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Implementing Circular Carbon Economies in the Gulf and Beyond
About KAPSARC
KAPSARC is an advisory think tank within global energy economics and sustainability
providing advisory services to entities and authorities in the Saudi energy sector
to advance Saudi Arabia's energy sector and inform global policies through
evidence-based advice and applied research.
This publication is also available in Arabic.
Legal Notice
© Copyright 2023 King Abdullah Petroleum Studies and Research Center (“KAPSARC”).
This Document (and any information, data or materials contained therein) (the
“Document”) shall not be used without the proper attribution to KAPSARC. The
Document shall not be reproduced, in whole or in part, without the written permission
of KAPSARC. KAPSARC makes no warranty, representation or undertaking whether
expressed or implied, nor does it assume any legal liability, whether direct or indirect,
or responsibility for the accuracy, completeness, or usefulness of any information that
is contained in the Document. Nothing in the Document constitutes or shall be implied to
constitute advice, recommendation or option. The views and opinions expressed in this
publication are those of the authors and do not necessarily reect the ofcial views or
position of KAPSARC.
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Implementing Circular Carbon Economies in the Gulf and Beyond
The circular carbon economy (CCE) provides a comprehensive, technology-neutral framework for
designing Paris Agreement-aligned energy transitions in diverse countries worldwide. KAPSARC’s
CCE Index measures how countries are performing on the CCE today and how they are positioned to
make progress toward CCEs going forward. A workshop held at Expo 2020 Dubai in March 2022 used the
CCE as an overarching frame for discussions about sustainable energy transitions in the Gulf Cooperation
Council (GCC) countries and beyond, building on insights from the 2021 CCE Index.
The workshop was structured around three themes. Key highlights from each included:
On implementing CCEs in the GCC and beyond:
Given the diversity of countries’ circumstances, each country will have its own technology mix and
CCE pathway. Countries worldwide are starting to embrace a growing number of carbon circularity
approaches. For example, in Germany, which has been a world leader in the ‘reduce’ component of the
CCE, the debate on carbon capture and storage (CCS) and negative emission technologies is picking
up. Japan has major plans to import both green and blue hydrogen and ammonia. Saudi Arabia and the
United Arab Emirates (UAE) have low-cost, relatively lower-carbon hydrocarbon production and a deep
understanding of their reservoirs. They are able to generate renewable electricity at some of the lowest
costs in the world, which will be an asset in many areas of the CCE, should they manage to scale up
deployment rapidly.
There are growing concerns over the resilience of the global transition to net zero, brought about by
recent energy price hikes worldwide and, more recently, the war in Ukraine. Trust-building will be
essential for cost-effective CCE transitions, which require international cooperation that builds on each
country’s competitive advantages.
On how countries can reach their long-term climate policy targets and pathways:
Governments play a key role in creating and enabling policy frameworks for companies to meet their
climate and CCE targets. Domestic and international carbon markets can supplement these and have the
potential to generate revenues for net-zero and CCE transitions, including scaling up CCS.
Regional collaboration will in many cases be key to maximizing the potential of various CCE solutions.
Industrial clusters in several locations in Europe and the GCC can play a major role in supporting various
pillars of the CCE.
On enablers for CCE transitions:
The key enablers required to speed up CCE transitions include more specic and targeted government
policies and harmonized environmental, social and governance (ESG) disclosures. Continued policy
support for, and the rapid scaling up of, clean technologies, in particular CCS, will be fundamental to
meeting globally agreed upon climate targets. With an eye on globally harmonized ESG disclosures,
which could be expected as soon as 2024, the GCC can stand to benet from taking early action to
prepare its industries and businesses to keep attracting foreign investments.
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Key Points
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Implementing Circular Carbon Economies in the Gulf and Beyond
The workshop was structured into three sessions:
exploring countries’ current CCE status, their
policy targets and plans for achieving net zero and
CCEs, and the enablers required to support CCE
transitions. Participants were given a high-level
overview of the 2021 CCE Index results, and each
session kicked off with scene-setting presentations
that drew on insights from the index.
This brief provides a summary of the discussions,
corresponding to the workshop sessions:
Implementing a CCE – Country Perspectives
from the GCC and Beyond
Policy Targets and Pathways for Countries and
Industries
Finance and Other Enablers for CCE Transitions
The circular carbon economy (CCE) is an energy
transition framework that is based on a holistic,
technology-neutral and country context-sensitive
approach to achieving net-zero emissions. It
embraces all available technologies and tools, from
renewable energy to carbon capture and storage
(CCS). In November 2021, KAPSARC launched the
rst edition of the CCE Index, which is a composite
indicator that enables cross-country comparisons
on two related aspects: how countries are currently
performing on the CCE, and how they are positioned
to make progress toward CCEs and carbon or
greenhouse gas (GHG) emissions neutrality.
In March 2022, KAPSARC’s CCE Index team
convened a workshop aimed at deepening the
discussion on how countries with both similar
and different circumstances can accelerate
progress to reach CCEs. Organized at Expo 2020
Dubai, discussions focused primarily on the Gulf
Cooperation Council (GCC) countries, with insights
from other countries and regions.
The workshop also served as an opportunity to
showcase the results of the 2021 CCE Index to a
GCC expert audience and to launch the CCE Index
Lab. The Lab is an interactive feature of the CCE
Index web portal, available via https://cceindex.
kapsarc.org/. It allows users to toggle indicator
weights and values based on their preferences and
priorities and examine how these changes inuence
countries’ index scores.
Summary
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Implementing Circular Carbon Economies in the Gulf and Beyond
Background: The CCE Index and the
CCE Index Lab
The circular carbon economy (CCE) is an
economy in which atmospheric carbon
dioxide (CO2) and other greenhouse gas
(GHG) emissions are minimized and offset by
reducing, recycling, reusing and removing carbon.
