Saudi Arabia’s Imposition of a Carbon Tax

Posted: January 4th, 2023

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Abstract

The report focuses on Saudi Arabia and looks at its capacity to apply a carbon tax as a way of lowering the emission of greenhouse gases that heavily contribute towards climate change. The study shows that the country has possibilities that could allow the application of a carbon tax, but experiences some hurdles that could dampen the efforts to place such stricter measures on major emitters of carbon and other elements that contribute to climate change, which is a major cause for global warming. The state has considered applying a carbon tax, and adheres to the carbon law that was formulated following the adoption of the Paris Agreement. The government has other plans, which it aims to rely on as a way of curbing excessive and irresponsible emission of greenhouse gases, but their success would depend on a number of factors. The success of such initiatives and particularly the implementation of the carbon tax would depend on whether the leading oil and gas companies are committed to cut the large volumes of greenhouse gases that they still emit and forecasters even think that the rate may increase in the coming years. The leading oil producers must also show their commitment to cut emissions, and should not put their economic interests beyond that of the environment. Aramco appears to be on the right path towards regulating emissions that could have severe environmental impact by engaging in numerous researches and publications aimed at informing the company and other players the importance of minimizing carbon emission. Aramco works closely with other leading producers such as SABIC to develop recycling plants that change carbon waste into harmless and useful products. The formation of the Saudi Vision 2030 presents a suitable opportunity to further curb GHG emissions that present considerable threat to the environment because of the escalating concerns to protect the environment. Saudi Arabia should not relent in its quest for tougher measures against the irresponsible release of harmful components due to oil and gas production and should take advantage of its membership to international organizations and treaties such as OPEC, UN COP24 and the Paris Agreement and develop stiffer structures that abide by the provisions of such pacts that all advocate for the application of better and effective ways of addressing climate change that is gaining global attention. The Kingdom appears to understand the importance of lowering the amount GHGs that could hasten the effects of climate change, which offers a suitable platform to introduce the concept of a carbon tax to the operators in the oil and gas sector, but as it appears in the report, most of the initiatives focus on strategies that do not put much emphasis on the application of the tax which could equally shutter the attempts to introduce such a form of curbing GHG emissions.

Saudi Arabia’s Imposition of a Carbon Tax

Chapter I – Introduction

The world is experiencing drastic changes in its climatic patterns and stakeholders in various sectors are worried about the worsening situation. Environmentalists are increasingly becoming worried that things may get out of hand if nothing happens within good time to salvage the effects of climate change. Combating the menace, nevertheless, requires collaboration from all sectors, including operators in the oil and gas sector that are perceived to be the largest emitters of greenhouse gases. It is encouraging that many oil and gas producers nowadays appreciate the need to initiate and implement regulations and policies that combat excessive emission of greenhouse gases, but still some countries such as Saudi Arabia need to make drastic changes to enforce tougher measures on the local companies that produce the largest volumes of oil across the globe. Whereas the country has structures to guide the release of greenhouse gases into the atmosphere, the non-stringent measures result in a situation where the operators still produce large volumes that surpass the expected standards. Saudi Arabia may take longer before imposing stricter measures such as a carbon tax that several Western countries such as the U.S. consider to be an effective and fair way of restricting because the major investors in the oil and gas sector feel that enforcing the tax may restrain local companies from generating enough revenue considering that they are already paying hefty levies to the national government. It is not too late for Saudi Arabia to introduce a carbon tax and the possibilities are evident in the way the Kingdom already has local guidelines to restrict emissions. KSA applies a carbon law, relies on the guidelines of the Saudi Vision 2030, achieves vital guidance and support from Aramco, and has plans to introduce standards that would limit how emitters produce harmful components. Saudi Arabia may possibly create a carbon tax based on proper estimations if it adheres to the call by international treaties such as OPEC’s frameworks, UN COP24, and the Paris agreement that constantly remind their members to give climate change the attention it deserves. The existing frameworks to achieve GHG emissions reductions indicate that it is possible to apply a carbon tax on major emitters among the country, but the call to impose the levy does not seem to receive adequate support and emphasis from the various groups in the oil and gas sector, which may hinder the progress made to institute stricter measures that are fair as well as transparent.

Chapter II – Background Information

Many scholars perceive climate change as the defining issue of the current time, and that the world is at a defining moment where appropriate intervention mechanisms are needed. From the mounting sea levels that make the threats of disastrous flooding to the irregular weather patterns that interfere with the mass production of enough food, the effects of climate change are universal in extent and not easy to quantify the magnitude of damage (United Nations 2020). The United Nations predict that failing to embrace proper measures now, adapting and reacting to the impacts in the coming years may be costly and more difficult. Usually, greenhouse gases (GHGs) occur naturally and are important to the survival of human beings and millions of other organisms, by preventing the rays of the sun from bouncing back into the space and making planet earth lively. At least one and a half century has now elapsed since industrialization began to pick so fast, and the emergence of other risk factors such as large scale agricultural practices, deforestation, and escalating amounts of GHGs in the atmosphere have climbed to heights not witnessed in the last three million years. Environmentalists, individual citizens, and operators in the oil and gas sector worry that as the population, quality of life, and national economies mature so does the growing size of carbon and other GHG emissions (United Nations 2020). The concentration of GHGs has risen strongly since the Industrial Revolution, which has caused global temperatures to increase in equal measures. The UN classifies carbon dioxide as the most abundant GHG, contributing about two-thirds of the entire GHGs in the atmosphere.

The UN Environment WMO (World Meteorological Organization) formulated the International Panel of Climate Change to develop an purposeful origin of technical and procedural data (United Nations 2020). The IPCC offered more insight into how human activities contribute towards climate change when it offered its Fifth Assessment Report (United Nations 2020). The IPCC was very categorical in its findings that climate change is happening and human operations are the main cause. The Fifth Assessment Report found that the global temperature escalated by 0.85⁰C from 1880 to 2012 and that the amounts of snow and ice and lowered, oceans have become warmer, and the sea levels have risen considerably (United Nations 2020). The universal sea level, for instance, shot up by approximately 20 cm from the onset of 1901 to the end of 2010 as a result of the increased effects of global warming and the ice that has turned into water. In addition, the degree of the ice along the Arctic region has drastically reduced in size in every succeeding year starting from the beginning of 1979, with 1 X 100 km²of depletion of ice for every ten years (United Nations 2020). Taking into account the prevailing intensity and continuing removal of GHGs, it is clear that by the time the century comes to an end the global temperatures will still enlarge past the rates emitted by various companies. Furthermore, the oceans across the globe will keep warming and ice will persist with turning into water. The Fifth Assessment Report predicts that the average sea levels are speculated to be 25-30 cm by 2065 and 40-63 cm by 2100 compared to the indication duration of 1986-2005 (United Nations 2020). The Report further warns that most aspects of climate change will continue for thousands of years, even if GHGs emissions are ceased.

The IPCC delivered a special report on the repercussions of global warming of 1.5⁰C, revealing that reducing global warming to 1.5⁰C requires the implementation of quick, unprecedented, and far-reaching transformations in all facets of the society. The report revealed that lowering global warming to 1.5⁰C could make it easier to develop an equitable and more sustainable society (United Nations 2020). Limiting global warming to 1.5⁰C requires effective transformations that bring together players dealing in energy, construction and development, transport, and land (United Nations 2020). The joint effort towards reducing carbon emission will facilitate the efforts to address the issue of climate change.

