The Middle East has shown that it means business at COP27. The 27th United Nations Climate Change Conference kicked off Monday in Sharm El Sheikh, Egypt and already, less than a week into the event, leading Arab Nations have been making big green energy deals. Saudi Arabia has pledged $2.5 billion to build and host a green initiative in the Middle East over the next 10 years and signed an energy deal with Oman which includes renewable energies, while on the sidelines the United Arab Emirates (UAE) has inked a deal with Egypt to develop one of the world’s largest wind farms. While these deals show a promising dedication to decarbonizing the global cradle of crude oil right out the gate of COP27, a recent report from the International Monetary Fund (IMF) shows that it will take a whole lot more time, effort, and money to get the Middle East on track to meet their own emissions reduction targets. The report focuses on two regions: the Middle East, North Africa, Afghanistan, and Pakistan (MENAP) and the Caucasus and Central Asia (CCA). These two regions provide an enormous share of the world’s oil production, but could also be major leaders in the global clean energy transition.
The UAE, which is currently OPEC's third-largest producer of crude oil, was the first Persian Gulf country to announce plans to reach net-zero emissions by 2050. Saudi Arabia and Bahrain soon followed suit, announcing their intentions to become carbon neutral by 2060, and Oman by 2050. Kazakhstan, which has the largest proven oil reserves in the Caspian Sea region, has also pledged to achieve carbon neutrality by 2060.
The IMF lays out two pathways for these two regions to achieve their own espoused decarbonization targets. One trajectory pairs a gradual removal of all fuel subsidies over the next eight years, paired with a phased introduction of carbon taxes: $8 per metric-ton of CO2-equivalent in MENAP and $4 in CCA. This approach would allow these regions to achieve 2030 emissions targets without investing any additional capital into renewable energies.
However, the deals being made at COP27 clearly indicate that the Middle East, at least, is ready to commit to a renewable agenda. But the ultimate price tag makes this week’s $2.5 billion Saudi green energy initiative look like peanuts. In a renewable energy-based scenario, the IMF says that “additional combined public investments of close to US$900 billion in renewable sources of energy between 2023 and 2030 would allow achieving the region’s emissions reduction targets with fuel subsidies reduced by two thirds and without any carbon tax.” $770 billion of that would come from MENAP, and $114 billion would come from the less wealthy CCA region.
It’s a sobering amount of money. In fact, it’s equivalent to “more than a fifth of the current gross domestic product of the 32 countries across the two regions,” according to a Monday Forbes report. “The sums involved are not a major concern for the likes of Qatar and the UAE, which are enjoying a windfall from high oil and gas prices at the moment,” the report goes on to say. “However, some other countries may find it hard to commit the finance to replace existing, conventional power plants.” While fronting the money may be difficult for more cash-strapped countries, however, delaying action will cost these nations even more in the long run.
The good news is that several large-scale renewable projects are already underway in Gulf states, on top of the projects announced this week in Sharm El Sheikh. Saudi Arabia announced five new renewable energy projects with a total capacity of 3,300 megawatts in September. Neighboring Qatar is building the 800MW Al-Kharsaah solar energy plant which will be able to meet a tenth of domestic electricity demand upon completion. The UAE is outdoing Qatar by building the world’s largest single-site solar park, the Mohammed bin Rashid Al-Maktoum Solar Park in Dubai. That park, a $13.6 billion investment, will have a 5GW producing capacity by that all-important 2030 deadline. The UAE also will host COP28 in 2023.
By Haley Zaremba for Oilprice.com
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