The concept emphasizes the need to address
emissions holistically using all available mitigation
options. It also recognizes the economic value of
carbon and each country’s specic circumstances
(see e.g., Williams [2019]; KAPSARC [2020]; and
Luomi et al. [2021]).
The CCE’s added value to the global energy
transition discussion comes from its call to pay
attention to carbon capture, utilization and storage
(CCUS)-related solutions alongside all other
technologies and options to reduce CO2 and
GHG emissions. The most cost-effective Paris
Agreement-aligned Intergovernmental Panel on
Climate Change scenarios all incorporate CCUS,
which will be required in the medium and even long
term in many hard-to-abate sectors in countries
across the world (Global CCS Institute 2020).
These sectors include long-haul transport and
industry. The CCE also provides a particularly
useful framework for energy policy planning for
hydrocarbon producers. These producers will need
to signicantly scale up their CCS-related solutions
to be able to keep generating value from these
natural endowments in the long term.
KAPSARC’s CCE Index project seeks to expand
and add rigor to the conceptual basis of the CCE as
well as its practical operationalization. In 2021, the
project delivered the rst edition of the CCE Index,
and the second edition is planned for launch at
the 2022 UN Climate Change Conference in Egypt
(COP 27) in November 2022.
A detailed description of the 2021 CCE Index
methodology is available in the KAPSARC
paper, “The Circular Carbon Economy Index
2021 – Methodology.” Three further KAPSARC
papers analyze the 2021 results in more detail:
one provides an overview of the results for the
30 countries included in the rst edition, which
comprise the G20 member countries and the world’s
top 20 oil producers. Another paper demonstrates
how policymakers can use the CCE Index, using
Saudi Arabia as a case study. The third paper
presents a comparative analysis of GCC countries’
performance on the CCE Index comparison to other
countries and each other. All these papers are
available via the CCE Index web portal, which also
includes an interactive Lab section that allows users
to toggle between various indicator parameters:
https://cceindex.kapsarc.org/
Figure 1 displays the indicator framework for the
2021 CCE Index and the aggregation logic. Each
country receives a score from 0 to 100 on each
indicator. These are then aggregated upward by
calculating the averages of clusters of indicators:
The CCE Performance score is formed by the
average score of its eight underlying indicators. For
the CCE Enablers score, indicator score averages
are rst calculated for each of the thematic sub-
dimensions (policy, technology, nance and so on),
and the average of these then becomes a country’s
CCE Enablers score. Finally, the total CCE Index
score is formed by the average of the Performance
and Enablers scores.
In the 2021 edition, the Oil Producers Lens (OPL)
adds ve indicators on each side (Performance
and Enablers) to enable the generation of
additional scores for major oil producers: the OPL
Performance score is the average of the CCE
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Implementing Circular Carbon Economies in the Gulf and Beyond
Background: The CCE Index and the CCE Index Lab
Performance score and the combined average of
the ve OPL Performance indicators. The OPL
Enablers score is the average of the CCE Enablers
sub-dimension scores together with the combined
average of the ve OPL Enablers indicators (see
Figure 1).
The March 2022 workshop marked the launch of
the CCE Index Lab, which is an interactive feature
of the CCE Index portal. The CCE Index Lab
allows advanced users to create simulations that
adapt to diverse country circumstances and user
preferences and priorities. Users can then test the
impact of specic CCE policies on country scores
and rankings. The rst simulation tool allows users
to change indicator weights. This helps show how
prioritizing different combinations of CCE activities
(actions that reduce, recycle, reuse or remove
carbon) and CCE enablers impacts the performance
of countries on the CCE Index. The second tool
gives users the ability to change countries’ scores
on different indicators. This demonstrates how a
higher performance on one or more indicators would
impact a country’s ranking in the CCE Index, ceteris
paribus. The Lab can be accessed via https://
cceindex.kapsarc.org/cceindex/lab
Figure 1. 2021 CCE Index indicator framework and aggregation logic.
Source: Based on Luomi, Yilmaz and Alshehri (2021a).
Total CCE Index score
CCE Performance score
(50% of the Total CCE Index score)
Energy efficiency Policy and regulatory support to EE and RE
CCS policy, law and regulation
Natural sinks protection policies
Reporting of emissions
Climate change policy
Research and development expenditure
Clean energy technology patents
Academic research intensity
University and industry technical collaboration
Medium and high-tech industry’s contribution to the economy
International high-technology interaction
Circular carbon economy investments
Access to sustainable finance
Access to finance
International financial connectedness
Carbon pricing
Regulations supporting business activity
Trade and transport infrastructure
RE investment and deployment opportunities
Energy security
Energy infrastructure stability
Economic diversification Employment
Quality of governance
Environmental health
Climate change resilience
Adjusted national income
Energy equity
Human capital
Policies and
regulation
(20% of the CCE
Enablers score)
Technology,
knowledge
and innovation
(20% of the CCE
Enablers score)
Finance and
investment
(20% of the CCE
Enablers score)
Business
environment
and energy security
(20% of the CCE
Enablers score)
Socioeconomic
context
(20% of the CCE
Enablers score)
Renewable energy
Electrification
Nuclear energy
Fuel switching
Natural sinks
Green hydrogen
Carbon capture, utilization and storage
CCE Enablers score
(50% of the Total CCE Index score)
+ Oil Producers Lens score
OPL Performance
score
(50% of OPL score)
OPL Enablers
score
(50% of OPL score)
OPL Performance
indicators
(50% of OPL Perf. score)
OPL Enablers
indicators
(50% of OPL Enab. score)
CCE Performance
(50% of OPL Perf. score)
CCE Enablers
(50% of OPL Perf. score)
Carbon intensity of crude
oil production
Flaring intensity of
oil production
Intensity of fugitive CH4
from fossil fuel production
Carbon intensity of
manufacturing value added
Value added of
chemical industry
Environmental, social
and governance risks
Company sustainability
disclosures
Carbon capture and
storage potential
Government and industry
commitment to net-zero
emissions
Quality of resource
governance
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Implementing Circular Carbon Economies in the Gulf and Beyond
Implementing a CCE – Country
Perspectives from the GCC and Beyond
This workshop session focused on two GCC
countries – Saudi Arabia and the United Arab
Emirates (UAE) – and two countries that are
expected to play a major role in enabling CCEs
in the Gulf through energy trade and cooperation,
namely Germany and Japan. Speakers reected
on the status quo of CCEs in these countries,
including their strengths and weaknesses, as well as
emerging trends.
