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. For sectors, the rating indicates that the target is consistent with warming of greater than 4°C if all other sectors were to follow the same approach.

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. For sectors, the rating indicates that the target is consistent with warming between 3°C and 4°C if all other sectors were to follow the same approach.

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. For sectors, the rating indicates that the target is consistent with warming over 2°C and up to 3°C if all other sectors were to follow the same approach.

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. For sectors, the rating indicates that the target is consistent with holding warming below, but not well below, 2°C if all other sectors were to follow the same approach.

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. For sectors, the rating indicates that the target 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. No “role model” rating has been developed for the sectors.

1.5°C Compatible< 1.5°C World

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 1020–1110 MtCO₂e by 2030—an almost six to seven-fold increase from 1990 levels. Saudi Arabia can reach the upper end of 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 the Saudi economy, with proceeds from exports covering almost 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.

Growing domestic demand for oil and gas, coupled with years of oil prices often below the level the fiscal breakeven price (i.e. the price needed to meet government spending) of USD 80–85 per barrel of oil estimated by the IMF, have led the government to steer its economy towards diversification from oil dependence (Alsweilem, 2015; Barbuscia, 2019). The risks associated with a heavy reliance on oil revenues were further highlighted in September 2019 when a missile attack on Saudi Arabia’s oil facilities temporarily cut total production in half (de la Merced & Reed, 2019).

To diversify its revenue streams, a central objective of “the Vision 2030” strategy, the Saudi government is planning to list a small share (up to 3% in a first stage) of the state-owned oil company Saudi Aramco on the stock market (de la Merced & Reed, 2019; Reuters, 2019). Saudi Aramco’s stock market launch has, however, been complicated by an uncertain security situation in the region and increased awareness about the financial risks related to fossil fuel investments (de la Merced & Reed, 2019). Recent research by the Climate Accountability Institute shows Saudi Aramco has contributed more than any other company to global carbon dioxide emissions since 1965 (Heede, 2019; Taylor & Watts, 2019).

In addition to fiscal 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 issues: 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 200 GW of solar (Bloomberg, 2018). At this stage it is not clear whether the 200 GW would be used to develop solar panels for export or whether they would be contributing to renewable electricity produced in Saudi Arabia (Ministry of Energy of Saudi Arabia, 2019c).

In late 2018 some news outlets claimed the project had been cancelled, but the Saudi government was quick to refute these claims (Beetz, 2018). Beyond a mention of the 200 GW plans in an early 2019 press release (Ministry of Energy of Saudi Arabia, 2019c), there has been no mention or recent developments regarding this megaproject.

If fully implemented as domestic electric capacity, the plant would far exceed the new targets and 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 further revised the renewables energy targets in 2016 and again in 2019. In the “Vision 2030” announced in 2016, the target was reduced to an ‘initial phase’ of only 9.5 GW in 2023 (Borgmann, 2016; Kingdom of Saudi Arabia, 2016). In early 2019, the Ministry of Energy announced an updated “Vision 2030” renewable energy target of 27.3 GW by 2023 and 57.8 GW by 2030.

In “Vision 2030” there is no further mention of the nuclear power target but it appears the nuclear objectives have been revised downwards. In 2013, Saudi Arabia announced that it planned to build 17 GW of nuclear energy by 2032; this date was later revised to 2040 (World Nuclear Association, 2019). In September 2019, the newly appointed Minister of Energy stated that Saudi Arabia would “proceed cautiously” with nuclear energy development. There are now tentative plans to build two reactors totalling 2.8 GW by 2030 (MEES, 2019). Due to this lower nuclear objective, the current policy scenario is close to our previous assessment, despite the new, higher 2030 renewable energy target.

Through the National Renewable Energy Plan, Saudi Arabia is taking concrete steps to expand renewable electricity generation. In February 2017, it launched a USD 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 bid to develop 300 MW of solar PV energy and 400 MW of onshore wind power projects (Bloomberg, 2017b). At the time the contract was signed, the solar PV project had set a new record price at USD 2.34 cents/kWh (Dudley, 2019).

In August 2019 the Ministry of Energy launched a second round of renewable energy tenders, inviting bids for a total of roughly 1.5 GW of solar PV. It also announced that a third round would still be issued in the final quarter of 2019 (Ministry of Energy of Saudi Arabia, 2019a). The government will need to increase the pace of installations to meet the 2023 and 2030 targets, considering that in 2018 the installed renewable energy capacity stood at only around 0.1 GW (IRENA, 2019a).

In 2019, Saudi Arabia’s Renewable Energy Project Development Office (REPDO) completed a study claiming that 13.5 GW of renewable energy could be integrated without major grid upgrades (Ministry of Energy of Saudi Arabia, 2019b). Beyond this, and in order to achieve the renewable energy targets the government has set by 2023 and 2030, large-scale investment in grid infrastructure will be necessary.

Our current policy projection range reflects optimistic and pessimistic assumptions on the implementation of the 27.3 GW by 2023 and 58.7 GW by 2030 targets for renewable energy from Saudi Arabia’s “Vision 2030”. Our planned policy projection takes into account the full implementation of a 200 GW solar plant producing electricity in Saudi Arabia. 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, 2017a).

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 its intent to establish an 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). But progress to date has been slow: Saudi Arabia only installed its first EV charging station in August 2019 (Utilities Middle East, 2019).

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 standards for appliances and lighting. The measures and standards in the building sector are expected to reduce emissions (Saudi Arabia Energy Efficiency Center, 2017).