Saudi Arabia

Critically Insufficient4°C+ World

NDCs with this rating fall well outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would exceed 4°C.

Highly insufficient< 4°C World

NDCs with this rating fall outside of a country’s “fair share” range and are not at all consistent with holding warming to below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach between 3°C and 4°C.

Insufficient< 3°C World

NDCs with this rating are in the least stringent part of a country’s “fair share” range and not consistent with holding warming below 2°C let alone with the Paris Agreement’s stronger 1.5°C limit. If all government NDCs were in this range, warming would reach over 2°C and up to 3°C.

2°C Compatible< 2°C World

NDCs with this rating are consistent with the 2009 Copenhagen 2°C goal and therefore fall within a country’s “fair share” range, but are not fully consistent with the Paris Agreement long term temperature goal. If all government NDCs were in this range, warming could be held below, but not well below, 2°C and still be too high to be consistent with the Paris Agreement 1.5°C limit.

1.5°C Paris Agreement Compatible< 1.5°C World

This rating indicates that a government’s NDCs in the most stringent part of its “fair share” range: it is consistent with the Paris Agreement’s 1.5°C limit.

Role model<< 1.5°C World

This rating indicates that a government’s NDC is more ambitious than what is considered a “fair” contribution: it is more than consistent with the Paris Agreement’s 1.5°C limit.

Economy-wide

It is difficult to assess whether Saudi Arabia’s current policy projections reach its NDC since there is no business-as-usual baseline available for the NDC (as discussed in the Pledge section) and there is limited data availability for the current policies trajectory. This is further explained in the Assumptions section. Based on these assumptions, we expect that under current policy projections, Saudi Arabia’s emissions to be at 1,061–1,117 MtCO2e by 2030—an almost six to seven-fold increase from 1990 levels. Saudi Arabia can reach its “Critically insufficient” NDC target under current policies projections.

Energy supply

As the world’s leading oil exporter, oil extraction has been the backbone of Saudi economy, with proceeds from exports covering 90% of total government revenues, and contributing more than 35% of GDP since 1970 (Al-Rushaid, 2010; Alshahrani & Alsadiq, 2014). Given the current policy framework in the energy supply sector, Saudi Arabia is projected to follow baseline levels using fossil fuels to supply its energy needs.

However, facing an oversupply in the market with the recovery of supply production from Iran, Iraq and Libya, the development of new, unconventional, oil supplies, a less energy-intensive phase of Chinese and East-Asian growth and the gradual commercial viability of renewables, Saudi Arabia is increasingly steering its focus towards diversification from oil dependence (Alsweilem, 2015).

In addition to international pressure, Saudi Arabia has one of the world’s highest rates of per capita energy consumption, forecast to triple by 2030 compared to 2010 levels (Al-Ghabban, 2013). This issue presents two hitches: it will significantly reduce Saudi Arabia’s capacity to export oil because of increased domestic needs, and it will increase government spending because oil is heavily subsidised for domestic consumption.

In March 2018 Saudi Arabia and the SoftBank Group Corp. signed a memorandum of understanding to build a 200 GW solar plant (Bloomberg, 2018). With an estimated full load hour of 2,200 hours this could lead to 440,000 GWh of renewable electricity in 2030. This would be worldwide the first solar plant project of this scale.

If fully implemented, the plant would far exceed previous government plans for renewable energy. In 2013, the government announced its plan to build 54 GW of renewable power and 17 GW of nuclear power by 2032 to cover 40–45% of future electricity production (Al-Ghabban, 2013). After already announcing an eight-year delay of these plans in 2015, Saudi Arabia has further revised the renewables energy targets in 2016. In the “Vision 2030” announced in 2016, the target is cut down to an ‘initial phase’ of only 9.5 GW in 2023 (Borgmann, 2016; Kingdom of Saudi Arabia, 2016). Targets for the period post-2023 have not yet been announced. In this “Vision 2030” there is no further mention of the nuclear power target.

Through the National Renewable Energy Plan, Saudi Arabia is taking steps to expand renewable electricity generation. In February 2017, it launched a US$30–50 billion renewable energy tender programme (Saudi-US Trade Group, 2017) through which domestic and international companies are invited to bid for renewable energy projects. In the first round, companies are bidding to develop 300 MW of solar energy and 400 MW of wind power projects (Bloomberg, 2017b).

In October 2017, the prices for the first round of bids on solar energy looked set to break the prior record lows (2.42 US cents/kWh in Abu Dhabi). Seven out of eight bids were below 3 US cents/kWh and the lowest bid was 1.79 US cents/kWh (Bloomberg, 2017a). After detailed evaluation of material compliance with RFP requirements, Saudi Arabia’s Renewable Energy Project Development Office announced two short-listed firms with 2.34 US cents/kWh and 2.66 US cents/kWh (PVTech, 2018).

Our current policy projection range reflects optimistic and pessimistic assumptions on the implementation of the 9.5 GW target for renewable energy from Saudi Arabia’s “Vision 2030”. Our planned policy projections take into account the full implementation of the 200 GW solar plant. For further details, see the Assumptions section.

Transport

The government is currently seeking to diversify the economy beyond oil exports. Government officials are studying the feasibility of reviving those infrastructure and economic development projects—which were suspended because of low oil prices in 2016—that could achieve the objective of a more diversified economy (Reuters, 2017).

Energy subsidy cuts are a key part of this reform plan that has started with an increase in fuel prices in December 2015, with the aim to reach international price levels by 2020. However, in December 2017 Saudi Arabia announced it would instead slow the pace of energy subsidy cuts to offset the impact of austerity measures on the stagnating economy.

Saudi Arabia is now planning to gradually reach parity with international gasoline prices between 2018 and 2025. In the same period, Saudi Arabia plans to increase local diesel prices to 90% of international prices. It has also announced other energy types price increases (Bloomberg, 2017).

We estimate that the updated energy subsidy cuts will result in emissions reductions of 53 MtCO2e compared to business-as-usual in 2030. The Government has also implemented a 5% VAT for fuel prices from January 2018 onwards (General Authority of Zakat & Tax, 2018). Another policy in the transport sector foresees fuel economy standards for imported vehicles by 2020 (IEA, 2017).

In October 2018, Saudi Arabia’s Public Investment Fund announced that it wants to localise the electric vehicle (EV) industry in the country following an agreement to invest more than USD 1 billion in the US-based EV manufacturer Lucid Motors (Reuters, 2018).

Buildings

In the buildings sector, Saudi Arabia has introduced energy efficiency measures such as insulation standards for new buildings, and tightened minimum energy performance standards for air conditioners (ACs) to reduce local oil consumption (IEA, 2014). Since the introduction of these measures and standards in 2012, the standards for ACs have been further refined and the insulation standards continue to be enforced. Saudi Arabia is currently looking into developing standard for appliances and lighting. The measures and standards in the building sector are expected to reduce emissions (Saudi Arabia Energy Efficiency Center, 2017).