Can net-zero carbon emission targets be met without crashing the economy?

A traffic jam in the central Attaba district of Egypt's capital Cairo, a climate protester in France and Iraqi farmers work at a farm outside Khanaqin. (AFP/File Photos)
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A traffic jam in the central Attaba district of Egypt's capital Cairo, a climate protester in France and Iraqi farmers work at a farm outside Khanaqin. (AFP/File Photos)
Commuters on their vehicles stand in a traffic jam after the government eased restrictions imposed as a preventive measure against COVID-19, in Allahabad on June 21, 2021. (AFP/File Photo)
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Commuters on their vehicles stand in a traffic jam after the government eased restrictions imposed as a preventive measure against COVID-19, in Allahabad on June 21, 2021. (AFP/File Photo)
A dead fish from Lake Powell sits in the sand at Lone Rock Beach on June 23, 2021 in Big Water, Utah, which has suffered from extreme droughts. (AFP/File Photo)
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A dead fish from Lake Powell sits in the sand at Lone Rock Beach on June 23, 2021 in Big Water, Utah, which has suffered from extreme droughts. (AFP/File Photo)
The San Gabriel River and the exposed lakebed of the San Gabriel Reservoir are seen on June 29, 2021 in the San Gabriel Mountains near Azusa, California. (AFP/File Photo)
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The San Gabriel River and the exposed lakebed of the San Gabriel Reservoir are seen on June 29, 2021 in the San Gabriel Mountains near Azusa, California. (AFP/File Photo)
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Updated 10 July 2021

Can net-zero carbon emission targets be met without crashing the economy?

A traffic jam in the central Attaba district of Egypt's capital Cairo, a climate protester in France and Iraqi farmers work at a farm outside Khanaqin. (AFP/File Photos)
  • The campaign for net-zero emissions by 2050 is gaining momentum ahead of COP26 in November
  • Divestment of assets may burnish image of oil companies, but will not lead to desired decarbonization

BERN, Switzerland: Global warming was on the international agenda long before the UN Framework Conference on Climate Change produced the Kyoto Protocol in 1997, widely seen as a landmark for the environmental movement. But it was the Paris Agreement, signed by 196 parties at COP21 in December 2015, that promised to be the game changer.

The agreement stipulated that any rise in temperatures by the end of the century must be limited to 1.5 C above pre-industrial levels. Scientists believe that in order to achieve this the world must reach net-zero emissions by 2050, which necessitates a 45-percent carbon-emissions reduction between 2010 and 2030.

According to the World Resources Institute, 59 countries, which between them are responsible for 54 percent of global emissions, have committed to binding net-zero targets. The UAE is reportedly considering its own net-zero goal by 2050, which would make it the first OPEC state to do so.

China, the world’s biggest CO2 emitter, has pushed back its net-zero deadline to 2060, as has its neighbor Kazakhstan. Russia and India, together responsible for 11.5 percent of global CO2 emissions, have yet to make any commitment.

There is, nevertheless, considerable momentum ahead of the COP26 summit in Glasgow this November. The majority of the countries that so far have committed to net-zero targets did so in 2020. The US followed suit in 2021.

Countries and multilateral entities such as the EU have the legislative power to drive change. But if net-zero targets are to be met, civil society plays a significant role.

Greta Thunberg is a case in point. The Swedish activist’s school strikes galvanized young people around the world and influenced the political agenda of many countries. So much so that parties have had to sign up to the green agenda in order to garner votes.

However, it is undeniable that the required changes will permeate every aspect of our lives. Action is needed to eliminate coal-fired power stations; install more renewable energy sources; retrofit buildings; decarbonize cement, plastics, aviation and shipping; expand public transport networks; and shift road traffic to electric vehicles. The list goes on.




A firefighter battles the flame in a forest on the slopes of the Troodos mountain chain, as a giant fire rages on the Mediterranean island of Cyprus, during the night of July 3, 2021. (AFP/File Photo)

All of the above will require huge investment. Indeed, the US intends to plough a good proportion of its post-pandemic infrastructure spending into green finance.

