MENA’s HTA industry leaders are in a race to decarbonize: Decarbonization has emerged onto the radar of the world’s high-emissions industries in a meaningful way — with 50% of recently surveyed business leaders saying they believe achieving net zero is more feasible than just a few years ago, according to a report (pdf) from UAE clean energy firm Masdar. Masdar surveyed 500 senior executives working in hard-to-abate (HTA) industries — energy, industry and transport — in MENA, Europe, North America and the Asia Pacific region, with 125 senior executives from MENA contributing to the report. A quarter of the survey respondents were from MENA, with the majority from KSA and the UAE.

MENA lags behind on net zero targets in HTA industries: 17% of the MENA survey participants said their companies plan to reach net zero by 2050. This compares to 44% of respondents from Europe, 45% from the US and 38% from Asia Pacific whose companies plan to reach net zero by 2050; and 7% of respondents from Europe and 7% from the US whose companies plan to reach net zero by 2030.

Across all regions, business is the key reason to decarbonize: For the majority (63%) of respondents, remaining financially competitive tops the list of their reasons to decarbonize — far outweighing climate considerations, which are a top reason to decarbonize for only 24% of respondents. Supplier demand is also listed as a top reason for many respondents (44%), as is customer demand (41%). 37% list investor or shareholder expectations as a top priority when planning decarbonization strategies and time frames.

New regulation from Europe is heightening the urgency: The European Carbon Border Adjustment Mechanism (CBAM) — which will impose a tariff on companies importing carbon-intensive goods to the EU, starting in 2026 — “will encourage companies in HTA industries to act,” the report notes. Firms operating in countries where decarbonization is more of a challenge worry about their ability to compete in the EU, it adds.

This gives some companies a competitive advantage: Emirates Global Aluminium (EGA) — which is already taking steps to decarbonize — has focused on emissions-reduction technology in its aluminum smelting process for decades, the report notes. The firm also signed an agreement with the UAE’s Energy and Infrastructure Ministry in September to join the UAE Hydrogen Leadership Initiative, exploring prospects for decarbonization across industries and the possible use of low-carbon hydrogen.

But financing is a problem…: 53% of respondents whose companies don’t have a net zero timeline noted the main reason for this as being a lack of reliable financing, while 68% of all survey respondents noted that their company decarbonization budgets were insufficient for them to set a net zero timeline. Meanwhile, the companies that demonstrated the most commitment to setting targets are also the biggest by revenue size — with 78% of companies with global annual revenues of over USD 10 bn having set targets.

… And the lack of commercial viability of nascent low-carbon technologies: For the world to reach net zero by 2050, almost 50% of the CO2 emissions savings needed would rely on emerging tech like electrolyzers or direct air capture and storage — which aren’t yet available on a commercial scale, the report notes, citing IEA data (pdf). This means companies wanting to get a jump start on using this tech often need to finance pilot projects without having a clear return on their investment — which brings financial risk.

Still, hope springs eternal: Some 70% of survey respondents expect to see an increase in their decarbonization budgets in the coming two-three years. 9% of respondents expect to see budgetary increases of over 25%; 22% expect an increase of 11-25%; 39% expect an increase of 1-10%; and 5% expect a decrease in their decarbonization budgets. 25% of respondents expect their budgets to remain roughly the same.

In terms of funding, private equity is a frontrunner: 64% of respondents listed private equity as their anticipated core source of decarbonization finance; 45% named regular corporate bonds; 43% existing liquidity; 40% bank loans; 36% green bonds; 30% development finance institutions; and 24% government funds or incentives. It’s possible that private equity is seen as a key source of funding because it has a higher tolerance for assets with high emissions and lower ESG ratings than public companies do, the report notes.

But government support would provide an extra boost: Though the respondents’ expectations for support in the form of government subsidies were low, global governments and the public sector have important roles to play in supporting decarbonization efforts, the report notes. They can do this through smart policymaking, financial de-risking, collaboration with industry and investors — all of which could boost innovation, reduce uncertainty and risk, and lower the cost of emerging cleantech.