The UAE’s energy sector will play a significant role in the country’s circular economy plan because the oil and gas industry will be low-carbon and a major contributor to GDP, the climate change and environment minister told S&P Global Platts.
The cabinet approved this year the UAE Circular Economy Policy 2021-2031 and established the UAE Circular Economy Council, which is chaired by minister Abdullah al-Nuaimi. The plan comes amid plans by Abu Dhabi National Oil Co., the UAE’s biggest energy producer, to boost its oil production capacity by 25% to 5 million b/d by 2030.
The UAE defines a circular economy as when the country’s natural, physical, human and financial resources are used in the most efficient and sustainable way to improve quality of life while protecting and conserving the environment.
“The circular economy policy aims to support the UAE economy, and since our modern and technologically sophisticated oil and gas sector is a major contributor to our GDP, companies in that sector will remain part of future development,” Nuaimi said in a written interview.
“Key industry players are taking decisive steps towards becoming responsible oil and gas producers.”
The UAE is juggling the energy transition agenda and plans to eke out a greater profit from its oil and gas projects as it seeks to secure a role in future crude demand scenarios, while at the same time appeasing investors looking to combat climate change.
As OPEC’s third largest producer, the UAE has committed to being a member of the group, but it is also pursuing its own agenda to speed up production of its oil reserves before peak oil demand becomes a reality.
ADNOC says it wants to achieve its 2030 target while at the same time addressing its greenhouse emissions and carbon intensity of its oil and gas operations. The national oil producer argues that its oil and gas production is low-cost and low-carbon as it plans to reduce its GHG intensity by 25% by 2030.
“In our view, the adaptation required by the oil and gas industry in order to shift to a circular economy will enhance its competitiveness,” said Nuaimi. “The global oil and gas industry is undergoing a transition, and the UAE is dedicated to ensuring that its industry remains competitive at all times during this period.”
Overall, the UAE’s per capita carbon footprint is nearly five times the global average, with 20 tons of CO2 per capita compared to the world’s 4.4 tons of CO2 per capita in 2018, according to data from the International Energy Agency.
The main source of CO2 emissions is gas, according to the IEA. Gas is the main feedstock for power generation in the UAE.
Climate Action Tracker, or CAT, expects that the UAE’s GHG emissions in 2020 will be 6%–9% lower than 2019 due to “an unprecedented slowdown of domestic economic activity, international trade, and oil demand,” it said in November.
However, CAT projected that emissions will grow by 50% by 2030.
The UAE’s emissions reached 199 million tons of CO2 in 2016, according to the environment ministry.
The UAE has pledged to lower its GHG emissions by 23.5% by 2030 in its second Nationally Determined Contribution, or NDC, that was submitted in December to the United Nations Framework Convention on Climate Change.
CAT rates UAE’s NDC as “highly insufficient” because “the scope and level of ambition of its NDC is lacking.”
“As a developing and growing economy, the UAE is taking proactive steps on renewables, energy efficiency, and other areas that play an integral role in emission reduction,” the minister said in reply to CAT’s NDC assessment. “The adoption of the circular economy model will make a significant contribution to the country’s climate action agenda.”
The UAE is banking on technologies such as carbon, capture, utilization and storage, or CCUS, to help reduce the carbon footprint of its energy sector. ADNOC is planning to increase its CCUS capacity to 5 million CO2 tons a year by 2030 from 800,000 tons in 2021.
“The initiatives that will be implemented under the UAE Circular Economy Policy 2021-2031 will lead to a further increase in emissions captured and reduced,” said Nuaimi.
The UAE, which plans to develop a detailed circular economy implementation plan this year, is focusing on four priority sectors: transport, manufacturing, food and infrastructure. It may tap private sector investments to help implement its plan.
“Given the scope and scale of the initiative, the government will leverage private sector financing as well as public financing,” said Nuaimi. “The amount the government needs to invest will depend on the degree of public-private partnership deemed appropriate.”
Despite efforts to diversify its economy away from oil and gas, the UAE is still dependent on the energy sector to fuel growth. But the circular economy initiatives could help boost the GDP.
“The transition to a circular economy is expected to produce several economic, environmental, and social benefits, including increased disposable income through reduced cost of products and services, and optimized use and conservation of resources. This will, in turn, support GDP growth,” said Nuaimi.