To set the scene for the discussion, the CCE
Index team presented insights from the 2021 CCE
Performance sub-index on the four countries. The
Performance side of the index measures countries’
current standing on eight main CCE activities that
reduce, recycle, reuse or remove carbon. Given the
diversity of countries’ circumstances, each country
will have its own technology mix and CCE pathway.
This is why each activity is given the same weight
when calculating the scores. Germany and Japan
both perform well on energy efciency (measured by
the energy intensity of the economy) and on nuclear
energy (as a share of the total energy mix). Germany
has a high share of renewable energy in its energy
mix, and Japan has a high rate of electrication,
which is a key vehicle for decarbonizing energy
systems. Saudi Arabia has made considerable
progress in switching from oil to gas in its power
sector in recent years, and the UAE leads with one
of the world’s largest CCS portfolios, when adjusted
to economy size. Germany and Saudi Arabia, in turn,
are leaders in green hydrogen projects.1
Germany, which ranked third in the 2021 CCE
Performance sub-index, has been a world leader
in the ‘reduce’ component of the CCE. This is
particularly true for commercial renewable energy,
which has been promoted through dedicated policy
instruments over three decades. This has also
helped bring down renewable energy costs for other
countries. Germany aspires to be a green hydrogen
leader and is investing signicantly in this area. The
German Ministry of Economy and Climate Change
has set up a research program focused on carbon
reuse (CCU) solutions. Legislation and policies have
in the past decade discouraged carbon removal
(CCS), driven by public resistance to geological
storage that stems from negative experiences from
coal mining-related damages. However, the debate
on CCS and negative emission technologies is
picking up, and research on the latter is accelerating
(see Figure 2).
1 The 2021 CCE Index results are available at https://cceindex.kapsarc.org/ and in Luomi, Ylimaz and Alshehri (2021b). The 2021
index does not include a separate indicator for blue hydrogen, nor does it incorporate it in a ‘clean’ hydrogen indicator because
of a lack of data availability. Blue hydrogen, however, is measured indirectly under the CCUS indicator, given that blue hydrogen
projects require CCS.
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Implementing Circular Carbon Economies in the Gulf and Beyond
Implementing a CCE – Country Perspectives from the GCC and Beyond
Figure 2. Germany’s engagement in various CCE domains.
Source: Axel Michaelowa 2022, embedded graphic based on Saudi Arabia’s Ministry of Energy 2021.
Note: DACCS = direct air carbon capture and storage; BECCS = bioenergy with carbon capture and storage.
Germany is very strong in the “reduce” component
• World leader in renewable energy
• Wants to be leader in green hydrogen
Reuse component not seen as material in Germany
Recycle component starts to be addressed by industry
• Research program by ministry of economy
Remove category was deliberately kept small for a long time
• Early moves stalled due to public opposition
• Serious debate has just started, research picks up
Other European countries much stronger on “remove”:
• Switzerland and Iceland on DACCS
• Sweden and UK on BECCS
But: German industry and research has key competences and can move quickly
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Implementing Circular Carbon Economies in the Gulf and Beyond
Implementing a CCE – Country Perspectives from the GCC and Beyond
Table 1. ‘4R’ technologies adopted in Japan.
Japan, is ranked 11th in the 2021 Performance
scores and is a highly industrialized net energy
importer, like Germany. It is already performing
well on energy efciency and is on track to improve
further over the next decade. The country will,
however, need to make additional efforts to meet its
national renewable and nuclear energy power sector
targets of 36% – 38% and 20% – 22%, respectively,
by 2030, from 18% in 2019 and 4% in 2020 (ANRE
2021). Japan has major plans to import both green
and blue hydrogen and ammonia. Regarding the
other CCE pillars, Japan has more limited removal
(CCS) capacity, but it is engaging heavily in
research and development (R&D) under the ‘recycle’
and ‘reuse’ pillars through biofuels for aviation and
CO2 absorption in concrete (see Table 1).
• ‘Reduce’ progresses most while other Rs are also catching up.
Source: Yoshikazu Kobayashi 2022.
Major issues / challengesStatusItems4Rs
Expansion of off-shore wind.
Limited at land for solar.
Grid development, etc.
Power mix target is set at 36%-38%
as of 2030 (12.8% as of 2020).
RenewableReduce
Efciency improvement of
appliances (air conditioner, heat
pump) slow down; optimization of
power supply and demand, etc.
Reduction target is set for 2030
(Approx. 13% cut from 2019 level).
Progress is on track (but may
rebound after COVID-19 is
contained).
Energy efciency
Acceleration of approval process.
Public acceptance, etc.
Power mix target is set at 20%-22%
as of 2030 (3.9% as of 2020).
Nuclear
Cost reduction of the entire supply
chain; policy incentive to promote
infrastructure development.