The gas and petroleum sector is one area that contributes significantly to the emission of GHGs that hasten climate change and global warming. Bach writes that the oil and gas sector has traditionally been reserved to address the issues touching on climate change, often being viewed as a dawdler. Even as the sector has tried to take more active roles in climate regulation and governance, taking part in various areas, including playing the role of originators, facilitators, and participants in multi-stakeholder and industry-oriented initiatives, GCC countries are striving to develop mechanisms of combating excessive emissions now that more players in the sector, especially major operators and initiatives in the Western world such as BP, Chevron, ExxonMobil, and Shell and IPCC respectively. Bach argues that many operators in the oil and gas industry nowadays embrace a more active sector engagement, one in which climate change and global warming is no longer perceived as a purely negative issue, but is instead perceived as a chance for the formation of new technologies, business structures, and the advancement of existing structures and processes. Globally, oil and gas climate initiatives have emerged that bring together some of the 10 biggest gas and petroleum companies accounting for up to 20% of the worldwide oil and gas production, and adding to about 12% of the historical GHGs emissions. Started in 2014, and in several ways just commencing, its members have encouraged for present climate policy and scientific research have started to reposition themselves within a future of low-carbon energy. The increased call to engage in sustainable practices compel all countries involved in oil and gas production to take necessary measures towards suppressing production practices that hasten climate change.

The hydrocarbon-dependent nations of the Gulf Cooperation Council (GCC), however, experience considerable hurdles in fitting to the new realities in energy markets. Other than the escalating gas and oil production in the U.S., the rising concerns regarding climate change imply that the revenues they generate from hydrocarbon is expected to drop over the long run. Even as each of the GCC countries, work hard to diversify its economy by expanding to the private sector, the huge capital production in the energy sector makes diversification hard and state investments usually crowd out the private industry investments they are trying to promote. Nonetheless, the urgency for reforms is not uniform across the GCC because whereas nations such as the UAE, Qatar, and Kuwait have stronger economies, numerous resources and small populations, countries such as Oman, Bahrain and the Kingdom of Saudi Arabia (KSA) experience much challenge. Saudi Arabia, for instance, has numerous reserves, but its big and diverse population implies that the revenues and reserves are considerably small on a per capita scale (Gross & Ghafar 1). Saudi Arabia must address the economic depression in oil prices that put so much pressure on the country and other GCC economies, and must also find ways of suppressing GHGs emissions in a bid to save the global environment from undergoing rapid deterioration. The question that requires adequate analysis, however, is whether KSA will embrace the appropriate methods to facilitate the rate at which it suppresses GHGs emissions and contribute towards environmental sustainability.

Chapter III – Literature Review

Understanding of the Carbon Tax

States and authorities often levy a carbon tax on the carbon level of fuels in the energy and transport sectors. At least 40 nations had implemented carbon taxes as of 2019 with the main motivation behind such adoptions being to achieve zero global emissions by 2050. The increased campaigns that carbon taxes appropriately lower greenhouse gas emissions and that such that taxes present suitable chances to address climate change with the least impact on the economy further drive many countries to implement the tax. The proponents of the carbon tax assert that when hydrocarbon fuels such as natural gas, petroleum, and coal are combusted, the carbon content is changed to carbon dioxide and other forms of carbon (Taylor, Paiva & Slocum, 2016). Many of the proponents of the carbon tax and environmentalists alike urge nations to implement the regulation arguing that carbon dioxide is a form of a greenhouse gas that facilitates the rate of global warming, which cause devastating effects to human health and the environment (Taylor, Paiva & Slocum, 2016). Many operators in the economic sector believe that carbon taxes create a potentiality cost-effective approach of lowering greenhouse gas emission, and view it as form of tax that helps to deal with the issue of irresponsible emitters of GHGs emissions not bearing the full social responsibility of their actions.

Implementation of the Tax

The increasing desire to control the adverse emissions of GHGs forces countries to adopt directives that would regulate further destruction to the environment. The escalated industrialization processes globally have increased the need to implement the tax carbon with many legislators hoping that the adoption will cut harmful emissions. The authorities should approximate the additional charges of each ton of GHG discharge to execute a carbon tax. It is typically a complicated procedure because of the varying views different stakeholders and experts have regarding the most suitable approach levying emitters based on their emissions.

Analysis of an Implemented Tax Example

The U.S. is an example of a country that implements the carbon tax because most states perceive the levy as a more efficient, fair, and effective manner to lower carbon pollution. The U.S. developed a federal carbon emissions tax structure as an effective strategy than having dissimilar structures at the state level. Economists in the U.S. believe that imposing a carbon tax would be the most effective and easier ways of reducing GHGs emissions because it appears like a structure all parties can implement because it would not put strict measures on businesses, but will instead allow industries to regulate their operations, while also demonstrating that the government is embracing proper measures to safeguard the environment. Economists in Chicago maintain that adopting a national carbon tax may be essential to minimize societal dependence on fossils and achieve GHGs reduction objectives such as the U.S.’s goal of 80% greenhouse reduction by 2050 (Rossi 2017). Elon Musk, the founder and CEO of SpaceX, support the position that a carbon tax is as essential to prosperous carbon minimization as the fee charged on garbage collection is to disposal of trash. The support a carbon tax receives in the U.S. drives many groups to support its implementation across the various states.

A survey by a group of researchers at the Massachusetts Institute of Technology found out that any attempts to implement a carbon tax would yield considerable influence on minimizing unregulated emissions in the same way the Renewable Fuel Standards, Corporate Average Fuel Economy and the Clean Power Plan when functioning as a unit. Stakeholders in the U.S. feel that the carbon tax is fair to the poor because the Household Impact Study reveals that the poorest people often get a financial boost from the country’s CF&D policy. The study finds that the CPP, the RFS, and CAFE do not benefit the poor compared to carbon tax policies, and points out to CAFE’s guidelines and standards that are hurting and regressive to the poor (Hinkle 2019). The chart below shows how if the tax is enforced to all greenhouse gas emissions a carbon price per metric ton of about 7USD in 2020, 22USD in 2025, and 36USD in 2030 will produce the same emissions cut as the three regulations combined (Hinkle 2019). The graphic presentation further illustrates that overall; all of the present carbon pricing bills meet the measures, and so would create more cuts in emissions than the regulations;

Hinkle 2019

In summary, the report by Citizens’ Climate Lobby is apparent that there is a productive function for regulation in inclusive climate guideline as a carbon price of fossils will not influence all generators of GHGs. Controlling the most of the emissions in the U.S., however, depend on the imposition of a carbon tax that many Americans perceive to be the fairest way of lowering emissions.

The European Union also applies a carbon tax that member states consider to be effective in regulating the amount of GHGs entering the atmosphere, and the same happens in Australia. The European Union Emissions Trading Scheme that was initiated in 2005 functions as the globe biggest carbon market that covering nearly 11,000 production points in almost 30 countries, including Liechtenstein, Iceland, and Norway as well as the 27 members of the European Union. Switzerland has plans to join the EU ETS in future (Partington & Horne, 2013). Most of the EU ETS members produce large volumes of oil, especially the United Kingdom that generates more than 53,300 tons of oils, which is more than 47,000 million m³of gas, Netherlands 80, 500 million m³ of gas and Denmark that generates about 11,300 tons of oil (Partington & Horne, 2013). The ETS presently restricts the emissions of carbon dioxide from industrial centers with a predetermined thermal income surpassing 20 MW, contributing to 40% if all the GHGs emitted in the European Union (Partington & Horne, 2013). The major areas affected by ETS, include the facilities producing oil, gas, glass, cement, metals such as iron and steel, and ceramics among other areas that generate large volumes of GHGs during production. Australia made considerable effort to improve its carbon emission through the enforcement of carbon in 2012 after the creation of the legislative package, which covers a carbon pricing system. The Australian framework covers firms releasing 25 kt CO2eor more every year, encompassing process emissions, and the distributors of natural gas (Partington & Horne, 2013). An appropriate carbon price is also levied via a fuel tax structure to the rail transport, shipping, road transport, and the aviation sectors. Other areas such as fishing, forestry, and agriculture that produce considerable large amounts of GHGs also have to abide by the provisions of the Clean Energy Future policy. The carbon pricing strategies in the EU and Australia have achieved considerable success in restricting unregulated GHG emissions, and both nations hope to achieve better results with continued adjustment of the policies.

