Masdar and Airbus partner on sustainable aviation fuel production

Good morning, nice people. The mid-week news cycle slowdown is continuing on the climate front, but there are a couple of ripples to take note of.

THE BIG CLIMATE STORY- UAE’s Masdar signed an agreement with French aircraft manufacturer Airbus to jointly develop sustainable aviation fuels, green hydrogen, and direct air capture technologies and Abu Dhabi’s Aldar Investment Properties — a unit of Aldar Properties — plans to issue its inaugural green USD-denominated Islamic bonds.

^^ We have the details on these stories and more in the news well, below.

THE BIG CLIMATE STORY OUTSIDE THE REGION- UN sets out plan to slash 80% of global plastic waste by 2040: The United Nations Environment Programme yesterday laid out a strategy yesterday aimed at reducing the world’s plastic waste levels by nearly 80% in less than two decades using pre-existing technologies if major policy changes are adopted. UNEP’s report — released two weeks before state representatives are due to land in Paris for negotiations on the INC2 plastic waste management treaty — advocates for policy shifts geared toward keeping produced goods in circulation for as long as possible under “reuse, recycling, and alternative materials” strategies.

Repurposing strategies such as reusable bottle mechanisms could see 30% of global plastic waste eliminated by 2040, whereas recycling schemes — if they become stable and lucrative ventures — could see an additional 20% push down. The replacement of single-use plastics with compostable materials could hike plastic reductions by a further 17%, according to UNEP projections. UNEP’s roadmap would reduce an estimated 187 mn tons of plastic waste and prevent damages to the tune of USD 3 tn over the next 20 years, but would need c. USD 65 bn in annual investments to be realized.

The story made the rounds in the international press yesterday: Reuters | CNN | Deutsche Welle | The Guardian | France 24

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OVER IN COPLAND- The UAE has invited Syrian President Bashar Al Assad to attend COP28, Syrian state news agency SANA reported earlier this week. Al Assad was handed the invitation by the UAE’s Chargé d’Affaires in Damascus. Several Arab states have been warming up to Syria after years of shunning Al Assad on the back of the Syrian uprising-turned-civil war. Last week, Syria was readmitted into the Arab League and Al Assad was invited to take part in the league summit this Friday in Jeddah.

All should take part: “COP28 is committed to an inclusive COP process that produces transformational solutions,” a COP28 spokesperson said in a statement emailed to Reuters. “This can only happen if we have everyone in the room.”

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WATCH THIS SPACE #1- No room for fossil-fuel focused growth: An energy mix that is dependent on fossil fuels cannot ensure sustainable economic growth for future generations, European Commission President Ursula von der Leyen said, Reuters reported on Monday. “A growth model centered on fossil fuels is simply obsolete,” she said during an event held by the European Parliament in Brussels. She added that the target of the EU's Green Deal energy transition is to create "a different growth model that is sustainable far into the future."

REMEMBER- The EU has a plan to slash net emissions by 55% by 2030 under a bid to reach carbon neutrality by 2050. It gave last month final approval for EU carbon market reforms that make it costlier for industries to pollute.

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WATCH THIS SPACE #2- The UK is cracking down on greenwashing: The UK’s Advertising Standards Authority (ASA) will begin taking stricter measures around the use of terms like “carbon neutral,” “net zero,” and “nature positive” when referring to offsetting activities that lack transparency, The Guardian reports. The ASA plans to file lawsuits against firms that claim their products do not contribute to climate change or nature-based loss by virtue of purchasing offsets, unless they can demonstrate that the offsets are effective.

This comes days after the EU parliament voted to ban claims of carbon neutrality based on offsetting: The European parliament voted on a non-binding bill last Thursday to ban businesses from saying their products are carbon neutral thanks to offsetting schemes such as planting trees to compensate for CO2 emissions. The parliament's final text also suggests banning claims such as “environmentally friendly,” “natural,” “biodegradable,” “climate neutral,” or “eco” if they are not backed by evidence.

REMEMBER- ASA issued a ruling last month halting the circulation of two Etihad Airways ads after the company’s failure to substantiate claims regarding sustainable aviation. It also banned an ad by Lufthansa in March for asserting that flying with the carrier can “protect the future of the planet,” even though there are “currently no environmental initiatives or commercially viable technologies in the aviation industry which would substantiate the absolute green claim,” according to the ASA.