Power mix target is set at 1% as of
2030.
Pilot testing of 20% co-combustion
of ammonia with coal.
Hydrogen/ammonia
Cost reduction and capacity
expansion.
R&D is pursued by energy and
engineering industry.
Biofuel for aviationReuse
Cost reduction of admixture;
Efciency improvements in curing
process.
Some of the products have been
commercialized.
CO2 absorption concreteRecycle
Cost reduction of feedstock
hydrogen.
Carbon accounting in case of
international trade.
R&D by city gas companies, oil
reners, engineering companies,
shipping companies, etc
Synthetic fuels (methane and
liquid fuels)
Securing storage location, including
outside Japan; development of CO2
transportation infrastructure, etc.
Pilot test at Tomakomai was
successfully done.
Exploring another storage location.
CCSRemove
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Implementing Circular Carbon Economies in the Gulf and Beyond
Implementing a CCE – Country Perspectives from the GCC and Beyond
Saudi Arabia, eighth in the 2021 Performance
ranking, is the world’s largest oil exporter. It has
acquired a deep understanding of its geological
sub-surface, which will help it scale up its CCS
capacity. It also has some of the world’s lowest GHG
emission leakage rates in hydrocarbon extraction
and production. A past success story was the
establishment of its Master Gas System that has,
since the 1980s, enabled Saudi Arabia to capture,
and convert into value, billions of tonnes of CO2
equivalent of emissions from methane. These two
factors will help place the Kingdom in a favorable
position to produce blue hydrogen (generated from
natural gas with CCS) with minimal emissions. Saudi
universities are engaged in cutting-edge research
into atmospheric CO2 capture. Alongside the UAE,
Saudi Arabia is at the forefront of enhanced oil
recovery technologies, which can enable exports
of carbon-neutral oil-derived products. The two
countries are also able to generate renewable
electricity at some of the lowest costs in the world.
The UAE, 14th in the 2021 Performance sub-index,
shares many attributes with Saudi Arabia in terms
of its CCE performance and strengths. Signicant
positive changes can be expected in the coming
years in the country’s sub-index position, driven by
policies and projects already underway. A nuclear
power capacity of 5.6 gigawatts (GW) is coming
online, and solar electricity is scaling up fast, with
3 GW of capacity under construction in Abu Dhabi
alone. The UAE also operates the world’s rst
commercial-scale industrial CCS project, which
captures 0.8 million tonnes (Mt) of CO2 per year.
Moreover, the country plans to increase its total
capacity to 5 Mt per year in the coming years.
Along with Saudi Arabia, the UAE has one of the
most advanced clean hydrogen production plans
worldwide, and the country’s oil production has a
low carbon intensity. Despite progress in improving
energy efciency, including through energy price
reform, further work remains in this area, as in other
GCC countries.
Workshop participants also highlighted the following:
• The resilience of the transition is a key
concern in light of present global economic
uncertainties, energy price hikes in Europe and
the war in Ukraine. The two latter developments
might either accelerate or slow down the
European Union’s (EU’s) green transition plans.
From the GCC perspective, a key question is
whether the EU and GCC can generate sufcient
trust to enable the scaling-up of clean hydrogen
markets, given the growing sentiment in support
of energy independence in Europe. The war may
also be a game changer for hydrogen policies:
blue hydrogen relies on natural gas, and Europe
may therefore now direct more policy support to
green hydrogen.
• International cooperation will be essential to
realizing the full potential of the CCE and for
countries to meet their Paris Agreement targets.
For example, there are clear complementarities
between Japan’s and Germany’s clean hydrogen
import plans, and Saudi Arabia’s and the UAE’s
hydrogen export aspirations. Gulf countries, in
turn, should seek to turn their similarities (i.e.,
hydrogen and CCUS ambitions) into a source of
cooperation rather than competition.
• Large-scale CCUS will be necessary to
meet the Paris Agreement’s goals effectively.
Countries can keep using fossil fuels as long as
they employ the four ‘Rs’ of the CCE holistically.
CCUS hubs are an attractive concept for GCC
countries, which have large concentrations of
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Implementing Circular Carbon Economies in the Gulf and Beyond
Implementing a CCE – Country Perspectives from the GCC and Beyond
industrial sources of emissions. Saudi Arabia
has conducted initial feasibility studies for
a regional CCUS hub and is looking at the
eastern industrial city of Jubail as a potential
location. Areas of collaboration could include
the development of standards and sharing of
facilities and resources. Pipeline infrastructure
connecting sources with storage still needs to
be developed, along with stronger domestic
enabling policies and international product
certication.
• Major hydrocarbon exporters like Saudi
Arabia still have a task ahead in changing the
external perception that they are seeking to
extend the status quo of global energy markets
instead of supporting CCE transitions. This will
require “walking the talk”: More specic policies
and initiatives to support decarbonization and
carbon circularity, such as carbon pricing
instruments, are still needed in the Gulf to
support the countries’ net-zero ambitions.
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Implementing Circular Carbon Economies in the Gulf and Beyond
Policy Targets and Pathways for
Countries and Industries
This session explored government and
corporate plans to reach net-zero emissions
in the GCC and in Europe.
As a scene-setter for the session, the CCE Index
team presented a map of GCC countries’ climate
change targets, as spelled out in their Paris
Agreement nationally determined contributions
(NDCs). This mapping highlighted that the UAE
and Saudi Arabia have communicated plans in
most of the main areas of the CCE, ranging from
renewables and energy efciency to CCUS and
hydrogen. In some of these areas, they have also
set quantitative targets, which are crucial medium-
term signposts for governments and businesses
alike. As of March 2022, 83 countries worldwide,
representing 74% of global GHG emissions, have
set mid-century net-zero targets (Climate Watch
2022a). This includes the GCC countries Bahrain,
Saudi Arabia and the UAE. In addition, a growing
number of major energy and industrial players,
including Saudi Aramco and many in Europe,
have announced net-zero ambitions. The energy
mix in many countries, including the GCC, is still
dominated by hydrocarbons. Achieving net zero will
therefore require broad and rapid transformations of
energy systems and roadmaps to lay out the path.