Geopolitical and Environmental Effects of the Taxes

Short-Term

The countries that impose a carbon tax report considerable short-term effects that they appreciate as being helpful towards minimizing emissions. An apparent short-term effect of imposing a carbon tax is the leading emitters are likely to halt their irresponsible act to avoid the hefty fines that they risk facing. McDougall (1993) presents details of short-term economy-wide and sector-wide consequences of the implementation of a carbon tax across Australia and discovers that the facilities that are likely to emit large volumes of GHGs are likely to formulate structures to limit their emissions to avoid the fines that come with surpassing the set levels of emissions. The introduction of a carbon tax is also likely to create confusion among various operators in the short run while they still try to come to terms with the regulations. Some companies and groups may be tempted to oppose its implementation citing over taxation while others may see the restriction as limiting their capacity to generate more profits. The confusion and anxiety, however, is likely to ease off after all the players become familiar with the terms and conditions, and all stakeholders realize the benefits of such implementation. McDougall (1993) argues that with regard to linear estimation, the repercussions of introducing a carbon tax are equal to the amount of the tax. McDougall (1993) asserts that over the short term, when relatively small substitution is probable between the various items made using energy, the linear estimation is projected to be appealing, considering the unpredictability emerging from the evaluation. Implementing the tax in different phases, however, results in a situation where the distinct phases are equal to the tax adjustment at that phase, and can be determined through the multiplication of the effects of the entire tax rate by the suitable comparables (McDougall 1993).

Long-Term

Implementing a carbon tax has some long-term merits, which encourage countries such as the U.S. to develop structures that promote the imposition of such a levy. Implementing guidelines to impose a carbon tax is beneficial because this encourages companies to turn to cleaner forms of energy such as solar, nuclear power, hydro-powered sources, and wind energy. The carbon tax will also heighten the price of electricity and gasoline, which will make buyers to become more energy effective, further lowering GHGs emissions (McDougall 1993). Implementing the tax shall permit industries to identify the most appropriate ways to lower carbon emissions, which is a suitable option to free-market economies than state regulations. Proper implementation of the tax presents the chance to achieve economic growth. Sweden is an example of a country that witnessed 55% growth in its economy after the country’s carbon tax cut carbon emissions by 24% in the last a quarter a century (McDougall 1993). Implementing a carbon tax offers the chance to generate substantial revenue that would help the economy to stabilize.

Government Regulation of Oil & Gas producing Countries

Existing Regulation and Laws in Place – Carbon Law

Saudi Arabia shows the viability of installing a carbon tax because it tries to adhere to the provisions of the carbon law that was developed after signing of the Paris Agreement. Nader () informs that upon ratifying the Paris Agreement, about six scholars and researchers wondered how the pact would be actualized, and whether politicians knew the changes needed to maintain global temperatures below 2⁰C. The six researchers were motivated to establish an inventive solution to adequately and speedily lower GHGs emissions, which they termed the carbon law. The carbon law addresses and quantifies the real constraints of lowering carbon emissions and functions like an exponential trajectory as depicted in Moore’s Law (Wogan, Carey & Cooke 2019). The magnitude of change in Moore’s Law is measured by the emerging technology, but in this sense the change is fostered by renewable forms of energy and not traditional forms of energy such as coal and oil. Purposely, Moore’s Law implies that the amount of transistors in an intense computer system that is so much integrated increase with two after every couple of years. The law started after the findings of Gordon Moore who started Intel and served as the CEO of Fairchild Semiconductor helps various groups, especially those in the IT sector to make projections based on current data and trend. Using an exponential trajectory similar to that depicted in Moore’s Law, therefore, offers a suitable structure for evaluators to understand how GHGs emissions are likely to increase or reduce in the coming years depending on the current practices and regulations. The carbon law adequately and vividly stipulates what the Paris agreement implies in terms of GHGs emissions increasing, volume of carbon removed from the atmosphere, rate of decarburization of the world economy, and the need to turn land utilization from a source of carbon to a sinking zone (Wogan, Carey & Cooke 2019). Further, the carbon law paper broadly explains how to engage in practices that stop or regulate deforestation and emphasizes on re-engineering agriculture to achieve effective storage of carbon.

Saudi Arabia is among the Arabic-speaking nations in the Middle East that applies the carbon law as it happens elsewhere. The application of the carbon law in Saudi Arabia takes a scalable approach such that it applies to various oil-producing companies, and is set to offer a structure to the oil and gas sector to deal with the issues concerning climate change (Wogan, Carey & Cooke 2019). Saudi Arabia is striving to invest in renewable because of its adequate supply of solar power. Even as some businesses in the oil and gas sector are reluctant to fully embrace the carbon law, major companies such as B Team that focus on cutting emissions have welcomed the policy. Many are concerned that the rate of renewable installations has doubled after every half a decade, and predict that if the trend maintains KSA could be fully powered by renewable forms of energy come 2050.

The Role of the Vision 2030 in Combating Emissions

Saudi Vision 2030 offers a suitable framework that would help Saudi Arabia focus on cutting GHG emission through the enactment of more stringent guidelines. KSA, through the help of Mohammad bin Salman, initiated the Saudi Vision 2030 with the intention of reducing the country’s extreme dependence on oil products, and to expand the local and international markets, and enhancing non-oil sectors that provide essential services and generate revenue at the same time (Saudi Vision 2030 2020). The plan that was announced on April 2016 seeks to diversify the economy even further by increasing state spending on the military, especially by acquiring more ammunition and equipment. Tremendous steps have been made towards realizing the Vision since Council of Ministers that recognizes and follows up the measures and mechanisms needed for the implementation of the Vision (Saudi Vision 2030 2020). The Vision serves as a suitable plan to help the Kingdom cut its emission to the atmosphere that may encourage the administrators to consider applying even tougher measures to prevent further emissions. The development of the nationally determined contribution (NDC) program was formed following the introduction of the Vision 2030 plan to support and hasten KSA’s economic reforms, while providing suggestions to combat excessive and unregulated carbon emissions (Wogan, Carey & Cooke 2019). The Kingdom hopes to achieve positive results from the first NDC that aspires to reduce at least 130 million tons of carbon dioxide emissions yearly by 2030 through the adaptation and diversification of the economy by 2030 (Wogan, Carey & Cooke 2019). Many are looking forward to achieve impressive results from the guidelines of the Vision 2030, and the structures outlined to curb GHGs emissions offer great opportunity to apply a carbon tax that many corporations would want to avoid, thereby helping to reduce harmful emissions.

