In global climate change policy this year, net-zero emission targets have been a defining feature. The Gulf region was no exception. In January, it looked like 2021 might see the Gulf region’s first net-zero target; but closing in on the end of the year, there are now three net-zero targets announced by Gulf governments, and the world’s largest oil producer, Saudi Aramco, has also announced a net-zero ambition. Additionally, all Gulf Cooperation Council countries under the Paris Agreement have submitted new or updated medium-term climate change plans – nationally determined contributions.
To understand where these targets come from, how significant they are, and where the region might be going next, it is necessary to look at the broader context. First, climate change has now become a mainstream energy issue in the GCC. Second, global and regional dynamics lined up favorably this year for climate ambition. Third, GCC countries’ climate plans came in many shapes and sizes, which in turn provides indications of where most activities will likely focus going forward.
Climate Mainstreaming on Energy Agendas
The six GCC countries, which together account for one-quarter of the world’s oil and one-tenth of its natural gas production, have had a difficult relationship with the global clean energy transition. Rhetoric around the transition has tended to focus on shifting away from fossil fuels, which implies lower hydrocarbon revenue and higher pressure to diversify economies away from oil and gas export dependence. But in recent years, in this regard, two Gulf countries in particular have both embraced change and reinvented themselves.
The United Arab Emirates began to carve a niche as the region’s “future energy leader” in the late 2000s, but even a decade later renewables still account for less than 1% of its domestic energy consumption. For a long time, climate change did not feature in a major way on the Abu Dhabi National Oil Company’s agenda. However, in the past year or two, things have changed dramatically, including due to a rapidly changing international investor sentiment. For example, in November, climate change and energy transitions took center stage at the Abu Dhabi International Petroleum Exhibition and Conference, a major annual oil sector event. The conventional wisdom has it that when the oil and gas sector in the GCC gets serious, things happen.
Saudi Arabia, in turn, has since 2019 embraced the concept of the circular carbon economy, which is a reinvention of the concept of the circular economy, which focuses on material and waste flows, in the realm of energy and emission flows. The circular carbon economy approach advocates using all available technologies to tackle emissions, in the most cost-effective way. The major innovation is that it provides a vision of a climate-safe future in which the GCC region has a stake, allowing it to engage proactively with the energy transition. In October, the kingdom took an additional step and formally adopted the circular carbon economy concept as the defining framework for its climate change policies.
Favorable Global and Regional Dynamics
Two of the region’s major external allies, the United States and United Kingdom, placed climate change high on their foreign policy agendas this year. This raised the global profile of the annual United Nations Climate Change Conference, COP 26, and spurred higher ambition worldwide. In April, Saudi Arabia and Qatar joined the U.S.-led Net Zero Producers Forum and the UAE and United States announced a multibillion-dollar climate change and agriculture initiative.
The U.S. administration and the U.K.’s COP 26 Presidency visited the Gulf region several times over the year as the region’s major external allies sought more ambitious climate pledges from the two largest GCC economies, Saudi Arabia and the UAE. It perhaps was no coincidence that both countries set mid-century net-zero carbon dioxide targets, and announced them around the same time, in October.
Inter-GCC dynamics also played into Gulf climate ambitions. As in many other domains, Saudi Arabia and the UAE sought to raise their respective regional profiles on climate policy. In March, Saudi Arabia announced the Middle East Green Initiative and hosted a related high-level summit in October, pledging a 15% contribution to a newly established circular carbon economy fund and a clean cooking initiative, with a total estimated value of $10.4 billion. In April, the UAE hosted a regional climate dialogue, which concluded with a statement signed by 10 countries from the region committing to accelerate climate action.
Amid what many interpreted as regional competition, there was an important sign of a lasting, longer-term alignment of interests on the issue, as Saudi Arabia’s and the UAE’s climate change policy leaders, Saudi Minister of Energy Prince Abdulaziz bin Salman and ADNOC CEO and UAE Special Envoy for Climate Change Sultan Ahmed Al Jaber, shared a stage in Riyadh when Saudi Arabia announced its net-zero target.