The Netherlands, in Northwestern Europe, offers
a case study of how the hydrocarbon industry is
preparing for a rapid scaling up of clean hydrogen
production and CCUS. It currently consumes
approximately 60% of the EU’s hydrogen,
predominantly as gray hydrogen, derived from fossil
fuels. There are now plans to convert this into clean
hydrogen as a part of the EU’s ‘Fit for 55’ program,
aimed at delivering on the union’s target of reducing
GHG emissions by 55% below 1990 levels by 2030.
Domestic legislation, including nancial penalties
for non-compliance, is also driving the industry’s
transformation.
The clean energy transition in the Netherlands will
involve expanding offshore wind and electrication
as well as CCUS and both blue and green hydrogen
capacity and infrastructure. Dutch offshore
gas elds offer an attractive location for CO2
storage, and a part of the country’s dual natural
gas transmission system will be refurbished for
hydrogen transport in the coming years (see Figure
4). A clean hydrogen pipeline system is envisaged
to connect the country’s industrial clusters with
others in Belgium and Germany. A transportation
system for CO2 is envisaged that can later act as a
transmission system for circular carbon products,
including chemicals.
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Implementing Circular Carbon Economies in the Gulf and Beyond
Policy Targets and Pathways for Countries and Industries
Figure 4. Illustrative map of NortH2 green hydrogen consortium plans.
Source: NortH2 – Gasunie, Groningen Seaports, Shell Netherlands, Equinor, RWE and Eneco 2022.
Saudi Aramco announced a net-zero emissions
target for 2050 in October 2021. The target applies
to Scope 1 (direct) and Scope 2 (indirect, related to
energy use) emissions from the company’s wholly
owned assets. The company’s production is low
cost and has a low carbon intensity (10.6 kilograms
of CO2 equivalent per barrel of oil equivalent
[Masnadi et al. 2018]). Signicant GHG emissions
could be avoided if the entire global oil industry
achieved a similar carbon intensity performance.
Aramco also aims to diversify its portfolio into
low-carbon solutions, which include expanding into
chemicals and hydrogen. It has set up 11 energy-
focused R&D centers across the globe, which are a
key component of its business strategy.
Governments play a key role in creating policy
frameworks that enable companies to meet
their climate and CCE targets. For a company
like Aramco, these could include: (1) creating
certainty through targets, roadmaps and policies;
(2) providing nancial support, including grants,
loans and offtake agreements; (3) promoting
public-private collaboration, including through
carbon markets; (4) harmonizing energy product
denitions and standards and promoting technology-
agnostic metrics, such as life-cycle assessments;
(5) establishing CCUS and hydrogen hubs to enable
economies of scale; and (6) investing in innovation,
particularly in CO2 reuse and removal (i.e., CCUS)
technologies.
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Implementing Circular Carbon Economies in the Gulf and Beyond
Policy Targets and Pathways for Countries and Industries
The UAE has set a net-zero target for 2050 and a
new baseline GHG emissions target in its updated
NDC for 2030. It has launched its Hydrogen
Leadership Roadmap and aims to capture a
quarter of the market share among key importers
of clean hydrogen by 2030. In addition to preparing
a detailed hydrogen strategy, the government is
revising its overarching energy strategy for 2050,
which will include reecting a recent decision to
convert a new 2.4 GW power plant to run with
natural gas instead of coal. The UAE also recently
launched a new national water and energy demand
management program to support its long-term
targets to reduce energy and water demand in
the top four consuming sectors by 40% and 51%,
respectively, compared with business-as-usual
projections, by 2050.
Speakers and participants also highlighted the
following:
• Regional collaboration will in many cases be
key to maximizing the potential of various CCE
solutions. In Northwestern Europe, government
policy, and in some cases direct funding, is
the primary driver of the current developments
in the industry described above, and regional
cooperation is driven by close coordination
among governments. At the same time, industry
itself has been the main proponent of some of
the projects going forward in the Netherlands
and its neighboring countries. Governments
cannot produce decarbonization; they can only
set the frameworks.
• Industrial clusters in several locations in
Europe and the GCC can play a major role in
supporting various pillars of the CCE. Mapping
and understanding the potential of these clusters
and the related infrastructure early on is crucial.
This helps ensure that they can enable, through
economies of scale, more effective electrication
and the introduction of hydrogen carriers into the
energy system, including through refurbishing
existing infrastructure, such as gas pipelines.
• Domestic and international carbon markets
have the potential to generate revenues for
net-zero and CCE transitions, including CCS.
However, there are questions around whether an
exclusively domestic system would be sufcient,
given the more limited number of stakeholders,
many of which are government-owned or related.
A regional carbon market, aligned with the Paris
Agreement’s Article 6 guidance, might therefore
be a more attractive option for the GCC. Here,
governments will need to play a leading role
in creating the right frameworks and market
conditions for private sector and corporate
engagement, while ensuring carbon markets
also help raise ambitions to reduce emissions
over time.
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Implementing Circular Carbon Economies in the Gulf and Beyond
Finance and Other Enablers for CCE
Transitions
The nal session zoomed in on three key areas
of CCE transition enablers: nance, policies and
technologies. Speakers called for attention to be
paid to the globalization of environmental, social and
governance (ESG) disclosures, more specic and
targeted policies to speed up the CCE transition and
support for scaling up CCS.