The Role of Saudi Aramco in Lowering Emissions

Saudi Aramco is one of the leading oil and gas companies in the Kingdom and all over the world. Aramco is committed to cut its emission of GHGs, which could not only encourage other operators in the region to follow the trend, but can also push the government to consider creating tougher measures on emitters who surpass certain levels such as imposing a carbon tax. The president and CEO of Saudi Aramco, Amin Nasser attended the Oil and Gas Climate Initiative (OGCI) in New York in 2018 and reaffirmed the company’s position in greenhouse gas mitigation, as well as Saudi Arabia’s commitment to reduce potential harm to the environment. Nasser got the opportunity to convene with other presidents and CEOs of the ten permanent members of the OGCI as well as those of Occidental, Chevron, and ExxonMobil that were joining OGCI during the New York meeting and discussed the sector’s strategies to lowering GHGs emissions (Saudi Arabian Oil Company 2020). The participants unveiled strategies to lower their collective, standard methane concentration of interior upstream gas and oil activities to lower than 0.25% by 2025, with the objective of attaining 0.2% corresponding to a drop by at least one-third (Saudi Arabian Oil Company 2020). The initiatives show that Aramco is a prolific institution trying to safeguard the environment from further harm.

The president and CEO of Saudi Aramco while making his presentation made reference to the findings of one of the most detailed oil field carbon intensity (CI) researches ever conducted and published. A multi-faceted team led by researchers from the Stanford University calculated the CI of the globe’s active oil reserves and the outcome offered valuable lessons to Saudi Arabia. CI is the estimate of the greenhouse gas emissions occurring from the production of crude oil, starting from the reserve to the refinery gate (Saudi Arabian Oil Company 2020The study by the team at Stanford assessed the CI of about 8900 of the globe’s active oil fields across 90 nations, representing more than 90% of the world’s condensate and crude oil production in 2015 (Saudi Arabian Oil Company 2020). The scientists realized that among the nations producing more than 0.1% of the world’s oil production, KSA ranks the least in CI of any leading producer to generate, refine, and transport its crude oil to the refinery point (Saudi Arabian Oil Company 2020). The president and CEO said during the meeting that KSA is the leading producer of oil globally, but has fewer numbers of extremely productive and large reservoirs, and that the study showed the nation has low per-barrel rate of gas flaring and little production of water – causing less mass raised for every unit of oil generated and little energy utilized for separating fluid and other essential processes such as handling the fuel, treatment, and reinjection – thereby resulting in low CI content (Saudi Arabian Oil Company 2020). Nasser said that Armaco is committed to serve as an example on how to maintain the utilization of low CI oils, which is important considering that the demand for oil remains significant for the next tens of years because, the call to suppress climate change is gaining momentum. The President of Armaco said his company is dedicated to maintain a low CI even as the demand for oil will be pushed higher by escalating need for chemicals, which is anticipated to double over the next two and a half decades. In the meantime, Armaco is dedicated to source oil in the most carbon-responsible way using the most effective technology.

Aramco engages in numerous programs, researches and publishes reports that may help the company and Saudi Arabia embrace stiffer measures of regulating the release of carbon into the atmosphere. The belief that continued investment in further lowering the GHG intensity of crude oil and its products will yield advantages for energy consumers and producers alike encourage the company to initiate the Flaring Minimization Program that allows the firm to establish stricter guidelines and monitor important performance indicators. Aramco engages in research and development that touch on four principle areas that are of strategic significance. The company is committed to perform researches on proper ways of sustaining minimum carbon intensity (CI) crude oil, and performs R&Ds aimed at finding ways of growing non-fuel use for crude oil with the hope of reducing emissions. The R&D initiatives at Aramco aim at finding solutions to effective ways of achieving sustainable transportation of oil and gas, and to identify ways of advocating for high-impact remedies. The emissions-cutting techniques Armco uses allow higher transport efficiency, and help to achieve cost effectiveness of carbon capture, utilization and storage (CCUS) as well as low CI in its operations. The company is increasingly exploiting modern technologies such as artificial intelligence (AI), virtual reality (VR), advanced analytics, and big data (Saudi Arabian Oil Company 2020). Aramco’s Engineering Solutions Center, for instance, fuses advanced analytics and operational data and internally developed technologies and skills to assess the company’s rate of consuming energy. The company is confident that adopting the technologies it is developing, especially at the global scale, will help to achieve game-changing contributions to the minimization of GHGs emissions from the production and utilization of hydrocarbon energy sources (Saudi Oil Company 2020). The commitment Aramco displays in regulating emissions shows that operators in KSA acknowledge the importance of reducing emissions that could hasten climate change, a situation which can encourage the state and oil and gas producers alike to embrace stiffer measures to control organizations that still violate the set measures and guidelines.

Carbon Recycling Plants

Saudi Arabia’s investment in carbon recycling plants shows the country’s commitment to restrict the amount of GHGs entering the atmosphere. Some of the leading oil producers in the Kingdom receive the government support to create recycling plants that would transform carbon and its components into products that are useful and harmless to the environment. The Executive Conference Advisory Board chairman and chief technology officer at Aramco, Ahmad Al-Khowaiter, reiterated during the 11th International Conference and Exhibition on Chemistry in Industry (ChemIndix) in Bahrain held under the guidance of the Prime Minister of the Kingdom of Bahrain (Prince Khalifa bin Salman Al Khalifa) that it is important to embrace a circular economy, which entails shifting away from from a linear model, where components are utilized and then disposed off, to a more circular approach through the minimization of use, reuse, and recycling (Saudi Oil Company 2020). Saudi Aramco’s chief technology officer said during the meeting that to achieve a circular carbon usage, carbon dioxide emissions from the burning of hydrocarbon should be captured, used again, and recycled in other ways of energy to shut the carbon cycle appropriately. Al-Khowaiter illustrated how Saudi Aramco is committed to recycle carbon using the latest technology by working together with automotive engine manufacturers to improve efficiency to lower the GHGs emissions from utilizing hydrocarbon fuels (Saudi Oil Company 2020). Furthermore, Al-Khowaiter said that Saudi Aramco is working closely with various partners to form carbon capture and storage systems for various automobiles. The latest development according to Al-Khowaiter is the prosperous testing of a system for large trucks and attaining the capturing and storing capacities of 45% of the carbon dioxide removed from the exhaust (Saudi Oil Company 2020). Regarding the removal of carbon dioxide, Saudi Aramco is already sequestering about 800,000 tons of carbon dioxide yearly to advance oil recovery in its Uthmaniyah field, and believes that exploring various alternatives for sequestering carbon, including directly ejecting carbon dioxide from the atmosphere at an industrial level will have considerable effects in lowering adverse effects on the environment (Saudi Oil Company 2020). Furthermore, Saudi Aramco employs various other methods of carbon capture technologies to show how it is a leader in the area, and to widen its chances of regulating unwanted emissions. Some of these strategies include oxy-combustion, mobile carbon capture, utilization, and bio energy carbon capture and storage (BECCS) method (Saudi Arabian Oil Company 2020). Hopefully, the attempts by Aramco to develop carbon recycling plants and to introduce new techniques will help to curb the rate at which carbon escapes into the atmosphere thereby helping to regulate climate change.

Other than Saudi Aramco that receives considerable support from various groups to develop carbon recycling plants and initiatives, Sabic is making considerable steps in creating measures that would lower the amount of carbon that escapes into the air. The Saudi-based oil and gas company that diversifies its operations to the production of metals, fertilizers, chemicals, and industrial polymers, and which operates as the second largest public oil and gas company in the Saudi Arabia and the whole of Middle East showed its commitment to combat the emission of carbon through its 2015 SABIC Sustainability Report called Enabling Tomorrow’s Solutions (SABIC 2020). The company is optimistic that the opening of a carbon recycling plant at United in 2015 will boost the firm’s overall operational efficiency because of the plant’s capacity to capture and purify nearly 500,000 metric tons of carbon dioxide from the production of ethylene glycol annually. The Executive Vice President for Technology and Innovation at SABIC, Awadh Al-Maker, expressed hope that the exquisite program acts as a standard measure for effective, sustainable, and environmentally friendly program that relies on advanced technology to lower emissions, change waste carbon dioxide into valuable items, and improve work efficiency, offering the company with both long-term and short-term advantages (SABIC 2020). SABIC then utilizes the products made using carbon it generates from the purification practices it conducts to form urea, which is of much importance in the agricultural sector, liquid CO₂ that performs essential functions in the production of consumable products. SABIC uses the products of carbon to manufacture methanol that companies use as a raw material to produce a wide range of chemicals used to perform several operations in different industries. It is apparent that the existence of various carbon recycling plants in KSA suggest that oil and gas company and the government acknowledge the importance of installing mechanisms that regulate the amount of carbon that enter the air in a bid to lower the effects of climate change (SABIC 2020). Nonetheless, the existence of carbon recycling plants in the region does not relate to the implementation of a carbon tax although such effective measures to lower emissions suggest that some chances exist to install stricter forms of regulating emissions.

