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Monday, 9 October 2023

TODAY: Aramco inks agreements to reduce carbon emissions + More details emerge on Masdar’s mega renewables projects in Malaysia

Good morning, friends. It’s another busy morning with some big EV updates from UAE and KSA and more detail on Masdar’s sizable renewables agreement with Malaysia, but first…

THE BIG CLIMATE STORY- Saudi Arabia’s oil giant Aramco is working with Danish firm Topsoe and Siemens Energy on projects to reduce emissions, and will also explore tapping into geothermal energy in a bid to expand its renewable energy portfolio.

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

THE BIG CLIMATE STORY OUTSIDE THE REGION- There’s no single story grabbing the headlines this morning, but investors have turned their back on renewable energy funds in the third quarter of the year on the back of higher interest rates and surging material costs, Reuters reports, citing data by LSEG Lipper. Renewable energy funds globally were hit by a net outflow of USD 1.4 bn during the three months to end-September in a record quarterly outflow. Yet, the outflows only partially offset a trend in the first half of the year seeing investors pour USD 3.4 bn into renewables funds, according to the data. The sector’s total assets under management are currently estimated at USD 65.4 bn, representing a 24% fall from end-June, the data showed.

What the experts are saying: “Renewable energy funds have faced weakened sentiment due to company performances in recent quarters and a shift in investor attention this year towards other themes like AI and US Infrastructure,” Global X research analyst Madeline Ruid said. She said that lengthy timelines, project delays, high interest rates and higher material costs, especially for wind and solar power projects have put their toll on firms in the sector.

WATCH THIS SPACE #1- Saudi Arabia’s domestic GHG credits scheme is coming soon: Saudi Arabia will roll out a greenhouse gas credits scheme that would allow firms to offset their emissions by purchasing credits from projects that voluntarily slash or remove carbon emissions in early 2024, Reuters reports. The Greenhouse Gas Crediting and Offsetting Mechanism (GCOM) — launched during the UN’s MENA Climate Week — “aims to act as an incentive to develop emission reduction and removal activities to achieve the kingdom’s ambitious target to reach carbon neutrality by 2060,” a statement by the Saudi Energy Ministry read. Taking part in the scheme is voluntary and project-based and would include greenhouse gas and non-greenhouse gas "metrics across all sectors,” according to its website. Public and private sectors and foreign companies’ subsidiaries will be allowed to participate in the domestic scheme.

REMEMBER- The voluntary carbon market has been of interest to the Saudis: Saudi Arabia’s Regional Voluntary Carbon Market Company (RVCMC) — established by the Saudi sovereign wealth fund and the Saudi Tadawul Group — plans to launch a carbon trading exchange early next year. The announcement came as the RVCMC sold 2 mn tons of carbon credits in June in what the company described as the largest-ever voluntary carbon credit auction.

WATCH THIS SPACE #2- Adnoc is stepping up the game for global expansion: Abu Dhabi oil giant Adnoc says it is seeking potential investments in renewable energy, petrochemicals, LNG, and gas under a global expansion plan, Reuters reports. Adnoc did not provide details on the countries it is considering, but two sources with knowledge of the matter say the company is seeking investments in LNG assets in Africa and is looking into acquiring Galp’s 10% stake in a multi bn USD natgas project in the Rovuma Basin north of Mozambique. Adnoc is also investing in energy trading, the company told the newswire, without providing further details.

REMEMBER- Adnoc wants to accelerate its roadmap to carbon neutrality: Adnoc recently said it is planning to reach net zero by 2045, instead of its originally planned 2050, and double its carbon capture capacity by 2030.

WATCH THIS SPACE #3- Morocco’s ongoing drought shows no signs of improvement: Morocco is entering a fifth consecutive year of drought, shifting the country into an era of water scarcity that officials say is one of the biggest threats facing the kingdom, The Financial Times reports. Morocco’s Minister for Public Works and Water Nizar Baraka said that reservoirs are currently only 26% full as the annual average water inflow fell from 22 bn cbm to 14 cbm in parallel to losses from increased evaporation due to rising temperatures.

The agricultural + economic impact is major: While agriculture contributes only 12% of Morocco’s GDP on average, 39% of the labor force works in agriculture resulting in reduced incomes for most rural inhabitants, FT writes. A recent World Bank report found that rain-fed agriculture represents 80% of Morocco’s cultivated area — including the country’s crucial cereal crops such as wheat and barley — and employs most of the agricultural workforce.

