The news that the Kingdom, Qatar and the UAE have pledged a total of $750 million to a new fund to tackle global warming was one of the most concrete news to come out of the recently concluded OPEC Riyadh Summit in November. Saudi Arabia led the way with a $300 million donation, and stated that the new fund’s objectives would be to encourage research and practical ways on finding technological solutions to the climate change problem, now stressed by many observers and key world governments. It is in OPEC’s interest to participate in finding “clean oil” solutions, including carbon capture and storage, so as to help reduce global warming and ensure that fossil fuel is still the energy of choice among competing energy sources.
Governments around the world, after years of paying lip service, have suddenly become converted eco-warriors and seem to be outdoing each other in their desire to create stable and sustainable economies based on low carbon emissions. The world’s largest polluter — the US — has also joined on the eleventh hour at the recent Bali climate change meeting, after much bitter lobbying and public berating — basically naming and shaming. The “green” lobby groups, arguing for such a message, must be overboard with joy at these mass conversions to a more environmentally friendly world. However, sometimes lofty principles and moralistic words seem to come down to earth in the face of business pressure and economic reality, and the fact that technological advances to reduce global emissions have not kept face with the rise in emissions.
This is where the OPEC fund is to be welcomed and demonstrates a serious commitment from OPEC, led by the Kingdom, in ensuring that practical solutions are funded. Resistance from industry is often couched in terms of added costs imposed on manufacturers in trying to reduce emissions or find more efficient ways of utilizing energy. Some see such extra investments as a way of surviving in the future, in the face of a more hostile environmental lobby and emission monitoring groups. For many, the cost of initiating new research is just too prohibitive and they hope their governments can either delay the imposition of stringent emission control targets, or postpone target deadline dates. Europe, for example, has set a target of 2020 to produce 20 percent of its energy from renewable sources, but some EU government are quietly trying to wriggle out of this on “technical” difficulties. Matching the OPEC fund would be one way to demonstrate commitment to climate change, and ensure that research laboratories around the world, as well as manufacturers, have access to these funds to develop new technologies.
Dedicated low-carbon funds should be set up for European and other major manufacturing regions’ energy and infrastructure projects, as well as funds set aside for carbon capture and storage. There is a limit by how much global emission can be controlled through credits and debits in carbon trading and “offsets” between polluters and those countries who are planting “green zones”.
Extra funds for research in green technologies, as well as sovereign investment funds to help countries such as China and India towards low-carbon sustainable economies are to be encouraged, given that these two countries are now the world’s engines of economic growth. At the Riyadh OPEC Summit, Indonesia called for special fund to be set up — the so- called “Oil for Forests” fund — to manage forest in a sustainable way, but others argued that oil-consuming richer nations pay for environmental protection elsewhere.
Some environmentalists are already thinking outside the box for solutions, and one area is in energy efficient housing and office buildings. The proposed model has interesting implications for the ongoing massive construction boom in the Middle East, and local contractors could set a new international standard and become pioneers in this area. The model, in its simplest form, would encourage the use of renewable energy in buildings, such as Solar Photovoltaic (PV) and wind to meet goals of creating, what virtually could become, “every building a power station”. Bahrain has set an exemplary standard by adopting this approach in one of its newest landmark buildings, and the experiment is being watched closely by others in the Middle East. In the wider world, governments could attract investors into energy-efficient construction projects by introducing tax-free investment schemes, and penalizing “polluting” projects through higher tax rates.
For Middle East corporations, the message is once more that investment in environmental friendly technology is something that they must seriously consider and invest in, before stricter legislation is enforced, catching many unprepared. The global message concerning the dangers of climate change is now far too frequent and occurring all over the globe, to put this down to climate aberrations. Over the past year alone, we have seen unnatural flooding in Britain, destructive forest fires in Greece and California, floods in Bangladesh and Oman, and the opening up of the fabled North West Polar passage due to melting ice caps. Governments, and more importantly, ordinary citizens, have a very stark choice — either make hard decisions now in terms of more investment and possible lower economic growth and standard of living, or turn a blind eye and hope that the problem goes away.
This guarantees that our grandchildren pay for a policy of appeasement in terms of fighting climate change head-on. The Kingdom of Saudi Arabia has thrown a challenge to the rest of the world to take the matter seriously. Let us hope that others follow suit, pick up the challenge, and be as generous with their funding of climate change.
(Dr. Mohamed Ramady is a visiting associate professor, Finance and Economics at King Fahd University of Petroleum and Minerals)