Saudi Arabia should not relent in its creation of carbon recycling plants considering that such initiatives are developing elsewhere where oil and gas generators have seen the importance of creating a plant where they turn carbon into useful products. Jackson (2019) gives the example of LanzaTech that partnered with Shougang Group’s Jingtang Steel Millthat is still a startup and has already made considerable strides in developing a carbon recycling plant to lower harmful emissions. Jennifer Holmgren who heads the carbon recycling plant at LanzaTech informs modestly how the company had save a lot of money by venturing into practices that reduce air pollution and curb climate change. At the Jingtang Steel Mill located in Heibei province, LanzaTech makes use of bacteria to modify discarded gaseous components into ethanol for usage of arresting carbon and its components so that they are not released into the air as substances that could increase the threat of climate change. The Chief Executive Officer said that the process works like the process of fermenting sugar during the process of making beer. The company perceives the process of keeping carbon dioxide out of the atmosphere through carbon capture and storage (CCS) as a suitable way of lowering global warming to the target level of 1.5⁰C or 2.7F as set in the Paris Agreement (Jackson 2019). The corporation also employs the enhanced oil recovery technique, which involves pumping the generated CO₂ from companies into oil fields to enlarge their production. Already, some of the leading facilities that capture and recycle carbon move the product to the EOR because of the merits associated with the process (Jackson 2019). Other oil and gas companies within the GCC region and other parts of the globe are also working hard to embrace effective means of recycling carbon, which should encourage the companies in KSA to embrace similar or even better measures.

The INDC

Saudi Arabia relies on its initial nationally determined contribution (INDC) to regulate how firms release GHGs to the atmosphere and the state believes that the initiative will have considerable impact preventing unregulated emissions. KSA communicated its INDC to the United Nations Framework Convention on Climate Change (UNFCCC) Secretariat on November 15, 2015 to comply with the provisions of a new, flexible, and global climate administrative structure (Wogan, Carey & Cooke 2019). The NDC will make it possible the nation generate policies that make it possible to achieve the goals of the diversification initiatives to attain an economy that does not strictly rely on the revenues from the sale of hydrocarbons. Today, the oil and gas sector forms part of about half of the Kingdom’s GDP and roughly 70% of the earnings the GCC country makes from exports (Wogan, Carey & Cooke 2019). The Kingdom, through the INDC, hopes to formulate measures that will hasten its path toward economic expansion and diversification and produce mitigation benefits. The INDC proves to be an effective structure because it focuses on the key areas that are likely to contribute towards climate change such as electricity, industrial, manufacturing, transportation, agriculture, waste, and other. It is apparent that the country will lower its emissions even further if it pays adequate attention to improving its INDC.

Effectiveness of the regulations in place

Whereas KSA embraces and tries to apply the carbon law, which could pave way for the application of a carbon tax to achieve fewer emissions, the regulation does not appear to be as effective as expected because the nation must overcome particular bumps on the road that could derail the implementation process. Nader (2017) writes that theoretically the carbon law may be applied in the Arab world, but practically the regulatory and legislative frameworks first need to change to achieve a sound application of the law. Furthermore, Nader believes that it may only be possible to implement the carbon law effectively with adequate enlightenment for the public to be willing and receptive to abide by the regulations (Nader 2017). Steve Griffiths who works at the Khalifa University of Science and Technology as the deputy of research also feels that the application of the carbon law may be slow and the turning to renewable may take longer than anticipated. Other Arabic countries such as the UAE and Morocco have made considerable steps to implement the provisions of the Paris Agreement and are fast embracing the use of renewable. Nader (2017) believes that a carbon law is likely to work effectively in KSA as opposed to a carbon tax and refers to the views of Griffiths who thinks that nations should try to utilize their market forces to encourage climate supportive measures in Middle East and North African (MENA) countries as opposed to carbon regulations and taxes. Saudi Arabia while developing its carbon law should emulate countries such as Morocco and the UAE that are leading in their utilization of low cost-competitive utility-scale renewable forms of energy in various sectors. The governments in both countries offer adequate support with solar resources, land, financing aids, and other important connections. Saudi Arabia really needs to consider and address the possible factors that could derail its attempt to implement a carbon law lest it fails to achieve the rights results that would help the country maintain low levels of emissions.

Saudi Arabia must deal with some of the issues that could derail its attempts to diversify the economy, thereby reducing reliance on fuels that emit so much GHG. KSA that has the largest economy in the Gulf is now experiencing considerable challenges because other than the threat of the Covid-19 that continues to cause global anxiety in the oil and gas sector, the oil prices have fallen to as low as $30 a barrel, which could hamper diversification as called for under Vision 2030. The fall in oil prices has squeezed the financial resources allocated for the diversification process, thereby forcing the country to declare a SAR50 billion cut in expenditure to save the country from falling further because of the current challenges. Furthermore, KSA showed its commitment to diversify its economy as stipulated in Vision 2030 when the Finance Minister, Mohammed A-Jadaan announced on late March 2020 that the government would release SAR70 billion to help boost the private sector, especially small and medium enterprises, and promised to increase the package to SAR120 billion to increase the diversification process (Furness 2020). The Saudi government should not let the decreasing oil prices deter it from diversifying the economy, particularly by investing in the private sector because this could derail the efforts already put in place, especially in the recreation and tourism sector that is likely to suffer more if nothing happens to salvage the situation. Chief economist for MENA, Gabris Iradian who works at the Institute of International Finance cautions against letting the economy to drop because of the current challenges, warning that failure to apply adequate measures could lead to a scenario where the growth in the non-oil sector drops to 1.3% in 2020 from 3.1% in 2019 (Furness 2020). It is encouraging that Saudi Arabia’s national labor force is growing substantially, mainly improved by an escalation in female engagement in labor, and it is also encouraging that the government is focused on lowering the rate of unemployment to 7%, which could present better chances of diversifying the economy (Furness 2020). The Vision 2030 is a suitable plan that would contribute towards the reduction of GHGs emissions through the diversification processes, and may even allow for the imposition of tougher measures such as application of a carbon tax to reduce further reliance on fossils, and to save the environment from undergoing severe damage.