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WATCH THIS SPACE #3- India just can’t digest the proposed EU carbon tax: India plans to file a complaint with the World Trade Organization (WTO) over the EU’s plan to impose 20% to 35% tariffs on imports of carbon-intensive products from India like iron ore, steel, and cement, Reuters reports, citing senior government and industry sources. The EU gave the green light last month to a plan imposing tariffs on imports of carbon-intensive products starting 2026. The levy is set to impact imports of steel, cement, aluminum, fertilizers, electricity, and hydrogen. The tariffs are part of a wider plan by the EU to reach carbon neutrality by 2050.

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CIRCLE YOUR CALENDAR-

Japan will host the G7 Hiroshima Summit from this Friday, 19 May to 21 May in Hiroshima. One of the key topics addressed at the summit will be ensuring energy security with the goal of achieving net zero by 2050 based on the Paris Agreement.

Oman will host the Power and Energy Conference from 22 May to 25 May in Muscat. The event will bring together local and global industry leaders to discuss global energy market policy updates, future demand and growth projections in the sector, integration and power grid obstacles, and growth potential associated with renewables and EV deployments.

Germany will host the second meeting of the COP27 Transitional Committee from 25 May to 27 of May in Bonn. The meeting will build on the loss and damage fund established during COP27 with the aim of establishing institutional mechanisms and governance structures for financing, and will bring together a host of international financial institutions to discuss pathways to increasing funding capacity for climate vulnerable countries.

The UAE will host the Electric Vehicle Innovation Summit from 29 May to 31 May in Abu Dhabi. The conference will bring together state representatives, industry players from the EV sector, as well as engineers and researchers to discuss policy trends and tech innovations in the industry and provide attendees with networking opportunities across value chains.

Qatar will host the Carbon Capture, Utilisation and Storage (CCUS) Forum from 29 May to 31 May in Lusail City. The event aims to spotlight MENA’s CCUS regulations and policies, map out paths and business models that would bring down CCUS project costs, promote regional and international cooperation to advance the international carbon capture sector, and discuss the role CCUS will play in helping Gulf countries meet their net zero targets.

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

Masdar and Airbus team up on SAF production: UAE renewables company Masdar signed an agreement with French aircraft manufacturer Airbus to jointly develop sustainable aviation fuels, green hydrogen, and direct air capture technologies, according to a statement. The agreement also sees the companies jointly launching a book and claims framework that would enable aircraft operators to source their SAF supplies without being geographically connected to a stockpile site.

The details: Both companies will partner on developing direct air capture tech — which unlike conventional carbon capture, usage and storage technologies (CCUS) technologies sequesters greenhouse gasses before they are released into the atmosphere — with the aim of using the captured CO2 to fuse it with hydrogen and generate sustainable aviation fuels, the statement notes. Masdar is looking to capture as much of a share of the global SAF market, which is expected to grow at a CAGR rate of 42.39% to USD 14 bn by 2032, the company notes, citing market forecasts by Precedence Research.

Masdar is already making moves in the SAF generation front: Masdar, Emirates airlines, Adnoc, and Tadweer partnered up to launch a joint feasibility study with BP on the production of sustainable aviation fuels (SAFs) using solid waste and renewables-sourced hydrogen under an agreement signed back in January. The study will also explore the possibility of producing other products including renewable diesel and naphtha. Based on the results of the study, the companies could potentially set up the region’s first commercial-scale SAF production facility in Abu Dhabi.

Abu Dhabi’s Aldar Investment Properties — a unit of Aldar Properties — plans to issue its inaugural green USD-denominated Islamic bonds, Reuters reports, citing a document it has seen. The company asked banks to arrange a global investor call, followed by one-on-one small group fixed income investor calls. The document showed that a USD-denominated benchmark Reg S 10-year inaugural green senior unsecured sukuk issuance would then follow, subject to market conditions.

Advisors: HSBC and Standard Chartered Bank are acting as joint global coordinators, while Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank, Dubai Islamic Bank, Emirates NBD Capital, First Abu Dhabi Bank, and Mashreq are acting as joint lead managers and joint bookrunners.

