The Eyes of the World Will be on the Petrostates at COP28

The Eyes of the World Will be on the Petrostates at COP28

This year's climate negotiations in December will be one of the most important climate events in the history of international climate talks. This is not just because of the progress that is hoped to be made in important negotiating details, but because of the signal it will send to the world on whether wealth and influence can be used to help save the planet or perpetuate self-interests.

Wealth and influence

The gulf states are highly influential globally. Including Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the United Arab Emirates (UAE), these states are some of the wealthiest countries in the world. GCC members have GDP per capita in the top 16 percent globally, ranging from US$21k in Oman to US$81k in Qatar. 1 Other countries in the Middle East are considerably poorer (e.g., Iran, Iraq and Egypt) with an average GDP per capita of only US$13k.

This wealth has mostly come through fossil fuels - oil and gas – which are typically high grade, cheap to extract and extremely profitable.  GCC member states currently produce around 22 billion barrels of oil per day, or around 24 percent of the total global output. When oil reserves are considered, the Gulf states account for about 35 percent of global reserves, with Saudi Arabia alone accounting for 17 percent of total worldwide oil reserves. Dubai is an outlier with relatively few fossil reserves, and instead tourism and trade being its main economic drivers.

With this money the region has invested in vast brand building exercises. Four of the leading football clubs in the UK premier league are either owned or sponsored by Gulf-backed companies (Arsenal – Emirates (UAE), Manchester City – Etihad (UAE), Newcastle – Saudi Public Investment Fund (Saudi), Sheffield United - Prince Abdullah (Saudi). The most successful French football club, Paris Saint Germain is owned by Qatar’s sovereign wealth fund. Qatar hosted the football world cup in 2022. In motor racing, Formula 1 races are now held in Saudi Arabia, Qatar and Abu Dhabi. Golf, boxing and other sports are also feeling the pull of the Gulf.

The gulf states have provided 20% of world oil production in last 50 years

The environmental consequences of this oil-based wealth are considerable. Since the 1970s, the GCC states have made up around 20% of world oil production and 8% of world gas production. Allowing for emissions from coal and other oil and gas producing nations, the GCC states have been responsible for around 10% of global fossil fuel emissions over this period. With fossil fuel emissions accounting for some three quarters of global warming since pre-industrial times, the GCC states have contributed around 7-8% of total global warming and a temperature increase of 0.1oC simply through the sale of their fossil fuels. These estimates exclude other emissions from these countries and methane releases from oil and gas infrastructure.

Are the gulf states doing enough to tackle climate change?

In recent years the gulf states have been scrambling to polish this tarnished environmental image. All six GCC states have set net zero targets for either 2050 or 2060, and are targeting between 15% and 50% renewable energy contribution to the electricity mix by 2030 (Kuwait 15% by 2030, Bharain 20% by 2035, Qatar 20% by 2030, UAE 30% by 2030, Oman 30% by 2030 and Saudi Arabia 50% by 2030).

These targets may seem ambitious but are modest in contrast to countries with comparable wealth. The European Union, which has a GDP per capita similar to the average of the GCC countries, is targeting 40% share of renewables by 2030 and 80% by 2050. The US, under President Biden, has set a target of 100% carbon free power generation by 2035 (including renewables, nuclear and fossil generation with CCS). More importantly, the gulf states’ carbon targets only cover direct emissions. They exclude the carbon included in the oil and gas sold from these countries.

Carbon markets enter stage left

With such high carbon footprints and mounting public pressure, a number of GCC countries are looking to the international carbon market to provide a solution.

Saudi Arabia’s Public Investment Fund, along with the Saudi Tadawul Group, established the Kingdom’s Regional Voluntary Carbon Market Company (RVCMC) in October 2022 to facilitate carbon credit trading. Last year, the RVCMC oversaw the purchase of more than 1.4 million tonnes of carbon credits, with Saudi Arabian organisations, such as Aramco, the Saudi Arabian Mining Company and the Olayan Financing Company buying the largest proportion of these credits.

The RVCMC also delivered its second-largest voluntary carbon credit auction in Nairobi, Kenya in June 2023, during which 15 buyers, mostly from Saudi Arabia, bought more than 2 million tonnes of carbon credits for projects mostly based in the Middle East and Africa. Crucially, the RVCMC is not solely limited to serving as a global carbon credit trading platform, but has become a vehicle through which domestic public and private entities can purchase credits that directly contribute towards the climate change ambitions of their host country.

Elsewhere, the UAE took an early investment in one of the first international carbon trading platforms, Air Carbon Exchange (ACX).  The UAE also created Carbon Alliance - a group of UAE-based organisations supporting carbon markets. This group has now pledged to buy US$450 million worth of African carbon credits by 2030.

It is Qatar, however, that has been the epicentre of carbon credit activities in the region having set up the Global Carbon Council (also named “GCC”) in 2019. This group was renamed from the Gulf Carbon Trust created in 2016. But attention on the GCC has not always been positive. While the Carbon Council was approved in 2021 to market carbon credits for the pilot phase of the carbon offsetting scheme for international aviation (CORSIA) – often regarded as a high-quality benchmark – the platform has often been criticised for marketing out-dated and poor-quality credits, especially from the previous incarnation of the UN’s Clean Development Mechanism.

Gulf states need to lead from the front

Actions from the gulf states in setting targets for net zero emissions and renewable energy production, and early interest in carbon trading platforms are positive steps, but they are tiny in comparison to the contribution and impact of these countries to global warming through their production of oil and gas.

More importantly, as hosts of this year’s climate negotiations, the UAE has a responsibility to ensure that its position is used to advance climate ambition of the international community. These states should shift from creating platforms for trading carbon credits, to being the buyers of credits and retiring them, or investing in projects that unequivocally improve the environment. Saudi’s RVCMC and UAE’s commitment to buy $450m of African credits by 2030 should be the start of a much larger carbon offsetting programme funded by these states.

Through ownership and sponsorship of global sporting events, the gulf states have bought reputation and influence. It is now time for these states to buy a legacy that will protect the planet for future generations.


[1] Source IMF, PPP

25601700Trove Research
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