A CCE Index team member set the scene for the
discussion by presenting highlights from the 2021
CCE Enablers sub-index. This component of the
CCE Index measures ve areas of CCE transition
enablers: policies and regulation; technology,
knowledge and innovation; nance and investment;
business environment and energy security; and
socioeconomic context. In the 2021 edition of the
CCE Index, the widest gaps in countries’ scores
were in the rst three of these areas. Under the
nance and investment sub-dimension, the index
gauges countries’ strengths in both sustainable
and ‘conventional’ nance. On the former, the index
measures countries’ total energy transition (CCE)
investments and sustainable debt issuance (both
as a share of the country’s gross domestic product).
On both indicators, countries’ scores correlate highly
with their CCE Enablers scores. This signals that
those countries that are able to leverage higher
levels of sustainable nance also perform generally
well in other enabling areas. The top third of the
countries measured have signicantly higher shares
of both sustainable investment and debt than the
bottom two-thirds. The ve GCC countries included
in the 2021 edition rank in this latter group.
The 2021 results display similar patterns for the
technology, knowledge and innovation indicators,
which measure countries’ knowledge creation and
technology absorption capacity. In particular, the
top 10 countries in the CCE Enablers sub-index
have submitted signicantly more clean technology
patents (in relation to their population size) than
the remaining 20 countries, which include the GCC
countries. This indicates that, similarly to sustainable
nance and investment, knowledge creation is still
led by, and strongly concentrated in, a smaller group
of countries, while the need for scaled-up action
in both areas remains high globally. Similar trends
are visible under the policy and regulation sub-
dimension. For example, countries ranked in the top
third in the Enablers sub-index also rank the highest
on the “CCS storage law and regulation” indicator.
Environmental, social and governance (ESG) and
climate-related disclosures are quickly becoming
an increasingly common feature of companies’
strategic planning and reporting practices. Various
classication systems, or taxonomies, as well
as commercial ratings, have emerged in recent
years. The former are sets of criteria that form
the basis for an evaluation of a nancial asset,
and to what extent the asset can support given
sustainability goals (Ehlers, Gao and Packer 2021).
The EU’s taxonomy for sustainable activities is an
example. Commercial ESG ratings – Bloomberg’s
ESG scores, for example – can function as a
tool for assessing companies’ sustainability risk
management practices. However, they have many
shortcomings and have been accused of serving as
marketing tools for asset owners and managers, and
as a lucrative business for rating agencies and/or a
greenwashing vehicle for companies themselves.
Given the diversity and fragmentation of rating
criteria across these different systems, information
available to investors can be conicting. Early
academic literature also appears to suggest no link
between high ESG ratings and high investment
performance, or even a lower environmental impact
from companies’ operations (e.g., Freiberg et al.
[2020]; Pedersen, Fitzgibbons and Pomorski [2021]).
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Implementing Circular Carbon Economies in the Gulf and Beyond
Finance and Other Enablers for CCE Transitions
While ESG taxonomies should push toward more
transparency, and thus better disclosure standards,
they are in and of themselves not disclosures.
In recent years, disclosures have been actively
discussed and developed by the G20-afliated
Financial Stability Board, specically by its Task
Force on Climate-related Financial Disclosures.
Governments interested in attracting foreign direct
investment and corporate actors worldwide should
follow these developments closely, as they are
expected to inuence companies’ and countries’
abilities to attract foreign capital and export products
to certain markets. In response to growing calls
for harmonization, the International Financial
Reporting Standards Foundation recently launched
the International Sustainability Standards Board,
which is also working to develop standardized
sustainability disclosure requirements for
companies worldwide.
Policy frameworks and specic policies are
fundamental to driving business activity and
investments toward more sustainable outcomes.
In the GCC region, time periods between project
decisions and their execution are generally shorter
than in other regions, such as in Europe or North
America, which is an asset. At the same time, while
net-zero targets are now in place, clear roadmaps
that identify specic steps and execution stages
toward these goals have not yet been developed.
These are needed to guide companies on how to
align their investments and operations accordingly.
Both local and international companies operating
in the GCC have been encouraged by the recent
targets, but currently do not have the signals or
incentives to act accordingly. Discussions with the
region’s businesses and governments indicate
that GCC countries could accelerate their CCE
transitions by undertaking further activities. These
include energy pricing reform, investments in
renewable energy and energy efciency, new
carbon pricing instruments, R&D technology
investments and support to academia and public-
private partnerships in the energy sector. More
efforts to educate, build capacity and nurture young
talent would also be benecial. Saudi Arabia and the
UAE have been showing the way here.
The evolution of CCS implementation is
an example of how various enabling factors
inuence technology uptake, including technology
demonstration and consistent policy. The technology
cycle of CCS has passed through various stages.
In the late 2000s, a period of “hype,” catalyzed by
momentum around the 2009 Copenhagen climate
summit, drew both public investment and human
capital to the sector. However, in the aftermath of
the 2007-2009 Great Recession, a conuence of
the global shift in attention away from climate action
and the lack of established commercial business
models for CCS technology drove investment into
a “valley of death” in the rst half of the 2010s. The
Paris Agreement in 2015 kicked off the third phase,
under which all countries agreed to take action to
reduce emissions, in line with the latest climate
science. This led to both a renewed focus on CCS
and related business models, and more building
of awareness and capacity around the technology.
By this time, several large-scale demonstration
and pilot projects were also in place that could
demonstrate the technology’s commercial viability.
Several enabling policies also acted as catalysts,
including tax and other economic incentives, and
the emergence of ESG and net-zero targets on the
global corporate agenda. Going forward, consistent
policies, a value on carbon, continuing innovation
and regulation will be crucial to ensure faster
upscaling of CCS (see Figure 5.)
