Gulf industrial decarbonising needs ambition and urgency

Reuterts/Dominika Zarzycka/NurPhoto

Drive along the UAE coast from Ruwais in the west to Taweelah and Jebel Ali and then past Ras Al Khaimah in the north, and you will pass imposing industrial landmarks: first polymers and chemicals, then steel and aluminium, and finally cement.

They are all central to a goal of doubling non-oil industry’s contribution to the UAE economy by 2031. But how can this be squared with the country’s net-zero carbon target, and industrial decarbonising?

The first long-term climate strategy, released a week ago, and the Ministry of Industry and Advanced Technology’s plan that it unveiled at Cop28 in December provide some answers.

And there are valuable lessons both for and from Gulf neighbours.

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Industry accounted for nearly half the UAE’s greenhouse gas emissions of 225 million tonnes of carbon dioxide equivalent in 2019. This 103 million tonnes should drop a little by 2030, while overall industry grows sharply.

Then industrial emissions have to plummet to 37 million tonnes in 2040, and 7 million tonnes in the net-zero year of 2050. The small amount of remaining emissions will be mopped up by carbon dioxide removals from the atmosphere, by biological, mineralogical and technological means.

The oil and gas industry, including upstream production and refining, is a significant chunk of the total.

Abu Dhabi’s state oil company Adnoc has declared it will reach net-zero operational emissions by 2045, and its initiatives in carbon capture, carbon mineralisation, reduction of methane leaks and electrification of its offshore facilities have gained wide attention.

But other heavy industries are also major emitters. Emirates Global Aluminium declared 21.6 million tonnes of carbon dioxide equivalent in 2022, a fifth of the national total. Emirates Steel adds another 2.2 million tonnes. Cement, petrochemicals and fertilisers are the other big sectors.

Five pillars

Technically, the UAE’s path to net zero is straightforward in outline even if the details are complicated.

It rests on five pillars: greater energy and process efficiency; clean electricity, mostly from nuclear and renewable energy; changing production processes to use alternative feedstocks such as hydrogen and more recycled inputs; switching to clean fuels, moving from coal and oil to gas, and then to hydrogen and heat from solar or geothermal sources; and applying carbon capture and storage (CCS).

The UAE has several major advantages in these areas. Its nuclear power plant is almost fully up and running, and Emirates Nuclear Energy Corporation could add additional reactors.

The country’s sequence of world record low prices for gigawatt-scale solar farms is well-known. Emirates Global Aluminium, Emirates Steel and Adnoc already buy clean electricity from these sources.

Gas is low-cost and widely available, with the UAE aiming for self-sufficiency by 2030, which should be readily achieved. The country has ambitious aims for hydrogen, targeting about 15 million tonnes annually by 2050, split about equally between “green” (renewable-based) and “blue” (from fossil fuels with CCS).

The UAE hosts the world’s first commercial-scale application of CCS on an industrial facility, the Emirates Steel direct reduced iron plant, capturing 800,000 tonnes of carbon dioxide annually. Adnoc plans 10 million tonnes of capture by 2030, some of which will relate to making fertilisers, plastics, hydrogen and oil refining.

The nation’s well-understood geology, with giant subsurface structures, and high-quality reservoir rocks and sealing formations, lends itself to low-cost, safe, permanent, verifiable and uncontroversial storage of carbon dioxide – an easier proposition than in Europe or some parts of the US.

This technical pathway needs support from policy.

The UAE’s strategy includes a mandatory carbon cap-and-trade system, green government procurement, specific incentives for hydrogen and CCS, national infrastructure, and sector-specific regulations.

The other GCC states have ambitious industrial growth plans, too. Most notably, Saudi Arabia wants to increase its industrial GDP to 3.7 times its 2020 value by 2030.

That is part of a global trend to boost manufacturing, from the US and Europe to India. They also nearly all have net-zero dates: 2050 (UAE, Oman), and 2060 (Bahrain, Saudi Arabia and Kuwait).

It’s a competitive world: is industrial decarbonising a competitive boost for the Gulf or a drag?

Carbon border tariffs

The EU and UK, for example, are introducing carbon border tariffs to penalise imports of high-carbon materials, including steel, cement, fertilisers and hydrogen. With a mixture of environmentalist and protectionist motives, those tariffs are likely to ensnare ever more products.

The US has begun talking on similar lines, and no doubt Canada, Japan, Australia, South Korea and others will bring in equivalent policies or join existing clubs.

Corporations also seek to “green” their supply chains, so that complete reliance on coal-heavy China is less attractive from a climate as well as a geopolitical point of view. Europe’s high energy prices make it hard to compete in heavy industry, and its aluminium and fertiliser businesses are closing down.

These initiatives provide an opportunity for the Gulf states. But there are constraints.

Saudi Arabia is the only other GCC state contemplating nuclear power. Bahrain is somewhat limited by availability of land area for renewables or green hydrogen. Kuwait is short of domestic gas output.

But other than those limitations, the rest of the Gulf countries have similar green advantages to the UAE’s.

In some respects, they are even ahead. Saudi Arabia has bigger CCS plans. Its Neom green hydrogen project will be the region’s first, and one of the world’s first, to enter large-scale production when it starts up in 2026.

Riyadh has also been investing actively in the mining and processing of minerals critical to the energy transition, both at home and abroad, and in manufacturing batteries and electric cars.

Oman has a well-thought-out green hydrogen strategy and has attracted numerous investors.

The green industrial opportunity is big enough for there to be more than one regional winner. The techno-economic path is clear.

Ambition, urgency and cool-headed calculation are needed to deliver a near-zero Gulf industrial sector, create a viable economy beyond hydrocarbon extraction and stop the region from heating up.

Robin M Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis