COP26| want green without sacrificing oil? How Saudi Arabia made a "net zero" commitment

The Paper's reporter Yu Xiaoxuan

"We are very serious about climate change ... But we also need to ensure that the commitment of the transition period is realistic. Saudi Finance Minister Mohammed Jadan said on October 31 at the G20 summit in Rome, Italy.

Just a week ago, Saudi Arabia hosted its inaugural Green Initiative Forum on the eve of the 2021 United Nations Climate Change Conference (COP26), in which Crown Prince Mohammed bin Salman announced in his opening remarks that Saudi Arabia aims to achieve "net zero" greenhouse gas emissions by 2060. While the pledge seems encouraging to some, there are also critics who argue that Saudi Arabia, the world's largest oil exporter today, is moving too slowly.

Saudi Arabia has one of the most profitable companies in the world, Aramco. In 2019, before the COVID-19 outbreak, the fossil fuel giant's annual net profit reached US$88.2 billion, more than the net profits of the world's 12 largest oil companies combined. In its 2019 prospectus for an international bond offering, Aramco disclosed for the first time the company's financial position and strategy, which was mostly positive, but mentioned a key risk 19 times – climate change.

Saudi Arabia, the country of "black gold", supplies about 10% of the world's oil demand, and energy exports form the backbone of Saudi Arabia's economy. However, as climate change becomes more important, Saudi Arabia, which relies on fossil fuel production, has to turn to a sustainable economy and diversified income.

Commit to "net zero" emissions by 2060

According to the European Commission's Joint Research Center, Saudi Arabia has the highest per capita carbon emissions among G20 countries and the tenth largest emitter of carbon dioxide in the world. Saudi Arabia has been under pressure from European and American countries to accelerate efforts to curb carbon emissions and increase investment in renewable energy.

According to consumer news and business news (CNBC), in a conference call on October 11 this year, British Prime Minister Johnson told Saudi Crown Prince Mohammed that he "hopes Saudi Arabia will make a net zero commitment." The United States and the European Union also want Saudi Arabia to join the Global Methane Reduction Initiative to reduce methane emissions by 30 percent from 2020 levels by 2030.

In anticipation, Saudi Arabia finally announced its commitment to achieve "net zero" by 2060 on October 23. According to the new annual target, Saudi Arabia's annual emissions reduction target is about 280 million tons, more than double the previous target of 130 million tons per year. At the same time, Saudi Arabia also pointed out that the country will join the "Global Methane Emission Reduction Initiative" of the United States and the European Union. On the same day, Saudi Aramco also announced that its operations will reach the "net zero" emissions target by 2050 – ten years ahead of the Saudi government's commitment.

"Hopefully, this landmark announcement will inspire ambitions in other countries ahead of COP26." COP26 Summit President Alok Sharma welcomed the news, but also noted that she looked forward to seeing more details on Saudi Arabia's plans to cut emissions.

"Saudi Arabia, as the leader of the global oil producer, was previously considered an important force in opposing and obstructing global emission reduction efforts, and this change of attitude is undoubtedly a positive news for global emission reduction efforts, and will also lead more countries to join the ranks of emission reduction commitments." Zou Zhiqiang, Youth Research Institute of the Institute of International Studies of Fudan University, told the surging news (www.thepaper.cn).

Zou Zhiqiang pointed out that Saudi Arabia's change of attitude on the issue of reducing carbon emissions has been driven by multiple factors, on the one hand, in the face of the continued pressure of the international community to promote energy transition and global emission reduction, on the other hand, in the face of other oil-producing countries' commitments to reduce emissions, Saudi Arabia needs to maintain its own leadership in the global energy field.

Three weeks before cop26 opened, the UAE had committed to achieving "net zero" emissions by 2050, more ambitious than Saudi Arabia's 2060, and the UAE was the first Gulf oil producer to make a "net zero" commitment. Russia, which has been ranked first and then second in the oil exporter rankings in recent years, also announced on October 13 this year that it hopes to become carbon neutral by 2060.

It is difficult for Saudi Arabia to reduce emissions, and there is no motivation?

Notably, despite plans to reduce carbon emissions within the country, there is no indication that Saudi Arabia will slow down investment in oil and gas or relinquish control of the energy market by stopping production of fossil fuels. CBN previously reported that according to the "net zero" emission rule, the calculation of a country's carbon emissions will only include carbon emissions within the country, so the oil and gas produced and shipped abroad will not be counted in Saudi Arabia's share.

The United Nations Environment Programme (UNEP)'s Production Gap Report 2021, released on 20 October, notes that despite rising global climate ambitions and "net zero" commitments, countries plan to produce more than double the total amount of fossil fuels they plan to produce by 2030 than they would achieve the 1.5°C temperature target of the Paris Agreement. Ahead of COP26, the report also focused the world's attention on major oil-producing countries such as Saudi Arabia.

Recently disclosed documents show that some countries, including Saudi Arabia, lobbied behind the scenes before the opening of the COP26 summit to try to change the statement on carbon emissions in the final report of the conference. According to deutsche Welle, some oil-producing countries, including Saudi Arabia, oppose the phase-out of fossil fuels, and according to the leaked documents, the Organization of the Petroleum Exporting Countries (OPEC) asked the authors to delete the phrase "more efforts are needed to actively phase out all fossil fuels in the energy sector, rather than just relying on fuel conversion."