In the GCC, Saudi Arabia is leading the way with the Saudi and Middle East Green initiatives, which aim to reduce carbon emissions by 60 percent with the help of clean hydrocarbon technologies and by planting 50 billion trees, including 10 billion in the Kingdom.

These steps were recently acknowledged by John Kerry, the US climate envoy, who had high praise for Riyadh’s plan to invest $5 billion in the world’s largest green hydrogen plant in NEOM — the smart city under construction on the Red Sea coast.

The EU’s Green Deal will similarly be financed by €600 billion from its Next Generation pandemic-recovery plan and the European Commission’s seven-year budget. The plan is aggressive in setting out how to decarbonize the economy. Given its environmental dimension, the Green Deal’s carbon border adjustment mechanism has the potential to revolutionize tariffs worldwide.




A view of vehicles stuck in a traffic jam amidst street vendors and pedlars in the central Attaba district of Egypt's capital Cairo. (AFP/File Photo)

The price of carbon may also rise by 50 percent to €85 per ton by 2030. This is a step in the right direction, but carbon pricing will only be truly effective if it is applied globally. In which case it can become a mechanism for directing actions and allocating investments.

This is the story for rich nations with the funds and technology needed to implement rapid change. But what about the developing world, which faces significant climate threats but has limited means to adapt?

The Kyoto Protocol, the Paris Agreement and the UN’s Green Initiative obliged wealthy nations to fund climate-adaptation costs in developing countries. The Paris Agreements’ Green Climate Fund, in particular, was groundbreaking in this respect.

However, Antonio Guterres, the UN secretary-general, has had to call on rich nations to meet their $100 billion-a-year pledge to fund mitigation and adaptation measures in developing nations. According to The New York Times, only a third of this sum has actually been met.

FASTFACT

* Net zero will be achieved when all global greenhouse gases released by humans are counterbalanced by their removal from the atmosphere.

Then there are the private sources of funding behind net-zero initiatives, which are particularly important because finance is a cornerstone of the Paris Agreement, binding as it does global providers of capital into the agenda.

Environmental, social and governance (ESG) principles — the non-financial factors that investors look at when identifying risk and growth opportunities — constitute the fastest-growing asset class in the world. Deloitte expects some 50 percent, or $34.5 trillion, of all professionally managed money in the US will flow into ESG-compatible investments by 2025.

On July 7, Aviva Investors and Fidelity International, alongside another 113 investors overseeing assets worth $4.2 trillion, urged 63 of the world’s global banks to up their game on climate change, including the publication of short-term climate targets compliant with the International Energy Agency (IEA)’s net-zero scenario before annual shareholder meetings.

While this is an encouraging sign, there remain several questions about standards and so-called greenwashing. So far there are no universally agreed ESG standards, although several institutions, including the World Economic Forum (WEF), are working to create their own benchmarks.




School students hold up placards at a School Strike 4 Climate rally during a mass school strike for climate action in Melbourne on May 21, 2021. (AFP/File Photo)

The drive towards ESG investments channels funds towards green companies and has diminished the investor base for oil, gas and coal.

Most big companies have subscribed to net-zero 2050 targets and many European oil majors have defined themselves for some time now as ‘energy firms’ rather than oil giants, with aggressive plans to shift their activities toward renewables.

While these developments will lead to higher greener-energy production, they can also be misleading. Oil majors increasingly divest assets, which other entities, particularly in the private equity space or national oil companies, snap up on the cheap.

Shuffling the deckchairs might help improve the image of publicly listed oil companies, but it will not necessarily move more carbon out of the system.

The purists, meanwhile, want to defund hydrocarbons altogether. In May, the IEA issued a report, titled “Net Zero by 2050,” which recommended no new investments in upstream oil and gas assets after 2021.




An employee connects a Volkswagen (VW) ID.3 electric car to a loading station of German carmaker Volkswagen, at the 'Glassy Manufactory' (Glaeserne Manufaktur) production site in Dresden. (AFP/File Photo)

It says clean-energy investment needs to triple to $4 trillion by 2030. Although well-intentioned, the proposal is much more feasible for developed countries, which can afford measures like the electrification of road traffic. But in developing countries, where almost 800 million people have no access to electricity, gas is still needed as an affordable transition fuel.

