A plan for the Gulf States to power a low-emissions revolution

This year’s United Nations Climate Change Conference, COP 28, will be hosted by the United Arab Emirates, which, together with its Gulf neighbors, enjoys abundant solar, natural gas and financial resources. At the same time, many poorer countries are struggling to generate the additional affordable electricity they need to power their development — especially as wealthier nations halted their overseas financing for high-emitting coal power plants.  

Unfortunately, the UAE and other Gulf states can’t easily export their solar resources to developing countries. However, they can export their natural gas to support affordable low-emissions power production in poorer countries if combined with donor-financed carbon capture, utilization and storage (CCUS)-equipped gas-fired power plants. The lead-up to COP 28 provides an opportunity to explore this mechanism to support low-emissions economic growth in poorer countries — a “gas for poverty and climate” power proposal.

As I noted in an earlier opinion piece, the decisions by the G-7, China and others to halt overseas financing for coal power plants serve important climate goals but do not eliminate developing countries’ need for more electricity at affordable prices. According to a February Reuters report, the Pakistan government has decided, in the face of high and volatile natural gas prices, to pivot from building gas-fired plants to more affordable coal-fired ones notwithstanding the higher emissions. This shift is all the more unsettling given the devastation Pakistan suffered last year from massive flooding with an intensity potentially exacerbated by climate change.

The decision to build more coal power plants reflects the difficult dilemma faced by many poorer countries: They are the most vulnerable to the impacts of climate change and yet they do not feel they can afford to forestall investing in affordable power generation and the shorter-term economic benefits it provides, even if this means building high-emitting coal power plants.

The upcoming COP 28 context might provide a way out, one that leverages the hosting of the event in the gas-rich Gulf region, with the stated interest of wealthier countries and multilateral development banks to support poorer countries in the energy transition.

The proposal has two basic elements: an undertaking by a Gulf producer to provide natural gas at a preferential low price to new “low-emitting” gas-fired power plants built with concessional climate finance in partnering developing countries.

The preferential pricing builds off of three interrelated Gulf state dynamics: the abundance in the region of gas resources, Gulf programs to contribute to the economic development of poorer countries and efforts to lower emissions from petroleum, such as the application of carbon capture technologies. The sales price would be fixed at a concessional level — e.g., notionally at (or even potentially below) the cost of production, liquefaction and transport, rather than generating typical market returns.

The subsidy embedded in this structure would be recognized as a financial contribution by the gas-supplying country to both international development and global climate efforts. This structure could potentially also be used by wealthy gas countries from other regions, such as possibly Norway, interested in simultaneously supporting development and tackling climate change.

The second element is the use of this natural gas in gas-fired power plants equipped with “carbon capture, utilization and storage” technologies to produce “low-emissions” electricity.

Many countries have looked to expand the use of gas-fired plants in part because they emit less than half the carbon dioxide (CO2) per kilowatt hour (kWh) of a coal plant. But their emissions are still consequential, potentially in the order of 350 grams of CO2/kWh according to one estimate —  a significant level when considering the “net zero emissions” targets put out by various countries or embedded in the climate modeling of the International Energy Agency.

CCUS is one tool to substantially further reduce these emissions by 90 percent or more. The potential result is CO2 emissions per kWh that are so low they might even be termed “near-zero emissions.”

Although CCUS technologies have been developed and tested for many years on power plants, they have yet to be deployed at a large scale. One reason is that they are expensive per ton of reduced CO2 emissions. Consequently, their cost would undermine a developing country’s electricity affordability objective.

To overcome this hurdle, the CCUS-equipped gas-fired plant would need to be financed in large part through highly concessional climate funding, to be provided notably by the international donor community. There may also be an opportunity to tap into carbon markets to fund both capital and operating expenditures given the lower (i.e., avoided) emissions from the CCUS-equipped plant as compared to the alternative of a new coal-fired power plant or a gas-fired one without CCUS.

There are, of course, additional complexities to explore. For example, the plant would need to be able to access reasonably priced options for CO2 use or storage. In addition, the greenhouse gases (including methane) emitted in producing and delivering the natural gas to the plant would need to be limited to ensure the produced electricity remains “low emissions” when considering the full value chain. Further analysis would also be needed on the pricing and other terms to make this structure attractive for the natural gas supplier, the donor community funding the CCUS-equipped plant and the developing country’s electricity consumers.

Building renewables plants across the Global South is a preferable alternative to generate fewer emissions — but the international community has to date been unwilling to provide the substantial funding needed to construct this type of additional generation capacity at the level developing countries require. And, as noted earlier, the technologies don’t yet exist for the Gulf states to export their abundant solar power resources, notwithstanding current discussions about green hydrogen.

The hosting of COP 28 in the Gulf provides an opportunity to think creatively about how to mobilize the gas resources of that region (and elsewhere) to better support both the development needs of poorer countries and the global climate effort. This COP 28 “gas for poverty and climate” power proposal might provide some elements.

Philippe Benoit has over 25 years of experience working in international energy and sustainability, including prior management positions at the World Bank and the International Energy Agency.  He is currently adjunct senior research scholar at Columbia University’s Center on Global Energy Policy and  research director at Global Infrastructure Analytics and Sustainability 2050.