What can be done? Morocco is working on projects for recycling wastewater, building more desalination plants, expanding the more efficient drip irrigation methods of cultivation, and building channels to connect rivers and supply more regions with water, the FT writes.

REMEMBER- The IMF just threw Morocco a lifeline: The IMF’s Executive Board signed off on a USD 1.3 bn Resilience and Sustainability Facility for Morocco last week. The arrangement follows a separate USD 5 bn Flexible Credit Line arrangement approved in April 2023 in response to slowed growth and raised inflation due to severe drought and spillovers from Russia’s invasion of Ukraine.

WATCH THIS SPACE #4- Siemens Gamesa’s troubles deepen: Siemens Energy’s wind turbine unit Siemens Gamesa may shut down factories and sales offices in efforts to curb losses after technical faults cost the wind company EUR 2.2 bn earlier this year, Reuters reports, citing sources with knowledge of the matter. The spillovers from the losses are expected to continue up to 2026. If implemented, the layoffs should provide long-term relief for Siemens Gamesa by outsourcing production of some key components, such as blades, in order to raise margins. Details of the wind division's restructuring are expected to materialize next month when Siemens Energy releases annual results and holds a capital markets day.

REMEMBER- Siemens Gamesa is a major player in Egypt’s wind energy sector, and is involved in the 500 MW Gulf of Suez wind farm — formerly known as the Ras Gharib wind plant — the 250 MW West Bakr wind farm, and the 220 MW Gabal El Zeit 2 wind project in the Gulf of Suez.

THE DANGER ZONE #1- Bad news for EVs? A new study (pdf) published in Nature — using Qatar as a case study — found that when examining the entire life cycle, autonomous electric vehicles might emit 8% more greenhouse gas emissions on average compared to non-autonomous electric vehicles. The results show that while autonomy introduces an average 21.2% decrease in operation phase emissions due to improved fuel economy, the manufacturing phase emissions can surge up to 40%, compared to non-autonomous vehicles. To make autonomous vehicles more climate-friendly, the researchers suggest cleaner and more efficient manufacturing technologies, ongoing fuel efficiency improvements in autonomous driving, renewable energy adoption for charging, and circular economy initiatives targeting the complete life cycle.

THE DANGER ZONE #2- Lack of copper mines spells trouble for energy transition: Copper producers globally say the number of mines currently under development is not enough to support the clean energy transition, The Financial Times reports. The warning comes as miners continue to be pressed by a decline in metal prices due to a fragile global economy and cost inflation. Labour shortages are also hampering new supplies, raising concerns over a transition to carbon-free energy. Higher copper prices alone will not be sufficient to secure the metal required for the energy transition globally, said Kathleen Quirk, the head of leading US copper producer Freeport-McMoran. “Now it’s not just price. It’s these other factors that really are going to limit how quickly we can develop supplies,” she said. “What may end up happening is that this [energy transition] gets extended out longer.”

Copper is a gem: Copper — a critical mineral for EV and battery storage production among other green applications — has been dubbed the “metal of electrification”, with forecasts it will grow twofold to reach a 50 mn ton market by 2035 in comparison with 2021 levels, FT writes, citing forecasts by S&P Global. The credit rating agency also expects a “chronic gap” between supply and demand for the critical mineral.


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The UAE will host the UNCTAD World Investment Forum from Monday, 16 October to Friday, 20 October in Abu Dhabi. This year’s theme focuses on sustainable investments, with a diverse range of climate financing sessions on promoting investments in the blue economy, agrifood systems, sustainable infrastructure, carbon markets, the circular economy, strategic minerals for decarbonization, and sustainable tourism. Some sessions will tackle reform of financial institutions needed to reach net zero, such as a session on integrating nature-related risk into capital markets and financing an equitable nature economy. Public sector investments and stock exchange action on climate disclosures will also be discussed.

Oman will host the Duqm Economic Forum from Monday, 16 October to Tuesday, 17 October in Duqm. The two-day event — organized by the Public Authority for Special Economic Zones and Free Zones — will showcase green investment windows and possible partnerships at the Special Economic Zone at Duqm.

Egypt will host the fourth meeting of the COP27 Transitional Committee from Tuesday, 17 October to Friday, 20 October in Aswan. The meeting aims to establish institutional arrangements, modalities, governance structures, and terms of reference for the landmark Loss and Damage Fund while expanding sources for climate funding under the program.

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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