Tunisia will spend USD 12.3 bn on a two-year green development plan

Good morning, wonderful people. The first work week of 2023 is winding down and Egypt is gearing up for a three-day weekend in observation of Coptic Christmas. We have a couple of stories from the region to cap a fairly quiet news week down below.

A quick programming note: Enterprise Climate will be taking a publication holiday on Monday, 9 January. We’ll be back in your inboxes at our usual time on Tuesday, 10 January.

THE BIG CLIMATE STORY- Tunisia has unveiled a two-year development plan in which the government will invest USD 12.3 bn to greenify its agricultural sector, partly by supporting startups working on water scarcity and drought and authorizing the use of agricultural land for renewables projects.

^^ We have chapter and verse on this story and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- No one major climate story is dominating international press coverage today, but there is big news out there. India approved a USD 2.1 bn incentive plan to promote green hydrogen as it hopes to become a “global hub” for green hydrogen, aiming at annual production of 5 mn tons by 2030, Reuters quotes Information Minister Anurag Thakur as saying. It also plans to build 60-100 GW of electrolyzer capacity for green hydrogen production, put in place mandatory targets for green hydrogen consumption for specific industries, and offer incentives for electrolyzer manufacturing and green hydrogen production, Thakur noted. Investment in the sector is expected to total USD 96.6 bn by 2030, he added.

India’s green hydrogen push has expanded to MENA: India’s Adani Group recently signed an agreement to develop and license Australian electrolyzer technology, and has reportedly been exploring the feasibility of hydrogen production in Morocco and Oman. ReNew Power signed an agreement with El Sewedy Electric in November for an USD 8 bn green hydrogen project in Egypt.

PSA- Tunisia slashes customs + VAT on imports of EV charging components: Imports of equipment for electric vehicle charging will be subject to lower customs and value added taxes, after the Tunisian government cut the customs tariff by 10% and the VAT by 7% for these imports, La Presse de Tunisie reports. The tax incentives, which will be valid until 31 December of this year, are meant to accelerate the transition to electric vehicles with hopes of deploying 50k EVs in the North African country by 2025, according to a Tunisian Environment Ministry study cited by the outlet.

WATCH THIS SPACE #1- Saudi Arabia will depend on private sector investments to explore mineral reserves: KSA is looking to its private sector to unlock its full mining potential and will streamline and digitize the license application process under Saudi law, Forbes quotes Saudi’s Vice Minister for Mining Affairs Khalid Al-Mudaifer as saying. The country is currently undertaking a geological survey to confirm the mining potential of minerals which it believes would amount to USD 1.3 tn, Al-Mudaifer told the news outlet.

Roadblocks still stand in the way: The main impediment is that the kingdom lacks a ready supply of water which is key for mining and the transportation of resources from mines in the north to the east of the country, where reserves will be processed and shipped. Saudi Arabia’s 2023 budget may address this, with a portion of its SAR 72 bn earmarked for the kingdom’s economic resource development including environmental infrastructure, energy sources, and desalination.

SIGN OF THE TIMES- Global lending to green projects surpasses fossil fuel ventures for the first time: 2022 saw the amount of money raised for climate-friendly ventures in global debt markets edge out the funds raised for fossil-fuel companies for the first time, according to Bloomberg data shared yesterday. Some USD 580 bn was raised in debt markets last year for green projects, while the oil gas and coal industries secured funds closer to USD 530 bn, Bloomberg notes. Revenue generated in 2022 from the sale of green bonds and loans stood at some USD 3.3 bn in 2022, while the sale of bonds and loans for the highest-polluting energy sectors stood at some USD 2.5 bn, Bloomberg data indicates.

But Big Oil is probably getting more funds from other sources: Last year’s high oil prices likely reduced fossil fuel companies’ dependence on capital markets, and they could also be securing capital from other sources like private equity, research manager at nonprofit Rainforest Action Network April Merleaux tells Bloomberg.

