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Written by Rafael Leal-Arcas, Professor of Law and Public Policy, KAPSARC School of Public Policy, Riyadh, Saudi Arabia
International trade is critical for industrial decarbonization in that, through free trade, there can be open borders for access to cheap and good-quality green goods, which, in turn, can help decarbonize the economy and generate wealth. Ways in which the link between trade and sustainability can be designed include energy transition partnerships, capacity building, technology transfer, and access to green-product markets, among others.
The impact of climate change is a transnational issue. For instance, Africa, whose population represents 18% of the world population, is responsible for around 4% of CO2 emissions, but contains most of the countries that are most vulnerable to climate change.[1] Throughout the world, legislation related to climate change mitigation is proliferating. One example is the European Union’s Carbon Border Adjustment Mechanism, which taxes carbon-intensive imports into the European Union, thereby putting a break on African industrialization.[2]
This article brings forward the potential of a trade[3] and sustainability partnership between two regions: the European Union (EU) and the Gulf Cooperation Council (GCC). On the European side, 12 countries plan to phase out fossil fuels from the heating of buildings.[4] In democracies, such as the EU, voters often disagree with green-friendly governments. To avoid this, policies would need to be drafted to reduce greenhouse gas (GHG) emissions with carrots (i.e., incentives), instead of sticks (i.e., penalties), to minimize the possibility of backlashes.[5]
On the GCC side, countries such as Saudi Arabia can help obtain minerals necessary for rapid decarbonization. According to The Economist, there are 72 countries (including the EU member states) that have committed to net zero targets by 2050, and combined represent 80% of global GHG emissions.[6] According to The Energy Transitions Commission (ETC), reaching that target will require “15 times today’s wind power, 25 times more solar, a tripling of the grid’s size and a 60-fold increase in the fleet of electric vehicles.”[7] The ETC further argues that “by 2030 copper and nickel demand could rise by 50-70%, cobalt and neodymium by 150%, and graphite and lithium six- to seven-fold.”[8] The trading system may benefit from an improvement in infrastructure. The GCC countries could integrate their railways and connect them to those of Iraq, Jordan, and Israel.[9] Moreover, low-cost Saudi hydrogen could reach the EU via pipelines across the Mediterranean.[10] The GCC could also export solar power to the EU. Being a region blessed with sunshine almost every day of the year, solar panels are the way forward.
A key country in the GCC is, without a doubt, Saudi Arabia, whose potential in renewable energy is phenomenal. Saudi Arabia is the world’s 12th largest country,[11] and the largest without a river, which explains why the Saudis take great interest in desalination plants. A century ago, Saudi Arabia had a population of about two million people, mainly nomads;[12] as of late 2023, the population was about 37 million[13] and it is expected to peak at around 45 million by 2060 before beginning to slowly decline after 2061.[14] Its capital, Riyadh, had a population of around 27,000 in 1930[15] and, within 90 years, it had grown to over seven million.[16] A country blessed also with enormous amounts of oil and natural gas, Saudi Arabia must modernize and make use of technology to maximize its renewable-energy potential to be part of the global 21st century trend of turning away from oil,[17] which was discovered in Saudi Arabia in 1938, only six years after the Kingdom of Saudi Arabia was established. As of 2021, Saudi Arabia was the sixth largest consumer of oil in the world, with air conditioning using 70% of Saudi Arabia’s electricity.[18]
As part of its aim of diversifying the economy, Saudi Arabia owns 5% of Tesla and has invested in General Motors’ new phase of electric cars.[19] Moreover, Saudi Arabia wants to create 750,000 jobs in renewable energy in Saudi Arabia as the country also hopes that, by 2030, 7% of electricity will come from renewables, mainly solar, especially because solar radiation in Saudi Arabia is one of the highest in the world.[20] Furthermore, in 2022 Saudi Arabia launched an electric vehicle brand called Ceer Motors,[21] in line with Saudi Arabia’s Vision 2030 for diversifying its economy.[22]
Key to future success is the importance of diversifying both the GCC economy (so that the GCC can reduce dependence on crude oil and gas) and the EU economy (mainly through exportation). Another way forward is a potential free trade agreement between the EU and the GCC on the GCC’s climate change goals. Moreover, both regions should explore the potential of a renewable-energy trade agreement between themselves. Finally, one should explore a potential investment agreement between both regions.
[1] The Economist, “Global warming: Africa’s climate laboratory,” 16 September 2023, pp. 31-32, at 31.
[2] Ibid.
[3] On the broader Middle East, Shimon Peres wrote a book in 1993 while he was Israel’s foreign minister titled The New Middle East, published by Henry Holt & Co, making the point that trade would help find peace in the region. Interestingly, this is how the European Union was created: to have peace in the old continent via the creation of a common market that would maintain peace in the long term.
[4] The Economist, “Green politics: In hot water,” 9 September 2023, p. 11.
[5] Ibid.
[6] The Economist, “The energy transition: Keep digging,” 16 September 2023, pp. 57-59, at 57.
[7] See The Economist, “The energy transition: Keep digging,” 16 September 2023, pp. 57-59, at 57 (citing the Energy Transitions Commission).
[8] Ibid.
[9] The Economist, “The Gulf countries want to reshape the Middle East in their image,” 9 September 2023, pp. 17-20, at 18.
[10] Ibid.
[11] https://www.worldometers.info/geography/largest-countries-in-the-world/. Note that Greenland is not a sovereign country (it is part of Denmark). This fact explains why Saudi Arabia, which is number 13 on the list of largest countries in the world by area (behind Greenland), is actually the 12th largest country in the world.
[12] Tim Marshall, The Power of Geography: Ten maps that reveal the future of our world, Elliott and Thompson Limited, 2021, p. 81.
[13] https://www.worldometers.info/world-population/saudi-arabia-population/.
[14] https://worldpopulationreview.com/countries/saudi-arabia-population.
[15] https://www.britannica.com/place/Riyadh.
[16] https://www.macrotrends.net/cities/22432/riyadh/population.
[17] Tim Marshall, The Power of Geography: Ten maps that reveal the future of our world, Elliott and Thompson Limited, 2021, p. 81.
[18] Ibid, at 109.
[19] Ibid, at 110.
[20] Idem.
[22] https://www.vision2030.gov.sa/en/.
Research Handbook on EU Energy Law and Policy
Second Edition
Edited by Rafael Leal-Arcas, Professor of Law and Public Policy, KAPSARC School of Public Policy, Riyadh, Saudi Arabia
Find more information on this title here.
Read the introduction for free on Elgaronline.