Aramco appears to be on the frontline advocating for reduced emissions that could hasten climate change, but does not come out clearly to support the imposition of a carbon tax, which requires more effort for the leading oil producer and other companies in KSA to embrace the levy, and also has to deal with a number of challenges. The company shows great commitment in the way it combats excessive flow of carbon into the atmosphere as a result of its practices using advanced technology. Aramco acts as an example to other companies in KSA, the Middle East, and other parts of the world in the way it conducts intense research with the aim of generating information that help the company and others contribute towards maintaining the minimum global temperature (Saudi Arabia Oil Company 2020). Nonetheless, the company does not come out aggressively to support the idea of a carbon tax knowing very well how the levy would impact on local companies, especially those that generate average revenue and are already striving with the current levies they pay to various state authorities. Other than not coming out clearly to support the implementation of a stringent carbon tax that operates in the same manner as of some Western countries, Aramco has to deal with the serious threats posed by adverse climate change that could derail its effort to combat excessive emissions. Robertson and Bloomberg (2019) write that “climate change create serious threat to Aramco’s long-term work strategy and escalating temperatures and sea levels could interfere with infrastructure, suppress productivity, and even stop some of the crucial processes.” Robertson and Bloomberg (2019) believe that the rising sea level create the major threat to the leading oil company in KSA and may cause some of its vital refining centers to remain underwater for the next dozens of years, making it hard for the producer to function. It is more threatening that the levels of water along the coastal part of KSA are expected to rise and this is where most of the company’s crucial infrastructure is situated. Major refineries such as Ras Tanura and Yanbu are likely to lose their productivity in the next few years if the situation gets worse (Robertson & Bloomberg 2019). Furthermore, the tensions between KSA and Yemen along the coast may interfere with Aramco’s focus to cut emission, especially if its recycling plants become a target for the air strikes (Robertson & Bloomberg 2019). Nonetheless, Aramco’s leadership is confident it will overcome the challenges, and believes the company will not relent in its quest to be a world leader in preventing adverse impact on the climate.

Despite the existence of carbon recycling plants across Saudi Arabia, the issue of emissions remains a major challenge in the Kingdom, which implies that more need to happen to achieve the lower levels of emissions that everyone wants to see. A report by Dargin (2019) show that over the past several years, KSA’s GHG emissions have steadily increased and are expected to escalate even further over the coming few years because of the increased industrial operations and demographic growth. The attempts to develop carbon recycling plants need to gain momentum because universally, KSA holds the position of the second largest emitter of carbon per capita, which grew by almost 75% between 1990 and 2013 growing from 9 tons of carbon dioxide per capita to more than 16 tons (Dargin 2019). The development of recycling plants need to improve considering that in terms of aggregate emissions, KSA still emits as much as 542mn tons of CO₂, putting it at number 18 globally (Dargin 2019). The government and the leading operators such as Armaco and SABIC, therefore, should remember that the country’s escalating demographic expansion, growing living standards, widening urbanization, and the growing of government aimed at downstream hydrocarbon firms have resulted in a steady rise in the need for energy, which has subsequently increased GHG emissions over the years (Dargin 2019). Such awareness will create the urge to create more recycling plants that would accommodate and process the volume of carbon that is expected to grow in future. Saudi Arabia, however, is in the right direction in the way it constructs recycling plants, although this initiative does not have any relationship with the imposition of a carbon tax unless the authorities would want to venture into this form of restricting emissions that harm the environment.

Potential Regulations and efforts

The Kingdom acknowledges the importance of taking measures that would lower the emission of carbon and the government is improving its efforts to cut emission, thereby creating the impression that the country appreciates the need to regulate carbon emission. The Kingdom plans to set up a trading scheme as the state aims to expand its energy supplies and lower carbon emissions. KSA’s Energy Minister, Prince Abdulaziz bin Salman, said during a press conference in the country’s capital that the country appreciates that carbon trading schemes are erupting all over the globe as governments are trying to meet the targets to lower GHGs emissions in the fight to combat global warming (El Gamal 2019). The Minister mentioned that the country is adequately prepared to lower the impact of climate change even as the country prepares to host the 2020 G20 meeting. Abdulaziz bin Salman talked about Aramco’s plans to go public and termed the move as being influenced by the increasing calls for environmental activism and a switch from fossil fuels. Salman who had attended a multi-stakeholder meeting in KSA’s capital said that the state will soon devise a plan on carbon trading that would be useful and flexible. The government official said during the press briefing after attending the meeting that carbon is a useful resource that should not be emitted and thrown carelessly. The Minister said he was confident the country is headed towards the right direction in terms of combating carbon emissions now that it operates the biggest carbon recycling plant in the whole world, transforming more than half a million tons of carbon dioxide. The Prince praised the country’s capacity has operating one of the region’s highly advanced carbon dioxide recovery plants that has the capacity to capture and contain about 800,000 tons of CO₂ yearly. The government is committed to developing and deploying more carbon capture, use, and containment infrastructure around the country. Furthermore, the energy costs and changes will make it possible to considerably reduce demand by approximately two million barrels each day by middle of 2030 (El Gamal 2019). Nonetheless, the country is still in the process of creating rigid structures to attain environmental friendly workplaces considering that oil and gas companies are yet to embrace newer guidelines. The implementation of a carbon tax in Saudi Arabia may take longer now that some of the nations that apply the structure are already experiencing considerable constraints with their imposition of taxes to major emitters. Rossi (2017) gives the example of the U.S. where the carbon tax has appeared to be politically elusive. Many states perceive the legislative adoption and implementation of a carbon tax as being infeasible and stalling, at least for several coming years.

KSA has plans to embrace effective clean energy standards that would further cut the carbon intensity (CI) of economic operations. The government acknowledges that creating a set of effective policies will reduce the overall CI of the water and power sector that generate the highest amounts of GHGs in the Saudi Arabian economy. Wogan, Carey and Cooke (2019) support the formation of clean energy standards to deal with the emissions that could have adverse environmental effects on Saudi Arabia. Establishing and implementing national policies according to Wogan, Carey and Cooke (2019) would encourage investors to venture in areas that do not produce much GHG emission. KSA should not relent in its efforts to create clean energy standards that would help it combat unrestricted emissions because such plans are already giving satisfying results in several parts of the world. The Emission Performance Standard is an important guide in regulating emissions in the United Kingdom. The standard offers a regulatory backstop to restrict the amount of emissions that can be released by new firms that join the oil and gas sector. The EPS fee is slightly past 400USD grams per kilowatthour impacting on all oil and gas companies producing more that 50 megawatts (Wogan, Carey & Cooke 2019). In addition, Directive 2010/75/EU of the EU Parliament and the Council on GHGs emissions in the EU adopted in 2010 and entered into operation in 2011 helps to regulate emissions across European countries (Wogan, Carey & Cooke 2019). Elsewhere in America, California’s LCFS that was created in 2007 but came operational nearly three years later presents an appropriate direction on how to regulate the discharge of carbon. The LCFS encourages a cumulative drop in the CI of fuels utilized for transportation purposes starting with a lower rate and progressing towards a higher rate as time pass (Wogan, Carey & Cooke 2019). The oil and gas corporations in this situation have the option of deciding whether to utilize less harmful forms of fuels, including such as hydrogen and biofuels. The Canada’s Clean Fuel Standard is an example of a low-carbon fuel standard that proves to be effective. The standard that would under the Canadian Environmental Protection Act of 1999 seeks to attain 30 megatonnes of yearly cuts in GHGs emissions by 2030 (Wogan, Carey & Cooke 2019). The success other countries witness with the application of their clean energy standards should encourage KSA to proceed further with the implementation. It is important to mention in this case that the application of proper clean energy standards offers a suitable chance to proceed further to institute a carbon tax, although the success of such standards would not mean that implementing a carbon tax would obviously yield positive results considering the current challenges the initiative faces from local operators in the oil and gas sector. A carbon tax would only work in this case if all the stakeholders agree that the authorities charge particular fees for surpassing stipulated rates.