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CIRCLE YOUR CALENDAR- Saudi Arabia will host The Future Minerals Forum from Tuesday, 10 January to Thursday, 12 January at the King Abdul Aziz International Conference Center in Riyadh. The event will gather 200 industry leaders and over 50 ministers to discuss attracting investments to the mining industry and decarbonizing mining projects globally. You can register for the event here.

UAE renewable energy firm Masdar will host Abu Dhabi Sustainability Week from Saturday, 14 January to Saturday, 21 January. The event will gather eight presidents and prime ministers and 30k participants in a series of conferences and summits including the Atlantic Council’s Global Energy Forum, the World Future Energy Summit, Masdar’s Green Hydrogen Summit, The International Renewable Energy Agency’s Youth Forum, and the Abu Dhabi Sustainable Finance Forum.

The UAE is hosting the Atlantic Council’s Global Energy Forum on Saturday, 14 January and Sunday, 15 January in Abu Dhabi. The forum will discuss the ongoing global energy crisis and its impact on the green transition, energy security, and decarbonization.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

Tunisia’s new public policy targets greener agriculture: Tunisia’s government unveiled a 2023-2025 development plan aiming to “greenify” its agricultural industry, increase phosphate production, address rising poverty and spur more private sector investment, French daily publication Le Monde reports.

The financials: The country plans to allocate some USD 12.3 bn for the development program through public spending from 2023-2025, Le Monde notes. It’s also looking to bring in private sector participation through facilitating public-private partnerships, among other things. Tunisia is hoping to increase the private sector’s share of investments in the program to 60% over the three years.

The recently-agreed IMF loan could help drive these developments: Tunisia’s USD 1.9 bn IMF package, agreed upon in October, contains provisions designed to help the country build climate change resilience, we noted at the time. These requirements include measures to promote investment in renewables, land and water management, to preserve the country’s coastline, and support agriculture, health, and tourism. Tunisia is still awaiting the final green light from the IMF for the dispersal of funds — which should then spur other international support — Le Monde notes.

The “green” elements of the plan are focused on resource use: Tunisian authorities will seek to support startups that are addressing the issues of water scarcity and drought through innovations in water reuse, Le Monde notes. The government is also set to authorize the use of agricultural land for renewables projects — notably in wind and solar energy, it adds.

And a leap in phosphate production: Tunisia’s three-year plan is targeting an increase in annual phosphate production to 5.6 mn tons in 2023 and 12 mn tons in 2025 — up from its current 3.7 mn tons, Le Monde notes. Phosphates are among the country’s few natural resources, but their production has decreased dramatically over the past decade, the outlet adds.

We can assume this is meant to enhance food security: Phosphorus — the mineral found in phosphates — is essential for the growth of food, but its supply is “increasingly disrupted,” raising the risk of a global food crisis, notes a recent article in the Conversation. Tunisia is particularly vulnerable to food crises, having been recently identified by the IFC as one of several Arab countries (including Yemen, Iraq, Lebanon, and Libya) potentially in need of support from its soon-to-be-launched USD 6 bn global food security platform.

But there’s a catch: Phosphate mining has substantial environmental impacts, including air pollution, water contamination, and the degradation of wildlife.

GCC green and sustainable bond and sukuk issuances saw massive growth in volume and value last year, with some USD 8.5 bn raised from 15 issuances — a sizable increase from the USD 605 mn raised from six issuances in 2021, according to data from Bloomberg’s Capital Markets League Tables picked up by Zawya. The Bloomberg data isn’t publicly available.

Saudi Arabia came in hot — and the UAE wasn’t far behind: KSA was the region’s leading issuer, accounting for over 50% of total issuance volumes, with the remainder coming out of the UAE. In 2021, all GCC green and sustainable bond and sukuk issuances came from the UAE, Zawya cites Bloomberg data showing.

