What should Saudi Arabia do?

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Enhance NDC to be 1.5 degree aligned by COP26:

  • It is unlikely that KSA’s stance against climate action will change because of its reliance on oil revenues.
  • KSA is OPEC’s swing producer, cutting oil production to balance markets when needed. It also keeps oil production capacity in reserve to call upon in times of shortage.
  • Increased oil and gas production in the US and growing concern about climate change (with peak oil demand forecasted sometime in the 2030s) are perceived by KSA as the main challenges to their hydrocarbon revenues.
  • However, given that production costs in KSA are among the world’s lowest, oil markets are likely to become more dependent on them in a world of declining oil demand.
  • KSA also faces the challenge of providing meaningful employment for a significant youth bulge – 40% of its population is under 251.
  • The existential urge for genuine economic diversification in KSA can be the right lever to push for a low carbon transition. The main driver of this transition is the opportunity cost of selling oil onto the global market instead of burning it locally for domestic purposes. The disadvantage of this approach is that the improvement of Saudi’s NDCs will be done at the expense of global climate action.
  • The strategic alliance between Saudi Arabia and the UAE creates a global giant of fossil fuel extraction (an alliance much more efficient than the OPEC or the GCC).
  • Saudi Arabia sits on two pools of liquids: one of the planet’s greatest and oldest freshwater resources, and one of the planet greatest oil reserves. The extraction of both is becoming increasingly problematic for the country.
  • Saudi Arabia is at the frontier of water scarcity and heat and is very vulnerable to climate change impacts, but, like its oil-rich neighbors, it is convinced that it has the financial resources to build (often unsustainable) adaption infrastructure.
  • The two leverages for climate action in KSA are decarbonization of the economy if that means decreasing the opportunity cost of consuming its oil resources locally and greening the unavoidable adaptation infrastructure needed to maintain economic livability.

What you need to know about Saudi Arabia?

  • Saudi Aramco has contributed more than any other company to global carbon dioxide emissions since 1965. It is the world’s most profitable company, with nearly twice the earnings of number-two company Apple in 2018.
  • The listing of Saudi Aramco in December 2019 could open the state-owned company to increased international scrutiny, including around climate-related issues.
  • SABIC (Saudi Basic Industries Corporation) is a chemical and petrochemical manufacturing company which 70% is owned by Saudi Aramco. In October 2019 SABIC merged with two other Saudi petrochemical companies, Sadaf and Petrokemya.
  • Yasir al-Rumayyan, former head of Saudi Arabia’s Public Investment Fund was installed as Aramco chairman and is likely to bring a more finance-driven approach to managing the company.
  • Saudi citizens feel a sense of pride in Aramco as their national champion and the heart of their economy.
  • There has been a visible absence of grassroots protests, including youth activism, against climate change in most of MENA, which stands in contrast with recent vocal youth climate strikes in the West.
  • The Arab Youth Climate Movement (AYCM) is an organization that emerged leading up to the COP18 in Doha, Qatar, in 2012. It is the largest climate advocacy group in the MENA region with chapters in over 15 Arab countries. AYCM activities are not on the front pages of global media outlets, but they have quietly made some inroads in MENA since 2012. In KSA, AYCM activities are limited to raising public awareness about climate change and the conservation of energy.

Recent developments, threats and levers for action

Recent developments

  • Renewable energy projects are still a limited fraction of the total energy mix.
  • Economic diversification in KSA can be the right lever to push for a low carbon transition.
  • KSA is OPEC’s swing producer, cutting oil production to balance markets when needed.
  • Saudi Energy Minister has dismissed the IEA road map, which would limit the average increase in global temperatures to 1.5 Celsius.

Strengths

  • Relatively strong environmental activism within civil society

Opportunities

  • KSA’s existential urge for economic diversification away from oil revenues should be leveraged to improve the countries NDCs
  • Post COVID-19 low oil prices increase pressures towards economic diversification

Weaknesses

  • Historical reliance on oil revenues.
  • Lack of freedom of expression and democratic institutions and hence, absence of grassroots climate movements.

Threats

  • Failure of economic diversification strategies (KSA following the non-oil model of Dubai which cannot yet be considered a diversification success)
  • Current low oil prices disincentive the tightening of renewables targets
  • Regional conflicts and geopolitical instability

About Climate Diplomacy Snapshots

The data is clear. Accelerated and enhanced action is needed now to build resilience and avoid the worst impacts of climate change. As they seek to address the ongoing health, economic and social impacts of COVID-19, governments should seize opportunities to invest in a recovery that will build social, economic and climate resilience on the long-term. The Climate Diplomacy Snapshots aim to provide the climate community with a clear overview of what each country should do, on climate and recovery, to pursue these joint objectives and keep the global average temperature increase to 1.5°C. Each has been prepared with the help of national experts, and will be regularly updated. The snapshots aim to support climate advocacy in the lead up to COP26.

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