Factors that could derail the Enforcement of the Carbon Tax

Even as Saudi Arabia seems to be prepared to cut its emission of carbon, some factors are likely to derail the attempts thereby exposing the country to more harm. A research by Al-Sarihi (2018) who is a member of the Carbon Pricing Leadership Coalition shows that the Arab Gulf States, including KSA, the UAE, Qatar, Kuwait, Bahrain, and Oman are extremely susceptible to oil price shocks because of their heavy economic dependence on oil and gas revenues yet these countries put little effort to shift attention into areas that do not rely so much on oil. Al-Sarihi (2018) informs that previously, oil shocks have been the main source of stress on the economies of the Arab Gulf States. The governments of these nations, however, only saw the urge to initiate local economic reforms and invest in alternative sources of revenues through economic diversification starting 2014. The administrators in several Arabic nations have also adopted and put considerable investment in other areas such as venturing into the private sector and increasing energy subsidy changes among other initiatives to improve the initiatives put in place to diminish dependence on the products made from gas and oil. Regrettably, the attempts to widen the economy in the Arab world do not really denote a transition to an economy that really reduces its usage and reliance on carbon and its products. Al-Sarihi (2018) informs that the current initiatives to venture into other areas that would improve the economy have been directed towards forming other areas that are equally dependence on gas and oil for their activities. Al-Sarihi (2018) further asserts that the GCC countries are still the major emitters of GHGs all over the world, which contribute towards environmental alterations. It is worrying that the release of climate changing GHGs is fast rising in the Arab Gulf States with such emissions growing on average 6% yearly between the 1970s and 2012 due to growth in energy consumption and GDP. The report by Al-Sarihi (2018) suggests that some of the leading areas that emit GHGs include the industrial and transportation sectors, and urges GCC countries to put considerable focus on these areas. The chart below shows that the KSA led in the emission of carbon in the Arab Gulf States since 1994 to 2012 in the field of electricity/heat, manufacturing/construction, transportation, fugitive emissions, and other fuel combustion;

Al-Sarihi (2018)

Many operators in the Saudi Arabian oil and gas sector feel that the demand for clean energy, electric cars, and the escalating climate lawsuits pose substantial threats to the huge profits local operators generate from their practices. Darby gives the example of Aramco that generated about $110 in 2018 and aims to acquire Sabic, which is petrochemical firm in KSA. Aramco, however, is disturbed that its operations and quest to generate more profits will be inhibited by the increased demands to prevent climate change, which has lowered the demand for hydrocarbons and hydro-carbon-based products. Furthermore, the leader in oil and gas production fears that climate policies and regulations such as energy efficiency guidelines, renewable energy requirements, and carbon pricing could reduce demand for fossil fuels. The company’s leadership also expresses fears that the escalating trends in clean energy prices and electrification of automobiles will be essential in determining whether it continues to generate profits or not. Armaco is currently battling legal challenges over the roles of its products in creating climate change. Rhode Island which is one of the states in the U.S., for example, sued an American subsidiary of Aramco, for contributing towards hostile repercussions to the costal ecosystem that contributed to overwhelming ecological effects. Whereas oil and gas corporations in the Kingdom of Saudi Arabia such as Armaco feel that initiating litigations aimed at protecting the environment could restrain their operations. Peter Barnett who works as ClientEarth’s climate as an attorney holds people are increasingly embracing the use of litigation processes, which are gaining velocity as various shareholders, cities, states, and people want credibility for extended reliance on hydrocarbons as the negative consequences of climate change are fast becoming intolerable. The hard stand leading operators in the Saudi Arabian oil and gas sector take towards climate lawsuits and climate policies may derail the attempts to initiate a carbon tax that would regulate how companies emit GHGs into the atmosphere.

Chapter IV – Methodology

The section evaluates the research by two different groups of researchers who examine Saudi Arabia’s capacity to combat excessive emissions of GHGs, now and in the future. The initial study is by Lee Fang and Sharon Lerner working as researchers for The Intercept examines various aspects regarding Saudi Arabia’s preparedness to curb unregulated GHG emissions through the enforcement of stiffer measures, including a carbon tax. Fang and Lerner acknowledge that whereas KSA has made considerable steps in combating it has to address certain key issues that will influence its outcome. The second qualitative study by Robertson and Bloomberg presents adequate insight into Aramco preparedness to cut emissions, and possibly facilitate the implementation of a carbon tax. The findings provide adequate awareness regarding KSA’s preparedness to combat excessive emissions considering that Aramco is the leading oil producer in the Kingdom and across the world. Both studies offer findings that help to answer the following key research questions;

How should the carbon policy be implanted?
To what magnitude has the concerns to combat climate change attracted global attention and discourse?
Whether implementing carbon policies will yield beneficial outcome on oil and gas companies in the Kingdom.
Whether applying the carbon policy will have positive or negative impact on KSA’s economy.
Whether KSA and other affected producing nations will enforce adequate measures to combat the effects of climate change.
Whether oil producing companies or the state should be subject to the tax.

Study Objectives

To give the varying perceptions on the subject of GHG emissions by oil and gas producing nations.
Address the importance of taking into account the economic and political requirements of imposing a strict carbon policy.
To highlight the initiatives already in place to combat excessive GHG emissions.
The magnitude of the ability to execute such regulations on oil and gas producing firms and nations.
To highlight the appropriateness of present environmental regulations, especially in the KSA.
Assess a real-life example of a nation that implements a carbon tax.

Research Design

Both studies apply the qualitative research method that requires the researchers to gather and examine the data. Shakouri (2014) considers the method to be effective because it offers adequate and important information regarding the different perceptions and views within the study group. The researchers consider the qualitative research style to be appropriate because of its elasticity, thereby enabling the surveyors to make necessary adjustments to the study materials, respondents, settings, and the study questions (Shakouri 2014). Furthermore, the surveyors in both studies choose to apply the qualitative research method because it allows the examiners adequate time to speculate the possible results and to choose how they plan to collect, assess, and present information (Shakouri 2014). The researchers seem to apply the qualitative research style because it promotes honesty, which encourages the respondents to give frank and self-explanatory reactions.

Whereas the qualitative research method may present some obstacles that could limit its usage, the researchers are dedicated to attain the set goals and objectives. The surveyors understand that the approach increase the chances of experiencing biasness, especially during the selection of respondents and during the analysis of the data. The other demerit of using the qualitative research method is the collected data may not be dependable or reliable because some of the participants may not be able to recall some of the information, which could end up affecting the nature of the study (Shakouri 2014). Some respondents may be tempted to provide misleading data when they do not remember the situation or information, or when they are not well conversant with the study questions, thereby affecting the results. Despite the challenges, the surveyors refrain from applying the quantitative research design, which is more suitable when gathering and assessing statistical data. The researchers, therefore, put considerable attention while using the qualitative research method to attain the best results.

Sample

Both studies engage various groups of respondents to allow ease the collection of the relevant data. Fang and Lerner engage state officials, experts in the field of oil and gas, and representatives from Aramco. Robertson and Bloomberg, on the other hand, include respondents from Callender who released a report on KSA’s preparedness to tackle GHG emissions and respondents from Aramco to get a glimpse of what companies to mitigate the issue. Both researchers utilize the stratified sampling method, which entails keenly evaluating the target group and assessing their relevance to the study before incorporating them into the research.

Data Collection

Both studies employ interviews as the main form of generating data where in both cases the interviewers reach the interviewee through a phone call. The data collection approach in this case is favorable because it gives the data collectors the chance to get a glimpse of the respondent attitude and feelings towards the subject and the exercise. The main challenge with using phone calls to conduct such interviews, however, is that they may be costly, especially when calling across international borders, and they are prone to network problems. Nonetheless, the data collection helps the researchers in both scenarios to generate all the data they need from the various respondents. Fang and Lerner interrogate Aramco’s CEO (Amin Nasser) who affirms that there are no limits for Aramco when it comes to offering the ultra-clean energy that many consumers highly need. The CEO further affirmed that the company is dedicated to achieve worldwide net zero discharges. Fang and Lerner also interview Joanna Depledge who is a climate expert regarding KSA’s preparedness to fight harmful emissions.