The IEA report also said the new green economy could create 30 million jobs. It was unrealistic, however, when it calculated job losses of 5 million. In some of the world’s developing countries, many more than this number work in the coal sector alone.

Also, many Western governments underestimate the role that carbon capture, use and storage (CCUS) will play in decarbonization of the economy. The concept of the circular carbon economy, which will reduce reuse, recycle and remove carbon, and which was endorsed by the G20, could be better appreciated by decision makers.

Furthermore, nobody has yet compiled a full environmental and economic analysis of the life cycle of various sources of energy. A failure to understand their impact could lead to policy failures and the misallocation of funds.

In all of the above, clear and predictable regulatory frameworks are essential if initiatives are to win the backing of investors. In other words, expect the journey to net zero to be bumpy, occasionally acrimonious, and not as straightforward as many would like.

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* Cornelia Meyer is a Ph.D.-level economist with 30 years of experience in investment banking and industry. She is chairperson and CEO of business consultancy Meyer Resources. Twitter: @MeyerResources


Cryptocurrencies slide as market selloff deepens

Cryptocurrencies slide as market selloff deepens
Updated 26 sec ago

Cryptocurrencies slide as market selloff deepens

Cryptocurrencies slide as market selloff deepens
  • Digital currencies gaining popularity among Indians in smaller cities

RIYADH: Prices of cryptocurrencies plunged on Monday as concerns over the spillover risk to the global economy from Chinese property group Evergrande’s troubles rippled over to wider markets.

Bitcoin tumbled 7.33 percent to $43,804 at 4:29 p.m. Riyadh time. Its rival Ether, the coin linked to the Ethereum blockchain network, fell 8.74 percent to $3,050.45, according to data from CoinDesk.

The loss in the value of cryptocurrencies comes at a time when institutional interest in the space has surged and some investment banks have ramped up their forecasts for cryptocurrencies in the coming months.

“Their fate seems a little tied to equities at the moment, and the price action is incredibly similar too,” said John Marley, CEO of forexxtra, a London-based FX consultancy. 

Ether price

Nikolaos Panigirtzoglou, managing director of JPMorgan said that the fair value of Ether is much lower than its current price.

According to a set of measurements based on the network’s activity, it calculated the value of the digital coin at $1,500, 55 percent below its market price.

One of the reasons cited was that Ethereum was not unique anymore, and it faced stiff competition from other chains such as Solana and Avalanche.

“We look at the hash rate and the number of unique addresses to try to understand the value for Ethereum. We’re struggling to go above $1,500. There is a question mark here. The current price is expressing an exponential increase in usage and traffic that might not materialize,” he stated.

 

Lawsuit

In the midst of an ongoing lawsuit with the US Securities and Exchange Commission, Ripple's legal team said they have no plans to settle with the SEC.

They are confident that SEC President Gary Gensler will be convinced that pursuing the case is to pick winners and losers in the crypto space based on innovation.

"Ripple’s legal team told Fox Business they have no plans to settle with SEC over lawsuit on XRP, confident they can show Gary Gensler in pursuing the case is picking winners and losers in the crypto business to the detriment of innovation,” Charles Gasparino tweeted.

 

Indians embrace crypto

Indian citizens are embracing cryptocurrencies to invest and earn extra money after the pandemic, according to reports from the regional media.

But what is even more interesting is that this growth has been greater in smaller cities, where interest in cryptocurrency is at its peak.

The profile of these participants was also interesting, as they are highly educated and open to diversifying their investment portfolios and not only focus on Bitcoin.

 A local exchange, Wazirx, has reported astonishing levels of new customers coming from these small towns, classified as Tier 2 and Tier 3 cities.

“Tier 2 and Tier 3 cities have driven almost 55 percent of the total user signups on Wazirx in 2021, thereby overtaking Tier 1 cities, which demonstrated a signup growth of 2,375 percent,” Wazirx CEO Nischal Shetty was quoted as saying in local media reports.


