Decarbonising Business

Published in Khaleej Times’ Business Technology Review

The growing frequency of investment trends in sustainability and green tech bode well for the fight against global warming

THE COP27 in Sharm Al-Sheikh and this year’s COP28 in the UAE are helping give global focus to the energy transition, and for good reason — the global economy must decarbonise quickly if we are to avert, or adapt to, the effects of the climate crisis. According to the 2015 Paris Agreement, we must substantially reduce global emissions (by 45 per cent from 2015 levels until 2030) and reach net zero emissions by 2050 if we are to limit warming to 1.5°C and avoid the worst consequences of the climate crisis.

Unfortunately, the road might be bumpy. Experts believe that the 1.5°C target is no longer viable or realistic. If we continue on the current path, emissions are actually expected to increase from their 2015 levels by 2030, leaving the planet on a path of increased warming (by 2.4-2.8°C). This would be catastrophic.

Big Reserve with Responsibility

The combustion of fossil fuels is the dominant cause of global warming. In 2018, 89 per cent of total carbon dioxide emissions came from the fossil fuels industry. The Gulf Cooperation Council (GCC) countries, which have large fossil fuel deposits, are contributing to high emissions, and five out of six GCC countries are expected to be in the top 10 countries globally for emissions per capita by 2030. Yet, on the bright side, these countries also have ambitious emission reduction targets.

The UAE plan for net zero by 2050 and one-third emissions reduction by 2030 has been hailed by UN Secretary-General António Guterres as ‘ambitious and important’. On the other hand, Saudi Arabia aims to cut emissions by 32 per cent by 2030 and reach net zero by 2060. On average, the six GCC countries plan to reduce emissions by 17.6 per cent by 2030 through climate tech innovation, with the deployment of green technologies being one of the region’s key priorities.

The African Contrast

On the African continent, leaders and innovators are thinking of ways to limit and adapt to the world’s climate effects on their countries and people, highly, and unequally, impacted by the repercussions of the climate crisis. The average African citizen contributes less than 18 per cent of the global average and less than 1 per cent of the GCC average.

While the regional and global challenge is making energy consumption more sustainable, Africa’s current concern is to produce more energy, a key roadblock in the continent's development. Some 590 million people (46 per cent) lack access to electricity, with electricity access rates in most countries at below 30 per cent and only 16 per cent in rural areas. Instead of decarbonisation, the priority in Sub-Saharan Africa (SSA) is electrification and improving energy access.

Many believe that SSA has a unique opportunity to leapfrog past fossil fuels, with the right amount of investment and support from the rest of the world.

The renewable energy opportunity is exciting, thanks to its cost-competitiveness: Africa’s renewable energy resources have shown to be two-thirds cheaper than coal-fired power plants. Between 2009 and 2020, the costs of electricity from solar and wind fell by 70 per cent and 90 per cent, respectively.

The Opportunity

Less than one per cent of the GCC’s energy came from renewable sources in 2019, yet GCC countries are planning to invest $10 trillion in renewable energy by 2030. Saudi Arabia is investing $100 billion in renewable energy projects and is hoping to produce 50 per cent of energy from renewables by 2030, up from 1 per cent in 2021, while the UAE plans to increase renewable power production to 44 per cent by 2050. National oil companies, major contributors to the GDP of GCC countries, have a big role to play in realising their countries’ climate agendas. Reducing net emissions by removing carbon from the atmosphere through Carbon Capture, Utilisation, and Storage (CCUS) is one evident solution. According to the Global CCS Institute, Saudi Arabia, the UAE, and Qatar account for 10 per cent of carbon captured globally. However, this could rise by 2030 to 56-69 per cent of global CCUS, making them global leaders.

In addition to decarbonising operations, another area to tap into is climate tech and innovation. The region must begin re-thinking how we do things in various sectors, including energy, transportation, and agriculture, the second most contributing sector to greenhouse gas emissions. Many start-ups have sprouted in the GCC and Africa, addressing various issues and providing innovative solutions based on each region’s challenges and state of development.

Early and focused investments in renewables and green hydrogen production can create sustainable economic opportunities for the region in a decarbonised world while cementing the GCC's role in energy markets. To achieve the GCC’s ambitious emissions-reduction ambitions, startups have become key players in the market, such as the UAE’s Yellow Door Energy, a regional market-shaper in solar and energy efficiency production, raising over $400 million in equity.

Some other innovators are offering the GCC solutions that are tailored to the region’s landscape and climate, like RedSea, a Global Ventures portfolio company with the goal of reducing food insecurity around the world by utilising saltwater-based agriculture products, systems, and services to help sustainably feed the world’s water-scarce populations.

Fighting Climate Change

According to the Paris Agreement, "accelerating, encouraging and enabling innovation is critical for an effective, long-term global response to climate change,” with the decarbonisation opportunity being named the biggest business opportunity since the internet revolution. Startup founders are eager to contribute to solving climate change, the world’s most pressing crisis. However, investors, governments, and large corporates must stand by them to provide them with the necessary investment, opportunities, knowledge, and support to ensure that innovation flourishes across the region and prevents us from reaching a climate deadlock.