Who were the big players? First Abu Dhabi Bank (FAB) played a leading role in the region, raising some USD 1.49 bn through three green bond issuances, Zawya notes. Also name-checked were the GCC’s major debut issuances: A USD 3 bn green bond issuance by Saudi Arabia’s Public Investment Fund (PIF), a USD 750 mn sustainable sukuk issuance by Dubai Islamic Bank (DIB), a USD 750 mn sustainable sukuk by Saudi National Bank (SNB) and a USD 500 mn green bond by Abu Dhabi Commercial Bank (ADCB).

All this growth despite a year of volatility: As we noted in our Year in Review on climate finance, MENA green bonds and sukuk had a good year — despite global bond market volatility. Globally, sales of new green and sustainable bonds and sukuk decreased 14% y-o-y in 2022, falling to USD 635 bn — in part, off the back of rising interest rates and overall volatility, according to the Bloomberg data.

And there’s more to come: As we noted yesterday, we can expect the boom to continue in 2023 as last year’s major debut issuances “suggest sustainable finance is continuing to enter the mainstream in the region,” Zawya quotes Venty Mulani, Bloomberg LP data specialist in sustainable fixed income as saying.

The GCC’s Western renewables acquisitions trend is poised to continue in 2023: Among the key trends we noted in 2022’s MENA climate investment landscape was the push by sovereign wealth funds (SWFs) to snap up renewables assets outside the region — notably in Europe and the US. A report published on Sunday by data platform Global SWF — which tracks over 400 SWFs and public pension funds — predicts the trend will carry on into 2023, with GCC SWFs set to accelerate their interest and investments towards renewables and Western assets.

Green investment by SWFs saw a substantial boost in 2022: Globally, state-owned investment (SOI) in renewables assets stood at USD 18.7 bn in 2022, the Global SWF report notes. Although this comes in at just below 2021 figures, if we were to exclude a 2021 USD 6 bn investment by Abu Dhabi’s ADQ and Kazakhstan’s SWF Samruk-Kazyna in building wind farms, 2022 “would have been a record high for green investing,” the report notes. SOI vehicles upped their investment in European renewables by 45% to USD 8.4 bn in 2022, it adds.

GCC SWFs played a big role here: GCC investment funds put forward 29% of the total SOI capital poured into renewables in 2022 — making them one of three major contributors (Canadian funds contributed 33% and Singapore contributed 26%). The UAE’s Mubadala was the second-largest single SWF investor in renewables in 2022, the report adds.

Green investment is a major trend that’s “here to stay,” and GCC SWFs will seek to capitalize on this, the report tells us. “The transition to low-carbon energy sources is at the top of the agenda of GCC SWFs as they seek to diversify domestic and regional economies and gain exposure to progress towards the Paris Agreement’s net zero goals,” it adds. Renewable energy investment is highly attractive for SOIs in general, as renewables assets are largely stable, can withstand inflation, and investing in them supports net-zero goals, the report argues.

GCC SWFs’ pivot to Western assets set to continue: GCC SWFs more than doubled their investments in Western economies in 2022 to USD 51.6 bn from USD 21.8 bn in 2021, the Global SWF report notes. Out of 60 “mega” investments (with ticket sizes of at least USD 1 bn), 26 were undertaken by GCC SWFs — 17 of which were in US or European assets, it tells us. “In 2023 and beyond, Middle Eastern sovereign investors will likely continue to be very active in Europe and North America,” the report adds.

GCC SWFs are also in a much stronger position than their peers: “In the global context of geopolitical, economic, and financial uncertainty, Middle Eastern funds are shining more than ever,” the Global SWF report notes. MENA oil and gas producers are set to benefit from additional revenues of USD 1.3 tn over the coming four years, thanks to the energy crisis spurred by the Ukraine war, the Financial Times notes, citing IMF forecasts. Much of that extra wealth will be funneled into the region’s SWFs, the FT adds.