Many Shades of Gulf Climate Plans
GCC countries have long engaged with the issue of climate change at different levels of intensity. Saudi Arabia and the UAE have been active internationally, in their own ways, and Qatar has made the occasional appearance on the global agenda (including by hosting COP 18), while the issue has been less salient on other GCC countries’ agendas.
Three GCC countries announced net-zero carbon dioxide targets in October: the UAE for 2050 and Saudi Arabia and Bahrain for 2060. Some analysts dismissed the region’s net-zero targets as contradictory, pointing to plans to continue or even expand oil production and the fact that the targets exclude “scope 3 emissions” – the indirect emissions that occur along the company’s value chain, outside its direct emissions, and include those from the consumption of oil and natural gas, for example.
However, this criticism misses the point that under the U.N. Framework Convention on Climate Change, countries’ emissions are accounted for where they are generated. For oil companies, the situation is different, as there are no international treaties governing their climate plans or actions. At the moment, nearly all major oil companies’ targets exclude scope 3 emissions.
Gulf countries’ enhanced nationally determined contributions, or NDCs, have received less attention in the media. Even though formally only the UAE was required to submit a new NDC (given the 2021 target in its first NDC, instead of 2030), political pressure globally in the run-up to COP 26 grew for all countries to issue updates. By late October, all six GCC countries had submitted new or updated NDCs along with 140 other countries.
There are major differences, both compared to the first NDCs from 2015 and across the six new documents. The UAE’s new NDC, if implemented, would effectively see the country’s emissions stabilize at pre-pandemic levels through 2030. Kuwait’s NDC update also introduces a new baseline target, which would amount to the country stabilizing its greenhouse gas emissions at pre-pandemic levels through 2035. The UAE’s previous NDC had only contained a clean energy target and neither the UAE’s nor Kuwait’s 2015 NDCs had included emission targets.
Saudi Arabia’s NDC update doubles its emission target compared to its original first NDC. While the absence of a baseline (i.e. information on projected emissions under a business-as-usual scenario, which emission targets are then based on) means it cannot be translated to an actual emission target, the updated NDC consolidates aims to generate half of the country’s electricity from renewables and the other half from natural gas by 2030, which are highly ambitious given that in 2019 an estimated 43% of the country’s electricity was generated from oil and 56% from natural gas. Interestingly, both the Saudi and Kuwaiti NDC updates refer to the circular carbon economy approach.
Qatar’s NDC also introduces a baseline target but does not include baseline data, which means it cannot be evaluated. Bahrain’s NDC includes modest quantitative energy efficiency and renewable energy targets but no emission target, while Oman’s new NDC would actually result in higher emissions than under its previous target due to a revised baseline.
2022: The Year of Implementation
If 2021 was the year of ambition and new climate targets, 2022 will be the year of implementation. Fortunately, climate change will remain high on the regional agenda as two Arab countries, Egypt and the UAE, will serve as the hosts of the next U.N. climate COPs.
The new NDC targets need to be translated into action as a matter of urgency. Among the outcomes from COP 26 was a headline decision called the Glasgow Climate Pact. It reminds all countries that they are expected to submit to the U.N. “long-term low GHG emission development strategies” and “adaptation communications” (national adaptation plans) by COP 27. The Glasgow Climate Pact also requests countries to align their 2030 NDC targets with the Paris Agreement temperature goals by the end of 2022. Submissions from the region, including net-zero roadmaps and perhaps even higher short-term ambition from some countries, or a clarification of baselines, could provide a boost to COP 27 and COP 28 preparations.
Based on the scale of the ambition in the NDCs as they now stand, most climate action in the coming years can be expected from Saudi Arabia and the UAE. In 2022, increasing attention in the region is likely to be focused on: energy transition financing, including environmental, social, and governance, or ESG, investing; hydrogen strategies and policy frameworks; and business models and new approaches to carbon capture, utilization, and storage technologies and large-scale deployment. Based on the NDC targets, there will hopefully also be significant scaling up of renewable energy capacity.
