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Tuesday, 25 October 2022

TODAY: Green hydrogen is cheaper than its fuel-based brother + Ins. companies are phasing out fossil fuel clients

Good morning, wonderful people. It’s another busy MENA climate news day, with green announcements across several sectors and a heated debate on loss and damage financing as COP27 draws ever closer. Let’s jump right in.

THE BIG CLIMATE STORY in our neighborhood- We now know more about Empower’s IPO offering next week: The Emirates Central Cooling Systems Corporation wants to offer a 10% stake next week as it gears up for its debut on the Dubai Financial Market. The district cooling firm — which is looking to raise USD 700 mn in the offering — was part of 10 state-owned firms slated for listing last November by Dubai’s government privatization program.

THE BIG CLIMATE STORY GLOBALLY? That would be COP27, it seems, given the event gets underway on 6 November.

THE COUNTDOWN TO COP (12 days to go)-

The US is in favor of a dialogue about “loss and damages,” but not so big on implementation, Bloomberg reported on Thursday, citing senior administration officials. Developing economies — including COP27 host country Egypt — are pushing for “loss and damage” financing to compensate countries that experienced major economic losses as a result of climate change. The issue gained fresh urgency after disastrous floods claimed north of 1k lives in Pakistan, caused more than USD 10 bn of damage — and displaced as many as 32 mn people.

What’s the problem? The US supports engaging in dialogue on the issue, but its negotiators are reportedly lobbying against putting any concrete funding commitments on the agenda for Sharm. In parallel, more than 100 US climate groups yesterday wrote to top US climate diplomat John Kerry to ask him to support the creation of a loss and damage fund at COP, Reuters reports.

BUT EU MINISTERS ARE DOWN WITH THE PROGRAM, having agreed yesterday to support putting climate change-driven loss and damage on the agenda in Sharm, Reuters reports. One note of caution: While the bloc said it would support talks on the subject, the purpose and focus of these discussions remain unclear, the newswire says.

There’s less and less wiggle room for wealthy countries and Big Oil on this issue as COP gets closer: Six fossil fuel companies made enough to cover the costs of climate change-induced extreme weather events in developing countries in 1H 2022, with USD 70 bn left over, a report (pdf) published yesterday by Oxfam International states. The usual rich-country argument against a loss-and-damage fund for emerging markets? That doing so would simply cost too much.

We know this will be a major theme at COP: Oxfam joins a chorus of prominent voices — including Egypt’s UN Climate Champion Mahmoud Mohieldin and the IFC’s VP of cross-cutting solutions Emmanuel Nyirinkindi, both of whom raised the issue in interviews with Enterprise Climate — who are determined to keep the conference focused on securing sustainable, long-term financing for poorer nations struggling with the effects of climate change. More than 60% of finance for climate action comes from debt instruments, and only some 12-13% of this debt-based finance is concessional, Mohieldin recently told us.

MEANWHILE- Israeli politicians will attend the global climate conference with no official backing for a verbal pledge to reach net zero by 2050, the country’s Environmental Protection Ministry said yesterday, according to the Times of Israel. As Knesset elections grow closer, the Justice Ministry ruled against passing a government decision on climate change and the Finance Ministry opposed including former Prime Minister Naftali Bennett’s net zero commitment in a climate bill earlier this year, thus backtracking from a verbal pledge made in the runup to COP26 in Glasgow. The bill instead commits the country to cutting its emissions by 85% by 2050.

AND- Egypt wants world leaders to act like grownups and put climate — not geopolitical tensions — first at COP27. That was one of the key takeaways from Egypt Foreign Minister (and COP27 President) Sameh Shoukry’s remarks with Emirati state news agency WAM earlier this week. Shoukry stressed the importance of separating international disputes from the urgency of tackling climate change concerns to avoid reaching a “point of no return.” EnterpriseAM had the full rundown yesterday.

FINALLY- Egyptian officials have reportedly canceled blue zone events on 7 November. COP27 officially gets underway on 6 November, and world leaders will be in Sharm El Sheikh 6 7 and 8 November (Monday and Tuesday) for the state-to-state negotiating track. Citing the need to maintain a high-security environment, officials have reportedly informed the UN that there will be no “blue zone” activities on the Monday; activities can go ahead as planned on Tuesday. Climate activists are not happy with the changes, according to reports in the Guardian and Reuters.

