations a means to offset their emissions by purchasing high-quality carbon credits. These credits help achieve carbon neutrality or net-zero goals after efforts to reduce emissions internally.
The GCC region hosts the first and only global South carbon market, providing accredited offsets. These markets facilitate the transition to cleaner technologies by incentivizing emission reductions and fostering sustainability.
GCC’s Commitment to Net Zero
Some GCC countries have set net-zero targets, while others aim to reduce carbon intensity by specific percentages. “These targets signify a commitment to sustainability,” says Rajhansa.
Yet, achieving them involves a mix of policy frameworks, technological innovations, and leveraging carbon markets to finance emission reduction projects. Challenges include securing climate finance, technology transfer, and implementing robust regulatory frameworks. However, solutions exist, and collaboration and capacity building can help overcome these hurdles. Additionally, leveraging carbon markets can provide crucial financial support for emission reduction efforts.
Rajhansa says monitoring and verification mechanisms in the GCC, particularly in renewable energy sectors, are already robust. However, further enhancements, such as digital MRV systems, can improve transparency and accountability. Real-time data accessibility and third-party verification ensure the integrity of emission reduction projects, instilling trust in carbon market initiatives.
Saudi Arabia is significantly advancing toward its ambitious climate goals, focusing on large-scale renewable energy projects, carbon capture technologies, and clean hydrogen exports. These plans were unveiled at the recent “Saudi Green Initiative” forum held alongside the COP28 climate summit in Dubai.
A central pillar of the strategy is a dramatic expansion of renewable energy production. Saudi Arabia aims to launch 20 gigawatts (GW) of renewable energy projects in 2024 alone, quadrupling their current capacity. This ambitious target is supported by ongoing projects exceeding 8 GW in construction and an additional 13 GW in various stages of development.
While transitioning to renewables, the Kingdom also recognizes the role of natural gas as a bridge fuel. They plan to launch a tender to establish four highly efficient gas-fired power plants with a combined production capacity of 7 GW.
Additionally, significant progress has been made in displacing liquid fuel usage in electricity production. The goal is to eliminate the burning of one million barrels daily through renewable energy sources.
Furthermore, several existing highly efficient gas-fired power plants are already operational, and plans are underway for additional gas plants with carbon capture capabilities.
Energy efficiency remains a crucial aspect of Saudi Arabia’s green strategy. Implementing programs across various sectors has resulted in a commendable 16 percent increase in energy savings between 2021 and 2022.
Renewable energy, particularly solar and wind, holds promise for transitioning to cleaner energy sources in the GCC.
Kishor Rajhansa, COO of the Global Carbon Council
Saudi Arabia will embark on a groundbreaking project to further optimize renewable energy development: the National Geographic Survey. The initiative will involve the deployment of over 1200 measuring stations across the nation.
Saudi Arabia is actively exploring carbon capture technologies. Two industrial centers are planned. One in the east will focus on carbon capture and storage (CCS), aiming to capture 44 million tons annually. The other, situated in the west, will target carbon capture and utilization (CCU) with a capacity exceeding one million tons annually for CO2 utilization.
The Kingdom is also a significant player in the clean hydrogen market. The NEOM Green Hydrogen Project, already secured with a US$8.5 billion investment, is expected to produce 1.2 million tons of green ammonia annually. Additionally, Saudi Arabia is actively seeking international partnerships to further develop local green hydrogen projects and is experimenting with hydrogen-powered trains as it explores clean transportation solutions.
A crucial memorandum of understanding, signed during the 2023 G20 summit in India, will facilitate the export of clean electricity and hydrogen produced by Saudi Arabia. The India-Middle East-Europe Economic Corridor (IMEEEC) is expected to play a vital role in this endeavor.
Bain & Company has previously highlighted the Middle East’s vulnerability to climate change, noting the region is experiencing climate change at twice the global average rate. This underscores the urgency for rapid action on rising temperatures and carbon emissions.
At the same time, the GCC must recognize the region’s ongoing industrial transformation, its impact on emissions, and the crucial role of collaboration between governments, companies, and individuals in addressing this challenge.
Bain & Company points out a significant gap between government and corporate action. While 50 percent of governments have set ambitions for achieving net-zero emissions, only 12 percent of companies have made similar commitments. This disparity underscores the need for a more robust push from the corporate sector.
The World’s Ships Face a Massive $3.6 Billion Climate Tax The extensive network of cargo ships crisscrossing the globe plays an essential role in our modern economy, transporting everything from daily necessities to industrial materials. However, this maritime industry also has a significant environmental impact.
To combat climate change, the European Union (EU) is implementing a new regulation that will significantly affect shipping companies: the EU Emissions Trading System (EU ETS).
