The Gulf needs carbon taxes, not just capture, to reach net zero

The clock is running down. Most Gulf countries have set explicit targets to achieve net zero carbon emissions, despite in normal times being major exporters of oil and gas.

Oman and the UAE are committed to net zero by 2050; Saudi Arabia, Kuwait and Bahrain by 2060. Qatar, previously the world’s largest exporter of liquefied natural gas, is an outlier, committing only to modest reductions to below business-as-usual levels.

Some are making progress. In Oman, the only country in the Arabian Gulf to achieve a green ranking on Net Zero Tracker, renewable energy accounted for over 9 percent of electricity production at the end of last year, according to the authority for public services regulation cited by Francesca Washtell. The UAE is about the same, according to the IEA. But other GCC states lag.

One method of achieving the net zero goals is carbon capture, utilisation (ideally) and storage. The UAE has for some time operated Al Reyadah, the first commercial-scale CCUS facility in the region. Qatar has a large scheme at Ras Laffan and Saudi Arabia’s Jubail Industrial City aims to capture about 44 million tonnes of carbon a year by 2035. So far so good.

But globally, if net zero is to be achieved in accordance with the Paris commitments, 2,500 large-scale capture projects would be needed, according to Siemens Energy.

This is not going to happen. The oil and gas giants of the region may prefer technical interventions but other policies and tools are needed, according to speakers at Oman Sustainability Week. Carbon credits or taxes – or something like them – can provide incentives for investment in abatement.

“In the region at the movement, there’s no incentive… for emitters to capture the CO2,” Ali Mohammadi, head of business development at OQGN, which operates Oman’s gas transmission network, said in Muscat.

So-called voluntary credits enjoy a poor reputation. Under these, an emitter – perhaps a large tech company – agrees to invest in forestry, for example, and obtains attestation that a certain amount of carbon has been sequestrated. But such systems are dogged by allegations of greenwashing and concerns about “additionality”.

The alternative is compliance credits – state-imposed rules and taxes and state-certified sequestration. According to Malek Al Chalabi of Shell, only 2 percent of credits produced so far are voluntary and 98 percent are compliance.

The European Union, for example, operates the Euro Taxonomy Regulation, which seeks to combat greenwashing and specifies thresholds for compliant entities.

Even Donald Trump’s United States offers the 45Q tax credit to encourage investment in CCUS and direct air capture.

Here the GCC has the capacity to act. In 2024, Saudi Arabia launched a regional voluntary carbon market to facilitate emissions trading. And the UAE’s ADGM has a carbon trading platform. But these are essentially voluntary.

Commentators such as AGBI columnist Manal Abdel-Samad have been making the case for carbon taxes for some time.

“A well-structured carbon tax in the GCC, with reinvestment in clean energy projects, could drive meaningful change without damaging economic activity,” Manal wrote last year.

Oman is the most committed of the six states to a green agenda, arguably because it has to be given its lower hydrocarbon reserves.

And, despite the travails of the Iran war, the sultanate is grinding on with its commitments to a less carbon-intensive future. With abundant land, wind and solar resources, it has a national strategy for an orderly transition to net zero.

In 2024 it created the Oman Centre for Net Zero, part of OQ, and last year it set up Mizan, a carbon tracking accounting tool. The government has more recently established an industry consultation taskforce on CCUS.

Oman can lead the way. But participants at Oman Sustainability Week said its government or others in the GCC need to act.

“The Middle East is, I would say, still so far away from where we need to be,” said Tamer Mitkees, head of sales at Siemens Energy. “From the policy point of view, we are way behind.”