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Saudi Arabia’s car imports have risen to 160,000 in the past two years: official figures

RIYADH: As global temperatures continue to rise, the Arab region is on the front lines of the fight against climate change.

In the global race to reach net zero, Middle Eastern countries face unique challenges that increase the urgency of addressing this environmental crisis to secure their future.

The Gulf region is one of the areas most affected by climate change, mainly due to already high temperatures that are above the global average.

In recent years, the Arab world has focused more on the effects of global warming, especially its economic consequences, to avert its harmful effects.

Events such as the MENA Climate Week in Riyadh in 2023, the UAE COP28 in 2023 and Egypt’s COP27 in 2022 underline the region’s commitment to tackling this pressing issue.

Speaking to Arab News, Sal Jafar, CEO of ESG MENA, underlined these efforts, saying: “I have seen first-hand the transformative progress that GCC countries are making in energy transition and efforts in climate change.”

He added: “This region, historically dependent on hydrocarbon economies, is now leading a crucial shift towards sustainability and environmental stewardship, underpinned by an ESG framework.”

The complicated relationship between atmospheric changes and financial growth in these countries underlines the need to adopt sustainable development practices.

A recent report from the Arab Monetary Fund states that the region may experience significant reductions in water availability and agricultural productivity by the year 2050.

This decline, which is linked to climate-related water scarcity, could lead to economic losses worth 14 percent of the area’s gross domestic product.

Saudi Arabia, a crucial player in the Middle East and a major oil producer, embodies the complexity and transformation potential of the region.

The Kingdom has been looking to boost its energy transition efforts for at least a decade, Yousef Al-Shammari, the CEO of CMarkits, a British-based energy research consultancy, told Arab News.

These measures started with the launch of the King Abdullah City for Atomic and Renewable Energy in 2013, he noted, saying: “At that time, the aim was to minimize crude oil consumption by using alternative energy sources. Especially as local crude oil consumption is expected to continue to rise due to national electricity consumption and of course road transport demand.”

Historically dependent on hydrocarbon economies, this region is now leading a crucial shift towards sustainability and environmental stewardship, underpinned by an ESG framework.

Sal Jafar, CEO of ESG MENA

Crude oil demand is expected to rise to as much as 8 million barrels per day, with the Kingdom producing 10 million barrels. This will inevitably lead to an “economic security risk” and result in the country’s first motive to ensure energy efficiency, Al-Shammari said.

But amid growing concerns about rising temperatures and environmental sustainability, the country launched its Vision 2030 in 2016 to position itself as a global leader in clean energy production and shift its economy away from dependence on oil .

The road to net zero

The Kingdom has embarked on several initiatives to reduce its carbon footprint and diversify its economy beyond the oil sector.

Mitigation efforts include ambitious targets of 44 million tons of CO2 captured annually by 2035 and 2 million tons of CO2 captured daily and used to produce glycol, urea and green methanol, as well as clean fuels, according to the 14th IEA-IEF- OPEC Symposium on Energy Outlook.

This is made possible by the Circular Carbon Initiative, which was introduced during the Kingdom’s Presidency of the G20, the CEO highlighted, saying: “The Circular Carbon Initiative that includes disposal, reuse and recycling,” he explained, adding: “Saudi Aramco is pursuing a very ambitious program in that area. I think there is one big project that will start in 2027 that will be the largest carbon capture project in the world.”

The facility, in which Aramco would play a key role, aims to capture 9 million tons of CO2 per year by 2027, with the aim of increasing capacity to 44 million tons per year by 2035, Al-Shammari outlined.

In October 2022, the Kingdom’s sovereign wealth fund launched its regional Voluntary Carbon Market business at the sixth edition of the Future Investment Initiative in Riyadh.

This move made it possible to launch tradable CO2 shares on an exchange, in which major players in the Saudi energy field, such as Aramco and SABIC, participated.

The idea of ​​the VCM is to make companies pay to offset their CO2 emissions. Furthermore, the voluntary nature of the market offers a greater chance of success than mandatory sectors implemented in other regions, Al-Shammari outlined.

He said: “It is voluntary, which means it could have a bigger impact than the mandatory carbon markets, which we have seen in Europe and which have not really led to any carbon reduction. The idea is that because it’s voluntary, it essentially allows companies to make economic sense of it. So if you get an economic return from these investments in carbon markets, that would pay back the costs of carbon capture. So in some way it encourages producers to minimize their CO2 emissions.” He added: “There has been so much research and literature on it and there is great optimism about it
the voluntary market is so large and encourages producers to minimize emissions compared to mandatory markets.”

Making the world greener

Equipped with a strategic location at the crossroads of three continents, the kingdom is well positioned to lead the world in renewable energy exports.

Two ambitious projects outlined in the Symposium on Energy Outlooks include the global export of 150,000 tons of clean ammonia and the construction of the world’s largest green hydrogen project in NEOM.

Therefore, the country’s location essentially allows it to export its potentially huge supply of renewable energy to the east or west, Al-Shammari pointed out.

While European countries look to produce and import green hydrogen, Saudi Arabia will remain the continent’s supplier “for the foreseeable future,” he outlined.

He said: “As part of the decarbonisation plans, if you want to produce green hydrogen in Germany it is going to cost you $5 per kilogram and if you are going to produce it in Saudi Arabia it is going to cost you between $1 and 1. $2 per kilo.”

He added: “In the meantime, Germany, Europe’s largest economy, will be dependent on green hydrogen for the foreseeable future and will have to import it from low-cost countries like Saudi Arabia.”

Similarly, Saudi energy giant ACWA Power currently has the most extensive green hydrogen storage unit in the world, producing 1.2 million tons of ammonia per year.

The company can “easily” import and export this large amount from its location in the northwestern region of the Kingdom to Europe.

These efforts allow the country to shift its global image from a crude oil exporter to a major player in all energy fields.