And they’ll likely retain this advantage in 2023: High oil prices and currency stability in the GCC mean that large, liquid funds like Abu Dhabi’s ADIA, Kuwait’s KIA and Qatar’s QIA are set to receive substantial capital inflows this year. Meanwhile, funds like Abu Dhabi’s Mubadala and ADQ, Dubai’s ICD and Bahrain’s Mumtalakat may not see large amounts of new capital but also won’t suffer major losses, because of their limited exposure to traditional stocks and bonds, the Global SWF report adds. “Investors from the region will emerge even stronger from the current economic scenario,” it predicts.

MENA’s state-owned enterprises are crucial to emission reduction efforts: Even with significant regional decarbonization efforts and MENA positioning itself strongly in the global climate discourse by hosting COP27 and COP28, 20 state-owned enterprises (SOEs) in MENA generate more carbon emissions than the whole of Canada, according to research by the World Economic Forum (WEF). These SOEs will be essential to meeting decarbonization efforts as they represent a significant share of the region’s economic activity and a definitive drop in their emissions — spurred by programs in initiatives currently being implemented — would have a significant impact on regional emissions as a whole.

Which companies are we talking about? Some of these 20 SOEs include Emirates Airlines, Saudi Aramco, and the Saudi Electricity Company.

These companies have massive climate plans in the works, which will have an outsized impact on regional decarbonization: In its examination of 20 of MENA’s largest state-owned emitters that disclose their scope one and scope two emissions, the WEF found that these companies were ahead of other businesses in the region in their climate-related initiatives. Some 44% of the firms were found to be pushing down toxic emissions levels from nitrogen and sulfur oxides, while over 70% launched programs to minimize water consumption and inaugurated wastewater management initiatives. Similarly, 67% of the SOEs had initiatives on waste reduction.

Why does it matter? GHG reductions from energy giants like Aramco would spell out a massive push down in carbon generation for MENA as a whole, the WEF notes, and as industry leaders, the companies would also encourage smaller businesses to follow their footsteps by setting an example. Since SOEs in MENA also make up most of the utility providers in our region, they can guide citizens on energy-efficient practices that conserve power and push down emissions, WEF notes.

The largest emitters in the region are also eyeing power from renewables: Almost 90% of the SOEs have plans to source a chunk of their power needs from renewable energy sources and 50% laid the groundwork to use clean hydrogen and carbon capture tech to push down their carbon footprint. Aramco, for instance, signed an MoU with China’s state-owned coal mining company Shandong Energy to cooperate in technologies ranging from renewables to hydrogen and carbon capture and storage. 30% have plans to use sustainable aviation fuels.

The Achilles heel? Carbon neutrality targets: While companies like ADNOC and Aramco declared ambitions to be carbon neutral by 2050, the research found that publicly-owned firms in MENA still have a long way to go on the decarbonization front. Only 30% of MENA SOEs declared goals to pursue a net-zero target, 20% have devised a plan to attain carbon neutrality, and only 5% have enforced climate change disclosure frameworks.

Auf Wiedersehen, 2022 decarbonization goal: Germany’s energy consumption dropped 4.7% y-o-y, but a reliance on coal and oil due to natural gas shortages more than canceled out the reduced energy consumption’s effect on the country’s emissions, Reuters reports, citing research by Berlin-based green think tank Agora Energiewende. The increase in coal and oil use comes despite renewables accounting for 46% of Germany’s energy mix. The country generated 761 mn tons of GHG in 2022, missing its target of reducing emission to 756 mn tons.

Not just Germany: Coal consumption is rising to record highs with no signs of abating until 2025 amid a continued energy supply crunch. The use of coal rose by 1.2% in 2022 surpassing 8 bn tons in a world first as the Russia-Ukraine war’s impact has forced countries to increase their reliance on coal amid supply chain disruptions.

Egypt’s solar panel project lands international award: The Egyptian government’s Egypt PV program — which offers cash incentives to businesses and individuals looking to implement small-scale solar energy systems — bagged the International Finance Magazine’s most sustainable energy provider in Egypt award for 2022, according to a statement. Egypt PV won the British Energy Institute’s award in its “Low Carbon” category in 2020.