In the west the debate over climate change generally falls along two competing narratives. The environmental left says that fossil fuels are the source of the CO2 emissions causing climate change and the solution is to abandon fossil fuels. Their opponents on the right say that climate change is a hoax or at least not a big deal and no justification for altering our continued reliance on fossil fuels.
Saudi Arabia, the world’s largest oil exporter, is generally viewed in the west as illiberal and obstructionist in international climate change talks, but this is an incomplete portrayal of their position. Saudi Arabia accepts the reality of climate change and the need to mitigate CO2 emissions, but they say that oil and gas are part of the solution. This view is in stark contrast to both sides of the debate in the west.
Saudi Arabia faces multiple challenges to their core oil business. They understand that the oil age will not last forever but at the same time they are committed to being the last man standing in the industry. Peak demand has likely already come with efficiency and alternative energy policies gaining strength globally. On top of that, their domestic consumption is out of control with subsidies making their retail fuel prices the cheapest in the world (part of their social bargain) and threatening export capacity. They also use oil to produce much of their electricity.
Climate change has real impacts in the Middle East and is not being denied there. The Saudis are investing heavily in CCS and in solar and these are not feel-good greenwashing efforts, but are core to their long term strategy to protect oil exports. Saudi oil fields have enormous carbon sequestration potential and Saudi deserts enormous solar potential, but very real technical challenges exist on both fronts. Desert dust blankets and scratches conventional PV and requires advanced material science to overcome. And CCS is bloody expensive, despite practical value in using CO2 for enhanced oil recovery.
The seemingly conflicted view the Saudi’s take that oil and gas are part of the global climate solution makes sense from their perspective. The Saudis have consistently taken the position in climate talks that the developing world (of which they are a leader) cannot be punished in the effort to reign in CO2 emissions. Hydrocarbons are the foundation of industrial civilization, and the Saudis argue that it is critical that the poor countries of the world continue to have access to them if they have any hope of climbing out of poverty, for this they are deemed obstructionist by climate activists in the west. The Saudis are pushing an innovation agenda where improved fuels, efficient engines, carbon capture and renewables, both protects the environment and their long term business prospects.
It remains to be seen if Saudi Arabia will be successful in their efforts to adapt to a low-carbon energy world, and they certainly have many challenges that dominate their attention in the near term, but in the debate over carbon emissions and climate change the behavior of Saudi Arabia is certainly worth watching.