Reaching net zero: Challenges and opportunities on the path to carbon neutrality

In November 2021 Bahrain became the third GCC member, after the UAE and Saudi Arabia, to commit to reaching net-zero carbon emissions by 2060. Although its current emissions amount to a fraction of those emitted by its neighbours, climate change poses a very real threat to the kingdom. Modelling carried out in 2017 showed that a rise in sea levels of 1.5 metres would see Bahrain lose 27% of its landmass, a figure that rises to 56% in the case of a 5-metre sea-level rise by 2100.

While it has yet to lay out a detailed strategy, Bahrain’s net-zero pledge presented some of its initial aims and methods to achieve the 2060 target. By 2035 the kingdom seeks to reduce emissions by 30% “through decarbonisation and efficiency initiatives”. It also aims to double its renewable generation capacity to meet 10% of the country’s total energy demand by adding 710 MW of green energy.

In the 2017 National Renewable Energy Action Plan (NREAP), Bahrain aspired to a renewable energy mix consisting of solar, wind and waste-to-energy technologies, with solar expected to do the heavy lifting. Given its limited landmass, decentralised small-scale photovoltaic technologies will be the focus of Bahrain’s solar ambitions, with larger utility-scale plants to be deployed where possible.

Carbon Capture

Another fundamental pillar of Bahrain’s net-zero plan is an investment in the development of carbon capture, utilisation and storage (CCUS) solutions, including both technologies and natural solutions like doubling and quadrupling tree and mangrove coverage, respectively. CCUS will be especially vital for Bahrain – and its Gulf neighbours – because oil and gas will continue to play a leading role in economic growth for the foreseeable future. According to the World Bank, oil revenue makes up over 70% of government revenues in Bahrain, illustrating the significance of the sector for the country’s economy. Furthermore, the government is in the early stages of commercialising new hydrocarbon discoveries, signalling that oil and gas exploration and production will remain part of the energy landscape for years to come.

Industrial activity is responsible for the majority of Bahrain’s CO emissions. By 2040 emissions from the manufacturing sector are expected to hit approximately 40m tonnes a year, up from 30m tonnes in 2020. The aluminium industry is responsible for much of the emissions, with production concentrated in the cities of Al Hidd, Sitra and Askar in the north-east. Work is already under way to reduce emissions generated by the industry. In March 2022 Aluminium Bahrain (Alba), a major metal producer, signed a deal with Mitsubishi Heavy Industries to explore the feasibility of applying carbon capture technologies to one of its aluminium smelting plants, in what would be a world first.

With the development and deployment of CCUS at scale in Bahrain, new opportunities could open up for the production of green and blue hydrogen, which has been mooted as a crucial part of the future renewable energy mix. According to a report released by AFRY & GaffneyCline in January 2022, new market opportunities in hydrogen export and CO storage services could add $15.5bn to $44bn in gross value added to the GCC economies by 2050, while supporting 87,300 to 245,400 jobs. Bahrain’s Sustainable Energy Authority, responsible for the country’s renewables plan, has already announced the first such project in the kingdom: a 4-MW plant expected to cost $150m.

Regulatory Reform

In recent years the cost of deploying renewable energy like solar and wind power has declined dramatically, reducing the need for investment incentives. Nevertheless, an enabling regulatory framework and a carefully designed renewables market are vital for such projects to attract investors. This is one area where there is scope for improvement. According to the law firm DLA Piper, to stimulate investment in renewables, it would be beneficial for Bahrain to “loosen its [legal] requirements and allow private deployment of renewable energy plants without an extensive prior authorisation process from the government”.

The country has been taking steps to improve the investment climate. In 2017 the NREAP identified several areas of regulation for reform to create a conducive environment for investment. These included changes to allow private players to operate renewable energy plants, export excess power to the grid and generate income by selling the power produced from renewable sources. The government also announced that it would adopt a scheme providing a long-term purchase guarantee of electricity produced from renewable sources at a predetermined price. It issued a mandate requiring all new buildings and real estate developments to meet a predefined minimum percentage of their energy needs from renewable sources.

Industry Shift 

The main challenge for Bahrain and its Gulf neighbours in hitting the 2060 target will be their continued dependence on fossil fuels for revenue generation. To achieve their net-zero aims, GCC nations will have to use proceeds from the oil and gas industries to make a sizeable investment in renewable energy sources and carbon capture solutions. Therefore, progress in decarbonisation will remain closely linked to the sector mainly deemed responsible for the problem in the first place. According to the ratings agency S&P Global Platts, Bahrain will face the most difficulty in hitting its net-zero target because it “has less capital to invest in the transition and downstream industry is a sizable part of its small economy”.

Some of the most prominent players in Bahrain’s energy landscape have endorsed the kingdom’s netzero push by signing commitments and developing initiatives. In February 2022 Alba and the Bahrain Petroleum Company (BAPCO) signed a memorandum of understanding to collaborate on the environment and social and governance initiatives of common interest. A feasibility study will be carried out on utilising current and future developments on surplus hydrogen that BAPCO will supply to Alba. Furthermore, in April 2022 Alba became the first Bahraini firm to refinance its loans using sustainable funding sources, paving the way for future green financing.

International investors are also taking steps to support Bahrain’s net-zero push. Oil giant Eni, which has been present in Bahrain since 2019 and is the sole owner and operator of offshore exploration Block 1, recently signed a deal with Nogaholding to launch several new sustainability initiatives, including cooperation in renewable energy. The agreement will contribute to opening opportunities for joint cooperation in order to develop innovative solutions in favour of the circular economy, building on the principles to reduce, reuse and recycle. Nogaholding has already declared its ambitions to move beyond oil and gas to invest in renewable energy sources. It has signed a deal with US firm AirProducts to assess the development of a hydrogen economy to support the energy transition in the kingdom.

Positive Steps

Shortly after Bahrain made its net-zero pledge at the COP26 UN Conference on Climate Change in Glasgow in late 2021, the government announced that it had already achieved roughly 95% of its energy target of reaching 250 MW of renewable generation capacity by 2050, with more than 237 MW already installed.

Similarly, in early 2022 the kingdom announced that one of its most high-profile international events, the Bahrain Grand Prix, would run solely on renewable power. This initiative met the energy requirements of Formula 1 while also supporting Bahrain’s commitment to its net-zero ambitions. (https://texasdls.com) Further phases will see the energy needs of Bahrain International Circuit met sustainably.

In the short term, Bahrain would do well to develop the circular energy economy by using technologies such as CCUS to cut its carbon footprint at the source. The government can also accelerate efforts to develop hydrogen as an energy source, thus creating a new high-value renewables segment. Further investment in existing renewable sources, with the government’s strategy centred on solar and wind power, will also help the country achieve its aims. Progress on liberalising the country’s existing electricity regulations will also send a powerful signal to international investors regarding Bahrain’s commitment to its net-zero ambitions.

Sweeping reforms are difficult for every country, especially when the sectors most in need of overhaul form the cornerstone of the economy, as is the case for Bahrain. While the country has made notable progress to date, the transition to a cleaner economy will likely remain an immediate priority and a sustained effort over the years and decades ahead.