REMEMBER- Interest in green bonds and green sukuk has been on the rise in the region in recent months ahead of COP28 in the UAE. Last month, the UAE’s state-owned Abu Dhabi National Energy Company (Taqa) raised an aggregate USD 1.5 bn in a dual-tranche green bond issuance that was almost 10x oversubscribed at a final order under the company’s new Green Finance Framework.

Big news for Morocco’s automotive industry: Morocco’s NamX has unveiled a hydrogen-powered vehicle prototype designed in collaboration with Italian design office Pininfarina, Maghreb Arab Press reports. The prototype — dubbed Hydrogen Utility Vehicle (HUV) — will be powered with hydrogen through a central tank complemented by six removable capsules, facilitating a quicker hydrogen recharge.

REMEMBER- Morocco has transformed itself into a regional automotive powerhouse through smart incentives and consistent government policy, and it is now a key exporter to Europe as well as to other MENA countries, including Egypt. It currently has a thriving EV assembly industry, with plans for expansion. Several global manufacturers produce hundreds of thousands of EVs at assembly facilities in the country. Morocco is targeting the production of around 1 mn EVs in the next three to four years, according to statements by officials last year.

Following BMW’s and Toyota’s lead? German automaker BMW rolled out the hydrogen-powered iX5 Hydrogen in March, noting that the current pilot phase is meant to demonstrate the potential of hydrogen vehicles as an emissions-free means of transport for select motorists. BMW is sourcing the fuel cells for its car from Toyota, which debuted two models of its Mirai sedan boasting hydrogen fuel cell technology similar to BMW’s iX5 last January.

And hydrogen fuel cell production is coming to the region: US-based hydrogen fuel cell (HFC) solutions company Renewable Innovations (RI) signed a joint venture agreement with Utah-headquartered Mena Holdings to establish a HFC products assembly plant in Saudi Arabia last month. The facility will build HFC products for distribution in the Middle East and North Africa and will enable Mena Holdings to offtake an undisclosed amount of RI products produced at the plant.

Irena releases a report on financing the energy transition: An annual global investment of over USD 4.4 tn is needed to raise the share of renewable energy in the primary energy mix from the current 20% to the 75%, according to a report (pdf) by the International Renewable Energy Agency (Irena) and India’s G20 Presidency. The report provides recommendations for enhancing collaboration among stakeholders, with the aim of financing energy transition projects with low-cost capital in G20 countries and beyond. The cost and price figures reflected in the report were gathered in 2021.

The risk factors: Differences in the cost of financing between the G20 countries were found to be primarily driven by non-technical variables including country risk, exchange rate risk, and off-take risks (risk of off-taker not paying for energy generated), which add a premium to the cost of capital and makes borrowing for renewable related projects more expensive.

The MENA region lags behind: The Middle East had a simple average cost of capital of 8.7% for utility-scale solar PV projects — the highest in the six regions surveyed by Irena in 2020-2021. Egypt and Tunisia specifically have one of the highest cost of capitals, and Saudi Arabia also showed a high cost of capital for wind and solar projects, standing at 6.2% compared to 2.5% in China, 1.8% in France, and 1.3% in Germany.

Case studies provide a guideline for methods to reduce financing costs: Multilateral development banks (MDBs) administered guarantees to Argentina’s green fund, which indirectly mitigated country risk. Brazil converted a former development agency into a state-owned financial institution that prioritizes flexibility and independence from the state. India’s 35-year-old renewable-energy-focused non-bank finance corporation was behind much of its success in rolling out renewables, along with its issuance of sovereign green bonds. Indonesia’s recent launch of the new Just Energy Transition Partnership is supporting the country in its phase-out of coal-fired power plants and creating a market for green sukuk.

The G20 made recommendations for the global facilitation of green transition: Recommendations include investing in researching and mapping the reasons for the differences in the cost of capital between countries through extensive stakeholder surveys, as well understanding the role of MDBs and other financial institutions in lowering the cost of capital and growing the available pool. The role of the public sector in setting up risk mitigation measures was highlighted, as well as the need to learn from the successes of solar PV and onshore wind in becoming commercially mature solutions.