"Everyone has their own toolkit, and no one should comment on which tool in the kit they use." Saudi Energy Minister Prince Abdulaziz said each country's approach to reducing emissions looks different. "If both your toolkit and the tools in my tool can reduce emissions, then that's right, and that's what happens."

Indeed, while it has been criticized by the West for its negative attitude towards climate issues, Saudi Arabia began to respond to a shift in its approach more than a decade ago. In 2005, Saudi Arabia submitted its first document reflecting its national position to the United Nations Climate Change Conference, and while the report insisted that measures to combat climate change would seriously damage the Saudi economy, the report acknowledged that Saudi Arabia itself was suffering the effects of climate change.

Since the 1960s, the Saudi city of Jeddah has been hit by floods almost every year due to frequent storms. At the same time, high temperature records in the Middle East and North Africa region have been repeatedly broken in recent years, and nasa data shows that the Arabian Peninsula has been dry since 1998, and the current drought period is the worst period in 900 years.

Is a "carbon cycle" economy viable?

In March, Saudi Arabia launched the Saudi Green Initiative, which will reduce carbon emissions by planting 10 billion trees in the country. Ahead of COP26, Saudi Arabia also unveiled a national renewable energy plan that plans to generate 50 percent of the country's energy needs from renewable sources by 2030. In addition, Saudi Arabia has launched a "carbon circular economy," a strategy to boost economic growth while addressing carbon emissions, which Saudi Arabia approved last year during its G20 presidency.

Zou Zhiqiang said that from saudi arabia's statements and plans, its measures to reduce carbon emissions are comprehensive: one is to vigorously develop and use new energy to replace oil; the second is to plant trees on a large scale and increase protected areas; and the third is to use carbon capture technology. However, Zou Zhiqiang stressed that "because carbon capture technology is not mature at present and costs a lot, this is more of an indication of the Saudi leadership's expectations and positive attitude towards new technologies, and there is uncertainty about how much role it can play in the future." ”

Carbon Capture, Utilization and Storage (CCUS) technology refers to the capture of carbon dioxide waste emitted by refineries or plants or power plants from the source and then stored with the aim of removing potentially harmful by-products from the environment and mitigating climate change. In addition, CCUS also includes the capture of carbon dioxide directly from the air. A report released by the Chinese Academy of Environmental Sciences in 2021 pointed out that at present, CCUS technology is still in the initial stage of research and development and demonstration, facing difficulties and problems in the economic, market, technical, environmental and policy aspects, and there are still many obstacles and challenges to achieve large-scale development.

Gulf oil producers, including Saudi Arabia, have long been open advocates for the use of carbon capture technologies rather than rapidly phased out fossil fuels. They warn that a hasty energy transition will deprive the poor of access to energy. However, the international environmental group Greenpeace has criticized that "unproven" carbon capture technology will allow countries to make optimistic assumptions that will allow more greenhouse gases to be emitted.

Despite the skepticism and criticism, many are optimistic about the Saudi plan. "While the circular carbon economy may not sound good to those who advocate a break with fossil fuels, it is a logical way to produce large amounts of low- or zero-emission fuels." Karen Young, director of the Economics and Energy Program at the Middle East Institute, told AFP.

Swiss oil and gas economist Cornelia Meyer also praised Saudi Arabia's green economy transition plan. In a commentary in Arabian News, the Saudi state media outlet, she wrote, "Saudi Arabia has made good progress in green initiatives, renewable energy and green hydrogen projects in the Middle East. Further development of carbon capture, utilization and storage technologies and the concept of a circular economy is also worthwhile in the long run, as addressing climate change is a long-term task. ”

In any case, however, Saudi Arabia's oil-price-pegged "rent-on-profit" economy needs structural reforms. Since Crown Prince Mohammed came to power, he has sought to diversify his economy by developing the private sector and reducing the size of the public sector. These include encouraging women's jobs, creating cultural and entertainment industries, and pushing the $2 trillion", Saudi Aramco, a "big Mac" to go public, but the results of these efforts have not yet been reflected in the structural shift in fiscal revenues.

Jadan said on the sidelines of the G20 summit that Saudi Arabia is working towards sustainable economic, revenue and energy goals. "We have a lot of green projects, a lot of solar and wind power plant projects that need financing, and a number of new plans are in the works." He also announced that Saudi Arabia has appointed financial advisers for the planned issuance of green bonds, but has not yet finalized the format of the issuance.

"Although Saudi Arabia's change of attitude is in line with global trends and the need to promote the structural transformation of its economy, its explicit and substantially increased emission reduction commitments, no matter how they are realized, will not be low cost, which undoubtedly increases Saudi Arabia's financial pressure." Zou Zhiqiang predicted that Saudi Arabia will take advantage of the recent relatively high oil prices to improve its fiscal situation and focus on reducing fiscal expenditures, and at the same time, Saudi Arabia must also adopt a more cautious and pragmatic foreign policy, "which is conducive to promoting its more serious development of new energy and economic reforms, but whether it can form a virtuous circle of energy transformation and economic diversification reform is still unknown." ”

Editor-in-charge: Hu Zhenqing

Proofreader: Yijia Xu