Saudi Arabia announced more than six years ago Vision 2030, which is a set of megaprojects and strategic investments that seek to diversify the economy, increase the state’s non-oil revenue, and reduce oil-dependent economic activity. However, political and socioeconomic obstacles have slowed the country’s pace of energy transition towards more sustainable alternatives. The state continues to rely on oil revenues to maintain the prevailing political economy of a welfare-based state that derives its political stability and survival from distributing hydrocarbon profits to citizens and a few local firms that control the majority of non-oil industries to ensure their loyalty to the government.
As a result of these welfare redistributive measures, inefficient energy subsidies and welfare measures continue to fuel a very carbon-intensive lifestyle and impede energy reforms toward adopting more sustainable renewable energy resources. Another hurdle that impedes diversifying the economy away from hydrocarbon in favor of non-oil sectors is the Kingdom’s inability to attract foreign direct investment (FDI), which is key to successfully delivering the 2030’s megaprojects and boosting the non-oil sector to reduce greenhouse gas emissions. The Kingdom failed to achieve the ambitious target of attracting $100 billion in annual foreign direct investment (FDI) by 2030. As of June 2022, the share of FDI of GDP stagnated at 0.7% or $7.9 billion. This places capital pressure on the country to fund and implement its Vision 2030 programs and maintains the state’s economic overdependence on hydrocarbons in energy exports and usage.
A multifaceted approach is necessary for Saudi Arabia to address its development needs while strengthening its climate policies. A key component of this approach is the investment in renewable energy infrastructure, such as solar and wind power. This reduces the country’s reliance on fossil fuels and paves the way for a more sustainable future. Concurrently, implementing energy-saving measures across various sectors, including buildings, industry, and transportation, can greatly enhance energy efficiency, further contributing to the country’s sustainability goals.
The shift towards less energy-intensive industries, as outlined in Vision 2030, can create sustainable job opportunities, aiding economic diversification. Sustainable agriculture practices are vital for ensuring food security with minimal environmental impact. Promoting urban green infrastructure by developing green spaces, sustainable housing, and enhancing public transportation systems can improve living conditions while reducing carbon emissions.
Fostering a culture of sustainability through public education on environmental conservation is also essential. Engaging in international cooperation on global climate initiatives and investing in climate research can provide innovative solutions tailored to Saudi Arabia’s unique context. Enacting laws and incentivizing businesses and individuals to adopt sustainable practices will accelerate the transition to a low-carbon economy. Efficient water management, through investments in desalination and water recycling, will ensure the sustainable management of scarce water resources.
This integrated approach, involving robust governance, clear policy directives, and active stakeholder engagement, is essential for effectively balancing economic growth with environmental sustainability.
This Post was submitted by Climate Scorecard Saudi Arabia Country Managers Abeer Abdulkareem and Amgad Ellaboudy.