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Implementing Circular Carbon Economies in the Gulf and Beyond
Finance and Other Enablers for CCE Transitions
Figure 5. Global status of CCS in 2021 and factors inuencing the project pipeline.
Source: Chris Consoli, based on Global CCS Institute.
Note: Mtpa = million tonnes per annum.
Participants also discussed the following:
• The harmonization of ESG disclosure
and reporting standards is expected to be
imminent. Global standards are expected to
be agreed upon by 2023, and some major
jurisdictions may make these compulsory as
early as 2024. For the Gulf, it will be important
to track these global-level developments, along
with those in its key export markets, including
the EU. At present, despite signicant growth in
2021, only 1.3% of global ESG debt issuances
by mid-2021 were in the Middle East and North
Africa (Khan 2021). While attracting ESG funding
is important, the debate has so far mainly
focused on publicly traded companies. The GCC
could stand to benet by preparing its industries
and businesses across the board for ‘readiness’
to keep attracting foreign investments in a
broader sense in a world increasingly permeated
by ESG disclosures.
• The speed of CCS deployment is not yet
fast enough, even though CCS technologies
are expected to be required in a wide range of
industries, spanning cement and steel, hydrogen
and power plants, alongside CCS with biofuels
and direct air capture. The current capacity
of CCS facilities in development, construction
or operation is just under 150 megatonnes
of CO2 (MtCO2) per year. New projects are
announced globally on a weekly basis, but
this is still far from sufcient. A recent study by
the International Energy Agency, for example,
suggested that a 7,600 MtCO2 capacity would
be needed by 2050 under a 1.5°C compatible
scenario (IEA 2021). While CCS deployment
will be required across the world, implementing
projects remains technically challenging and
costly. Many developing countries will require
signicant support in project implementation
because, going forward, every molecule counts.
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Implementing Circular Carbon Economies in the Gulf and Beyond
References
Agency for Natural Resources and Energy (ANRE). 2021.
“Outline of Strategic Energy Plan,” October. Accessed
March 16, 2022. https://www.enecho.meti.go.jp/en/
category/others/basic_plan/pdf/6th_outline.pdf.
Climate Watch. 2022a. “Net-Zero Tracker.” Accessed
March 16, 2022. https://www.climatewatchdata.org/
net-zero-tracker.
———. 2022b. “Historical GHG Emissions.” Accessed
March 24, 2022. https://www.climatewatchdata.org/
ghg-emissions?end_year=2018&start_year=1990.
Ehlers, Torsten, Diwen (Nicole) Gao, and Frank Packer.
2021. “A Taxonomy of Sustainable Finance Taxonomies.”
BIS Monetary and Economic Department Working Paper
No. 118. Bank for International Settlements. https://www.
bis.org/publ/bppdf/bispap118.htm.
Freiberg, David, DG Park, George Serafeim, T. Robert
Zochowski. 2020. “Corporate Environmental Impact:
Measurement, Data and Information.” Working Paper
20-098. Harvard Business School. https://www.hbs.edu/
faculty/Pages/item.aspx?num=57938.
Global CCS Institute. 2020. “CCE Guide: Remove:
Carbon Capture and Storage.” https://www.cceguide.org/
guide/.
International Energy Agency (IEA). 2021. “Net Zero by
2050: A Roadmap for the Global Energy Sector.” https://
www.iea.org/reports/net-zero-by-2050.
KAPSARC. 2020. “CCE Guide: Overview. A Guide to the
Circular Carbon Economy (CCE).” https://www.cceguide.
org/guide/.
Khan, Sarmad. 2021. “More Green Finance Raised in
MENA in First Half than in Whole of Last Year.” The
National. July 4. https://www.thenationalnews.com/
business/2021/07/04/more-green-nance-raised-in-
mena-in-rst-half-than-in-whole-of-last-year/.
Luomi, Mari, Fatih Yilmaz, and Thamir Alshehri.
2021a. “The Circular Carbon Economy Index 2021
– Methodology.” KAPSARC Methodology Paper.
November. doi:10.30573/KS--2021-MP02.
Luomi, Mari, Fatih Yilmaz, and Thamir Alshehri. 2021b.
“The Circular Carbon Economy Index 2021 – Results.”
KAPSARC Discussion Paper. November. doi:10.30573/
KS--2021-DP021.
Luomi, Mari, Fatih Yilmaz, Thamir Alshehri, and Nicholas
Howarth. 2021. “The Circular Carbon Economy Index –
Methodological Approach and Conceptual Framework.”
KAPSARC Discussion Paper. May. doi:10.30573/
KS--2021-MP01.
Masnadi, Mohammad S., Hassan M. El-Houjeiri,
Dominik Schunack, Yunpo Li, Jacob G. Englander,
Alhassan Badahdah, Jean-Christophe Monfort, James
E. Anderson, Timothy J. Wallington, Joule A. Bergerson,
et al. 2018. “Global Carbon Intensity of Crude Oil
Production.” Science 361(6405):851–53. doi:10.1126/
science.aar6859.
Pedersen, Lasse Heje, Shaun Fitzgibbons, and
Lukasz Pomorski. 2021. “Responsible Investing:
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Williams, Eric. 2019. “Achieving Climate Goals by Closing
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goals-by-closing-the-loop-in-a-circular-carbon-economy/.
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Implementing Circular Carbon Economies in the Gulf and Beyond
About the Workshop
KAPSARC held a hybrid workshop on March
17, 2022, at Expo 2020 Dubai (Dubai
Exhibition Centre), with 27 climate change
and energy policy planners, clean technology
practitioners, economists focusing on sustainable
nance and ESG, index developers, carbon
market specialists and other experts focusing on
various aspects of sustainable energy transitions.