Set to take effect in 2024, the EU ETS assigns a price to carbon emissions for ships entering and leaving European ports. This regulation means shipping companies will be financially accountable for the carbon dioxide (CO2) their vessels emit, aiming to incentivize the adoption of cleaner technologies and operational practices to reduce their carbon footprint.
According to Drewry Shipping Consultants, the estimated cost of complying with the EU ETS in 2024 is a substantial $3.6 billion for all ships combined. While this figure might seem significant, it’s crucial to view it in the context of the overall shipping industry.
Despite the billions in estimated costs, the impact on consumers is expected to be minimal for two reasons. First, the effect on shipping costs is limited, with EU ETS fees anticipated to represent just a small fraction of a ship’s total operating expenses. For example, a container ship sailing between Europe and Asia might face an additional $887,000 in EU ETS costs, which is minimal compared to the annual fuel expenses, potentially ten times that amount. Moreover, recent fluctuations in fuel prices significantly surpass the projected costs of the EU ETS.
Second, the shipping industry is highly profitable. For instance, container shipping giant Maersk reported nearly $30 billion in profits in 2023 alone. This financial strength allows shipping companies to absorb the initial costs associated with the EU ETS without markedly affecting consumer prices.
While the initial financial burden of the EU Emissions Trading System (ETS) may be manageable, the system is designed to become progressively more expensive. Over a three-year phase-in period, the percentage of emissions for which companies must pay will increase from 40 percent in 2024 to 100 percent by 2026.
The EU plans to expand the scheme to include other greenhouse gases like methane and nitrous oxide in the same year. This escalating cost structure will undoubtedly incentivize shipping companies to explore cleaner alternatives.
As compliance costs rise, the economic pressure to exploit loopholes in the EU ETS might intensify. However, the long-term benefits of a cleaner shipping industry are undeniable. Potential consequences of the EU ETS include:
- Shift to Cleaner Fuels: Shipping companies may invest in cleaner fuels such as liquefied natural gas (LNG) or explore alternative options like biofuels or hydrogen.
- Operational Efficiency: Companies may optimize routes and sailing speeds to reduce fuel consumption and minimize emissions.
- Technological Innovation: The EU ETS could accelerate the development and adoption of new technologies for cleaner ship propulsion and CO2 capture.
The EU is not alone in its pursuit of a greener shipping industry. Other regions are likely to follow with regulations similar to those of the EU. This could lead to a global shift towards cleaner practices throughout the maritime sector.
Additional Emissions in the MENA: War
While the environmental impact of war is often associated with lingering pollutants, recent events have shed light on the significant carbon footprint of these conflicts and their long-term effects on climate change.
Researchers studying the Russian-Ukrainian war estimated its first year to have produced 120 million tons of carbon dioxide, equivalent to Belgium’s annual emissions. This revelation led to calls for including military emissions in the UN Framework Convention on Climate Change.
Similarly, a study on the Gaza war found immense emissions in just the first two months, exceeding the annual carbon footprint of over 20 high-emission countries. The study attributed 99 percent of the emissions to Israeli air strikes and ground operations, with US cargo planes contributing nearly half.
The analysis focused on carbon dioxide from military activities, excluding other greenhouse gases and long-lasting toxic pollutants. However, it highlights the significant climate impact of war, which researchers argue should be addressed internationally. It emphasizes the need to hold militaries accountable for their carbon footprint and revise the current exemption that allows them to pollute without consequences.
New research estimates that rebuilding damaged buildings in Gaza could generate 30 million metric tons of greenhouse gases, equivalent to New Zealand’s annual emissions, exceeding those of many other countries.
The countries of the Middle East and North Africa (MENA) face a dual threat: a rapidly changing climate and a significant carbon footprint arising from their economies. While the GCC demonstrates ambition through sustainability initiatives and net-zero targets, a substantial gap exists between intention and action.
Collaboration is Key
The urgency of the situation cannot be overstated. The MENA region is particularly vulnerable to climate change, experiencing double the global average rate. This necessitates a swift and collaborative response from governments, businesses, and individuals.
Businesses must move beyond top-down approaches and embrace a holistic strategy that fosters buy-in from all levels. Governments can play a crucial role by incentivizing renewable energy and green technologies while holding corporations accountable for their environmental impact.
The impact of war on the environment cannot be ignored. The immense carbon emissions generated by conflicts highlight the need for international action. Integrating military emissions into climate change frameworks and holding militaries accountable are essential steps toward a more sustainable future.
The time for action is now. By bridging the gap between ambition and action, the MENA region can overcome this dual threat and build a more sustainable future for the next generations.