Saudi top 10 banks see robust growth in financing and deposits

Saudi top 10 banks see robust growth in financing and deposits
Updated 20 September 2021

Saudi top 10 banks see robust growth in financing and deposits

Saudi top 10 banks see robust growth in financing and deposits

RIYADH: Saudi Arabia's top 10 banks saw robust quarter-on-quarter growth in financing and deposits in the second quarter of 2021, Zawya reported, citing management consulting firm Alvarez & Marsal (A&M)'s KSA Banking Pulse.

Core operating income increased by 8.4 percent, compared to 1.2 percent in the first quarter of the year, in what is considered the fourth increase in a row, while loans and advances (L&A) increased by 13.1 percent and deposits by 12.6 percent.

L&A and deposit growth were primarily supported by the merger of National Commercial Bank and SAMBA to form Saudi National Bank (SNB), according to the report.

Operating expenses rose by 13.7 percent quarter-on-quarter and impairments jumped by 81.6 percent, affecting the second quarter's overall operating efficiency for the banking sector. This affected net profit for the top ten banks in the Kingdom.

Aggregate net income decreased over the same period by 8.1 percent to SR11 billion ($2.93 billion), while the fall in net profit was partially offset by a 11.1 percent increase in net interest income.

The top 10 banks in the report are SNB, Al Rajhi Bank, Riyad Bank , Saudi British Bank, Banque Saudi Fransi, Arab National Bank, Alinma Bank, Bank Albilad, Saudi Investment Bank and Bank Aljazira.


Blossoming Saudi fragrance market to hit over $3.8bn by 2030

Blossoming Saudi fragrance market to hit over $3.8bn by 2030
Updated 20 September 2021

Blossoming Saudi fragrance market to hit over $3.8bn by 2030

Blossoming Saudi fragrance market to hit over $3.8bn by 2030

DUBAI: The Saudi fragrance market is poised to reach $3.8 billion by 2030, according to a market report, with an annual growth rate of 8.2 percent from last year.

India-based P&S Intelligence said a growing trend in grooming and personal care will drive this performance of the Kingdom’s perfume sector, which in 2020 was valued at $1.74 billion.

The predicted growth follows a challenging year for industry, as manufacturing plants were shut down due to the COVID-19 pandemic.

The report said luxury product bifurcation will witness the fastest growth in the sector, as more consumers opt for high-end brands.

The parfum category, which uses the highest concentration of essential oils, took most of the market share in the past.

Demand for natural and organic perfumes will also increase, the report said, amid increasing brand consciousness among consumers.


Innovation zone aims to transform Cairo’s Bab al-Azab 

Innovation zone aims to transform Cairo’s Bab al-Azab 
Updated 20 September 2021

Innovation zone aims to transform Cairo’s Bab al-Azab 

Innovation zone aims to transform Cairo’s Bab al-Azab 

RIYADH: Egypt's Sovereign Fund plans to transform the historic Bab al-Azab area in Cairo’s Salah Al-Din Al-Ayoubi Citadel into the first integrated innovation zone in the Middle East and North Africa (MENA).

The fund signed a Memorandum of Understanding with Bidayat Investment company, under which the company will explore opportunities for cooperation in developing Bab Al-Azab and turning it into an innovation center to embrace Egyptian youth creators, founding partner Rachid Mohamed Rachid told Asharq Business.

The center also aims at embracing startup owners in fields such as engineering design, furniture manufacturing, jewelery, fashion, as well as films, he said.

Bidayat Investment Group has already established innovation centers in several international markets, such as Italy, France and Turkey.


Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistan's Maqsad raises $2.1m pre-seed funds
Updated 20 September 2021

Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistan's Maqsad raises $2.1m pre-seed funds

Pakistani e-learning platform Maqsad has raised USD$2.1 million in its latest funding round, just months after being created.

The edtech company offers after-school academic support to youngsters in English and Urdu, and the company aims to reach 100 million students in Pakistan.

The company will use the cash to fund a production studio, academics and animators in order to develop in-house content.

Maqsad co-founder Rooshan Aziz said: “Struggles of students during the early days of the pandemic motivated us to run a pilot program. With promising initial traction and user feedback, the potential to digitize the education sector became very clear.”