The workshop had two purposes: to disseminate
the 2021 CCE Index results and deepen the
understanding of how CCE transitions can be
accelerated in different countries, particularly those
in the GCC.
List of participants
Thamir Alshehri – Lead, KAPSARC
Fahad M. Alturki – Vice President of Knowledge and
Analysis, KAPSARC
Ahmed Elbermbali – Managing Director, MENA Clean
Energy Business Council
Christopher Consoli – Senior Consultant, Global
Carbon Capture and Storage Institute
Jorge Gascon – Circular Carbon Initiative Lead, Director
of KAUST Catalysis Center, King Abdullah University of
Science and Technology (KAUST)
Luciano Jannelli – Chief Economic Advisor, Ministry of
Investment, Saudi Arabia
Yoshikazu Kobayashi – Senior Economist, The Institute
of Energy Economics Japan
Mari Luomi – Fellow II, KAPSARC
Axel Michaelowa – Director, Perspectives Climate
Research
Robin Mills – CEO, Qamar Energy; Non-Resident
Fellow, Center on Global Energy Policy, Columbia
University
Tidjani Niass – Senior Sustainability Strategist, Saudi
Aramco
Coby van der Linde – Director, Clingendael International
Energy Programme
Fatih Yilmaz – Fellow I, KAPSARC
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Implementing Circular Carbon Economies in the Gulf and Beyond
Notes
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Implementing Circular Carbon Economies in the Gulf and Beyond
Notes
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Implementing Circular Carbon Economies in the Gulf and Beyond
Mari Luomi
Mari is a Fellow II in KAPSARC’s Climate and Sustainability Program. She is a
policy-oriented social scientist who has been studying climate change, energy
transitions and sustainable development policy in the Gulf and globally for 15 years.
She has worked for other leading energy, sustainable development and foreign
policy research institutions, including the Oxford Institute for Energy Studies, the
International Institute for Sustainable Development (Earth Negotiations Bulletin),
Georgetown University, the Finnish Institute of International Affairs, the Emirates
Diplomatic Academy and the Mohammed bin Rashid School of Government.
Mari holds a master’s degree in political science and international politics from the
University of Helsinki and a Ph.D. in Middle Eastern studies from Durham University.
In addition to a broad research publications portfolio, she has substantial experience
in executive training, presentations, policy advisory and reporting services for
multilateral environmental agreements.
Fatih Yilmaz
Fatih is a Fellow I in KAPSARC’s Utilities and Renewables Program. His current
research agenda aims to enhance our understanding of the nancial and economic
consequences of the global energy transition toward renewables and to design
effective policies to balance nancial risks and growth prospects.
Before joining KAPSARC, Fatih worked as an economist at the Structural Economic
Research Department of the Central Bank of the Republic of Turkey, where he was
involved in research and designing policies for the real and nancial sectors. He
has worked as a consultant for the World Bank and spent a year as an assistant
professor of economics at ADA University. He has authored various academic and
policy articles and organized conferences and workshops. He holds a Ph.D. in
economics from the University of Calgary.
Thamir Alshehri
Thamir is a Lead in KAPSARC’s Utilities and Renewables Program. He is currently
focused on creating data-driven tools to identify and evaluate different energy
market scenarios as well as using ‘big data’ technologies to better understand the
impact of consumer behavior and the environment on energy consumption. Thamir
is interested in using technologies to facilitate better energy public policy and energy
economical systems.
Thamir also acts as an advisor to the broader energy ecosystem in Saudi
Arabia, particularly in the areas of clean energy transitions, sustainability, and
carbon emissions management. He is also a member of the Technology and
Economic Assessment Panel at the United Nations Environment Programme. He
previously worked as a lecturer in Australia and has entrepreneurial and industrial
experience working on award-winning projects such as the Burj Khalifah Building
Management System.
About the Team
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Implementing Circular Carbon Economies in the Gulf and Beyond
About the Project
The Circular Carbon Economy (CCE) Index project seeks to expand and add rigor to the conceptual
basis of the concept of CCE, as well as its practical operationalization, by developing a robust
quantitative framework to measure countries’ performance and their progress toward it. The resulting
CCE Index is a composite indicator that measures various dimensions of the CCE in a national context,
across countries. Its main foci are current performance and enabling factors for future progress.
The CCE Index has been designed following international best practices in composite indicator
development for country comparisons. A consultation paper from June 2021 provided a preliminary
conceptual-methodological framework for the CCE Index and was used as a basis for expert and
stakeholder consultations. The Index’s International Technical Advisory Committee, comprising a group of
internationally renowned experts in relevant elds, also supports the delivery of a robust index.
The rst edition of the CCE Index, published in November 2021, covers 30 major economies and oil-
producing countries. It is being disseminated through various research outputs, including a KAPSARC
Discussion Paper presenting the 2021 CCE Index results, a KAPSARC Methodology Paper laying
out the 2021 CCE Index methodology and an online platform, located at https://cceindex.kapsarc.org.
Further research and analysis that use the CCE Index results to analyze countries in more detail are
also available.
The CCE Index has two main functions: rst, it is intended to enable further discussions around ways to
identify, measure and compare countries’ strengths and weaknesses in terms of the CCE, and to help
pinpoint areas where progress is already well underway and where further policy efforts are needed
or could be benecial. Second, the index promotes further understanding of the CCE concept and
the overall idea of adopting a holistic approach to managing emissions across energy systems and
economies and achieving carbon circularity. The project also seeks to support discussions within Saudi
Arabia, and other interested countries, on ways to measure and advance toward CCEs.
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Implementing Circular Carbon Economies in the Gulf and Beyond
www.kapsarc.org