Morocco and Belgium’s Wallonia Region have agreed to collaborate in five key fields including the energy-water nexus, Morocco World News reported on the sidelines of a Permanent Joint Commission session held in Rabat. The energy-water nexus refers to the link between water and energy, which is important to consider when assessing low-carbon energy projects including biofuel production, concentrated solar power, CCUS, and nuclear power — all of which are relatively water-intensive.

IN OTHER CLIMATE DIPLO NEWS-

• Saudi Arabia’s Deputy Industry and Mineral Resources Minister Osama bin Abdulaziz Al-Zamil met with Paraguay’s Industry and Commerce Minister Luis Alberto Castiglioni to discuss boosting investments in the mining sector. (Saudi Press Agency)

Indonesia to issue blue bonds in Japan’s debt market: The Indonesian government is looking to issue several blue bond tranches in Japan’s debt market, marking the first yen-denominated issuance by a foreign borrower, Bloomberg reports. Proceeds from blue bonds — first introduced by the Seychelles in 2018 — are channeled toward investments into upscaling water resource management and the conservation of marine ecosystems. These bonds are relatively uncommon compared to conventional notes and sustainability-linked green bonds, with just 12 bonds being issued since 2021 at a value of c. USD 2.8 bn, according to research by UK financial services company Santander. Indonesia will use the proceeds to enhance its climate mitigation efforts and bolster ocean conservation, Bloomberg reports.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Hertz plans to switch 25% of its 500k vehicle fleet to EVs by the end of 2024. (CNBC)
• Oman’s Foreign Minister Sayyid Badr Hamad Al Busaidi met with his Luxembourgian counterpart to explore potentially increasing cooperation and knowledge transfer on renewables. (Oman News Agency)

New collaboration on radioactive waste management in the UAE: Sharjah-based Beeah Group signed a joint development agreement (JDA) with British engineering and design consultancy Atkins to collaborate on projects focused on the off-site treatment of radioactive waste produced by nuclear facilities in the UAE, Beeah said on Monday. Under the JDA, they both will identify market openings in the UAE and MENA region, develop radioactive waste disposal facilities and share expertise on thermal treatment, decontamination, disposal and more.

More renewables cooperation with Uzbekistan? UAE-based company Empereal Ruby Energy and Innovations signed an MoU with Uzbekistan’s Solar Nature for joint cooperation on solar PV and solar thermal projects in Uzbekistan and the region, according to a statement. Under the agreement, the two companies will cooperate to design and provide medium to large-scale solar solutions to generate clean electricity. They will also invest necessary funds to help boost their cooperation to over USD 100 mn over a five-year period.

REMEMBER- Uzbekistan aims to develop 7 GW of solar and 5 GW of wind capacity by 2030 under a plan to meet 25% of its electricity needs from renewable sources by the end of the decade. Several leading Gulf firms have tapped Uzbekistan’s renewables potential in recent years, including UAE’s renewables player Masdar which recently achieved financial close on three solar photovoltaic projects in the country. The solar projects have a combined capacity of 900 MW, making it the largest solar development project in Central Asia.

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Emirates Global Aluminium and US-based Alcoa sign alumina supply agreement: UAE state-owned aluminum manufacturer Emirates Global Aluminium (EGA) signed a partnership agreement with US-based aluminum producer Alcoa for the supply of smelter-grade alumina which will allow Alcoa to offtake an undisclosed amount of EGA’s low-carbon alumina brand EcoSource, Wam reports. Production of one ton of EcoSource alumina consumes some 600 tons of carbon dioxide — half of the 1.2k tons industry average, according to EGA. The 8-year partnership agreement — set to be activated in 2024 — will see EGA secure some 15.6 mn tons of alumina from Alcoa’s plant in Western Australia.