SOUND SMART- The Blue Zone includes negotiating rooms, plenary space and room for side events. It’s where state-to-state negotiations take place, requires a special badge to enter and belongs to the UN. The Green Zone belongs to Egypt as COP27 host and is where business leaders and civil society members will spend time in workshops, events and other activities. The US Department of State has a nice explainer here and the COP27 website has a breakdown here.


WATCH THIS SPACE #1- Fossil fuel-based hydrogen is a lot more expensive now, paving the way for green hydrogen. Surging natural gas prices have driven up the cost of hydrogen produced from fossil fuels by 70% compared to global averages prior to the Russia-Ukraine war, according to a Carbon Tracker report (pdf). Fossil fuel-generated hydrogen assets totalling USD 100 bn may be stranded by 2030 due to increasing prices, making way for a rising demand for green hydrogen to the tune of USD 73 bn. The surging demand for non fossil-hydrogen and an accelerated generation rate of the low-carbon energy source could see green hydrogen priced under USD 2 per kilogram by 2030.

This is great news for MENA, which has had its sights set on green hydrogen for some time. Just yesterday, Oman announced a USD 140 bn green hydrogen strategy to be implemented by 2050. Egypt also signed green hydrogen projects worth USD 63.8 bn, while the UAE and Saudi Arabia each dedicated more than USD 10 bn to the generation of green hydrogen.

Obligatory note of caution: What’s happening now is a gold rush. Would-be builders are running around the globe signing MoUs and letters of intent to build green hydrogen / ammonium facilities, but the trick will be seeing how many of them get financing and are built. Among the deciding factors: How many rich countries roll out production subsidies as the Biden administration recently did with the Inflation Reduction Act?

WATCH THIS SPACE #2- Ins. companies are slowly phasing out fossil fuels as their impact becomes unaffordable, Insure Our Future global campaign said Wednesday. Some 62% of reins. companies and almost 40% of ins. firms have set up coal exit policies in the past five years, according to Insure Our Future’s 2022 Scorecard on Ins., Fossil Fuels and the Climate Emergency (pdf). Some 27.5% of reins. companies and 13.7% of ins. firms are also restricting oil and gas ins. The activist group said Allianz, AXA and Axis Capital were at the top of its scorecard in terms of best coal exit policies. Insure Our Future’s assessment is based on the ins. companies’ fossil fuel underwriting and divestment policies.


HAPPENING TODAY-

Spanish renewables firms to visit Morocco: The Spanish Institute for Foreign Trade (ICEX) is accompanying a delegation of 10 Spanish renewable energy companies to Rabat today, according to a press release. On the Moroccan side, renewable energy companies Masen, Institut de Recherche en Energie Solaire et Energies Nouvelles (Iresen), Fenelec, and Gaia Energy will be among those welcoming ICEX and Spanish stakeholders. The event aims to establish links between the countries’ private and public renewable energy players.

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THE DANGER ZONE-

Climate change and drought are threatening crop yields and household incomes in Iraq, according to a recent report (pdf) by the Norwegian Refugee Council based on an August survey of 1.3k households across Anbar, Basra, Dohuk, Kirkuk and Ninewa. 2022 marks the second consecutive year that fruit, vegetable, and wheat harvests have declined in Iraq on the back of record low rainfall, decreased river flows and drought conditions. Drought conditions and decreasing river levels have also limited access to potable water. The combined drought and climate change conditions are affecting the ability of households to access sufficient food, leaving them increasingly vulnerable.


CIRCLE YOUR CALENDAR-

Egyptian law firm Matouk Bassiouny and its German counterpart Freshfields Bruckhaus Deringer will hold a webinar on 2 November that will spotlight COP27’s potential impact on businesses globally. The online event will also focus on the challenges barring the Global South from unlocking financing options for climate adaptation projects, hoping to create a roadmap that would improve the quality and scale of climate-focused investments in Africa. Representatives from Taqa Arabia, Amethis and Enko Capital will participate as speakers. Register for the webinar here.

ADIPEC will run from 31 October to 1 November in Abu Dhabi, UAE. Some 40 ministers from around the world, including eight from MENA, will attend the event. Those include energy and oil ministers from the UAE, Kuwait, Bahrain, and Egypt. Discussions will partly focus on the transition toward carbon neutrality, a statement picked up by Zawya says. You can register as an exhibitor here, and as an attendee here.

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

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