EGA is investing heavily in low-carbon aluminum: The company — which is already taking steps to decarbonize — has focused on emissions-reduction technology in its aluminum smelting process for decades, and purchased clean energy certificates for 1.1 mn MWh of electricity back in November from the Emirates Water and Electricity Company to support its production of solar aluminum. The certificates will certify EGA’s production of around 80k tons of its solar-powered aluminum CelestiAL. EGA was also the first UAE-headquartered firm to join the First Movers Coalition by committing to sourcing the materials it needs for aluminum production from low-carbon sources, and signed an agreement earlier in September with the UAE’s Energy and Infrastructure Ministry to join the UAE Hydrogen Leadership Initiative, exploring prospects for decarbonization across industries and the possible use of low-carbon hydrogen.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• The UAE’s Climate Change and Environment Ministry has issued a decree regulating the use and distribution of hydrofluorocarbons in the country under a bid to control their distribution and curb their emissions. (Wam)
• Oman plans to add 7k EVs to the country’s automotive sector as part of state plans to have electric cars comprise 35% of all new vehicles in the sultanate by 2030. (Oman Observer)
• Dubai-based EV distributor Admiral Mobility signed a partnership agreement with car rental company Avis to import electric commercial trucks for the UAE’s leasing market. (Zawya)
• Dubai Electricity and Water Authority has reported that its hydroelectric power station in Hatta is 70% complete. (Wam)
• The University of Jordan signed an agreement with the China-Arab States Technology Transfer Center to establish a maintenance center for EVs in Jordan. (Al Mamlakah)
• The Abu Dhabi Waste Management Company (Tadweer) signed a partnership agreement with Greece-based circular economy solutions company Polygreen to jointly upscale waste management capacity in the UAE and Greece utilizing Polygreen’s Just Go Zero waste management model.

Danish engineering group Topsoe plans to spend USD 300 mn on a hydrogen electrolyzer facility in the US, CEO Roeland Baan tells Bloomberg. Topsoe plans to make a final investment decision on the project — set to double the company’s manufacturing capacity of the machines — by the end of the year. The firm is currently holding talks with prospective customers and authorities in the US on the best location for the facility, Baan said. The facility is set to be as big as a plant that Topsoe is building in Denmark with an initial capacity of 500 MW and a potential to grow 10x larger.

The UK’s Low Carbon raises GBP 310 mn to expand solar deployments: UK renewables investment company Low Carbon has raised GBP 310 mn (c. USD 391.2 mn) in additional financing from the Commonwealth of Australia, Intesa Sanpaolo, and Dutch banking firms ABN AMRO and ING to increase solar energy deployments in the UK and the Netherlands, according to a statement. The company will use the new funding to increase solar generation capacity in both countries by 448 MW to a total of 1 GW, the statement notes. Low Carbon — which manages some 1.3 GW of operational solar assets — has a target to supply some 20 GW by the end of the decade, and its current pipeline of renewables projects stand at some 8 GW, Reuters notes.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

• Microsoft signed an agreement with renewables developer Orsted A/S to purchase 2.76 mn tons of durable carbon credits from Orsted’s biomass energy and carbon capture plants in Denmark. (Bloomberg)
• The UK could make GBP 70 bn annually from renewable energy if it exports energy to mainland Europe. (The Guardian)
• South Korea’s Hyundai Motor is investing USD 2.45 bn over 10 years in expanding its electric vehicle production in Tamil Nadu, India. (Reuters)
• Vietnam plans to more than double its power generation capacity to 150 GW by 2030 by harnessing wind energy among other sources. (Reuters)
• Canada’s Prime Minister Justin Trudeau landed in Seoul, South Korea yesterday where he is expected to explore with South Korea’s President Yoon Suk Yeol partnership agreements aimed at increasing cooperation on critical minerals essential to EV production. (Reuters)

A killer whale visit in the region: A pair of killer whales spotted off the UAE coast last week are repeat visitors, The National reports. The two orcas were spotted off the coast of Abu Dhabi last Tuesday before heading to Jebel Ali and on to Umm Al Quwain, where scientists lost track of them. Environmental experts told The National that the rise in killer whale sightings along the Emirati coastline in the past few years is due to marine life thriving in this area.

REMEMBER- The UAE has been pushing with efforts in recent years to preserve marine and coastal environments due to their economic, social, and environmental importance. The UAE has put in place laws and regulations to protect marine life from pollution, regulate activities in the marine environment, and establish protected areas for conservation and biodiversity development.

Not the first time: The same pair of orcas were previously tracked near Middle East coastlines, with wildlife organizations spotting them three times in 2017 and 2018 in Iranian waters, the experts say. Experts do not know where the orcas came from before entering UAE waters or where they may be heading. “What we know so far, it would suggest that they can travel long distances within the Gulf and may even head out into the wider Indian Ocean,” one of the experts said.