Data Analysis

The researchers in both studies use the descriptive data analysis approach that gives them the chance to evaluate the content of the data that they generate from the study. The data analysis method gives the researchers the opportunity to analyze the key features of the data that they collect, and to deduce their meaning.

Findings

The interactions with Aramco in both studies create the impression KSA has made bold steps towards regulating GHG discharges into the atmosphere. The state officials reveal through the interviews that KSA has made considerable achievements in creating policies that curb harmful production during the extraction of oil and gas. The interview by experts, however, shows that KSA will overcome excessive emission and achieve the international standards by restricting weak regulations, and if companies accept to comply with the set rules and regulations.

Limitations of Study

Both studies depict common limitations because their objectives are almost similar. The surveys, for example, lack proper categorization of the various sections of a research study, which requires the reader or the audience to identify them. The other limitation is both surveyors sparingly use tables and charts to present some of the important statistical information, which could be easy to reach and analyze if they were organized in tabulated forms.

Discussion

The findings of the study offer valuable information regarding KSA’s preparedness to combat GHG emissions, which may be of significance to oil and gas producers today and in future. The findings from both surveys indicate that Saudi Arabia has made tremendous growth in enforcing measures aimed at curbing adverse emissions. The initiatives by Aramco to safeguard the environment from harmful emissions suggest that the country and major oil and gas producers in the country appreciate the need to lessen global temperature. The findings, nonetheless, suggest that the state and oil and gas companies need to go a step higher to institute stricter measures such as the carbon tax on a wider scale. The results call on KSA and countries that produce large volumes of oil to consider how a drop in price could disrupt the initiatives put in place to achieve positive progress towards maintaining emissions at a level that do not put the environment at risk. Instituting the right mechanisms, however, calls for the adoption of effective strategies that have yielded positive results in other regions.

Chapter V – Recommendations

Avoiding the long-term negative effects such as escalated total carbon emissions and depreciating air quality associated with escalating petrochemical energy sectors, improving energy efficiency, and fossils subsidy reforms, and the utilization of clean energy technologies are really helpful in dealing with the emerging concerns. The government of Saudi Arabia should improve its focus on carbon pricing that Al-Sarihi (2018) proposes as a helpful instrument to complement the various approaches. Al-Sarihi describes carbon pricing as placing a price on carbon pollution as a way of lowering GHGs emissions and driving investors into cleaner and environmental friendlier options. The government of KSA should permit carbon pricing to become applicable because the plan provides an economic indication for the GHG emitters to decide for themselves whether to carry on with their actions that serve as the origin of pollution, minimized emissions, or progress with releasing damaging components and pay for it (Al-Sarihi 2018). Dealing with the GHGs emissions that are a major concern for environmentalists and other parties today requires Saudi Arabia to consider following the suit of 40 other nations that put a price on carbon emission. The Kingdom should consider applying the carbon pricing techniques such as carbon taxes and emissions trading systems (ETS) that are widely applicable in the Western countries and are already yielding significant outcome in lowering harmful emissions (Al-Sarihi 2018). Using ETS requires the government to pre-define the entire amount of emissions to be lowered, often referred to as the cap, and permits those areas with little emissions to sell their additional allowances to major emitters. This way, the requirement and distribution for emissions is created, based on which the market velocity for GHGs emissions is formed. A carbon tax differs with ETS in the way it directly puts a price on GHGs by stipulating a tax rate on emissions, or more often, on the carbon portion of fossils, which is denoted by the price per tCO₂e (Al-Sarihi 2018). A carbon tax is different from ETS because the total number of emissions that should be reduced is not pre-determined.

The government of Saudi Arabia should consider a carbon tax scheme to be the most suitable approach to fit the economic and national situations of the Gulf States in the short and long-term because the approach connects with recently created value added tax structures. Applying carbon tax schemes could possible lower the administration costs. Contrary to an ETS approach, a pre-created carbon price alleviates volatility to price increase connected with flexible carbon rates (Al-Sarihi 2018). The government or implementers in KSA, however, should not forget that while a carbon tax allows the carbon price in the economy, it does not give surety about the impact on the environment (Al-Sarihi 2018). Accordingly, considering the widening of the downstream energy intensive sectors in the Arabic countries, an ETS framework, which entails capping all emissions, can be embraced in the short to long-term basis to make sure that states in the Gulf region are not victims of major contributors to global climatic deterioration.

Saudi Arabia, however, is only likely to achieve the desired outcome of applying carbon pricing techniques by overcoming some of the challenges obstructing the application of the technique in the country. Al-Sarihi (2018) mentions a statement by Lord Nicholas Stern who has the perception that the carbon pricing structures that KSA and other Gulf nations use presently is too fragile to achieve the requirements of the Paris Climate Agreement. Professor Stern warned while attention a meeting that brought different stakeholders together in 2017 that price must attain 45-80USD for each ton of CO₂by the end of 2020 and 60-110USD by the start of 2030 to attain the provisions of the Paris Climate Agreement (Al-Sarihi 2018). To provide insight into how much yearly revenue can be generated in the Gulf countries, Professor Stern proposed four carbon pricing strategies which as 40, 50, 80, and 100USD that should be imposed to all the carbon dioxide emissions released in 2014 (Al-Sarihi 2018). Some situations, nevertheless, the entire revenues that can be generated from placing a price on carbon surpass the entire amount of subsidy placed on the fossil fuel industries.

KSA can utilize the revenues collected from carbon pricing as an additional source of income, which can be channeled directly back into the local population. Another alternative is to distribute revenues collected from the carbon pricing schemes towards clean energy technologies and researches because this shall create the opportunity to diversify the national economy in the long term, at the same time fossil fuels are being minimized to alleviate emissions all over the globe (Al-Sarihi 2018). Carbon pricing offers an appropriate opportunity for Gulf States, including the Kingdom of Saudi Arabia to institute a transition to low-carbon nation and to attain the needs of global regulations, particularly the guidelines of the Paris Climate Agreement. Considering that Saudi Arabia, like other Gulf countries, is in many ways susceptible to the adversities of climate change, encompassing escalated temperatures, more or less precipitation, sea level rise in a country that already experiences aridity, water shortage, and persistent drought, urgent measures to change from dependence on fossil fuels to clean energy is important for the country to meet its GHGs emissions objectives and hence minimize the severe climate impacts nationally and on the region (Al-Sarihi 2018). Nonetheless, the Kingdom should set the appropriate carbon prices to attain proper outcome because improper regulations may yield negative effects. In other words, the government of Saudi Arabia should decrease or even eliminate the disparity between subsidies put on fossil fuels and carbon prices to end the act where fossil fuels influence operations in the reverse side to carbon rates.

Other oil and gas companies in Saudi Arabia can contribute towards cutting emissions by emulating Aramco’s strategies that appear to be effective in combating excessive emissions of GHGs that could increase the effects of climate change. Companies should continuously implement the most effective reservoir management practices that champion for minimization of flare and adoption of GHGs emissions management (Saudi Arabian Oil Company 2020). Companies are also likely to significantly lower their emissions by applying a structure similar to Aramco’s methane leak detection and repair (LDAR) that is increasingly becoming applicable across the Kingdom (Saudi Arabian Oil Company 2020). The introduction and increased use of cost-efficient methane monitoring techniques such as quantification sensors, laser detection, and thermal cameras will make it easier to lower routine flaring making it possible to maintain a flaring concentration rate of less than 1% (Saudi Arabian Oil Company 2020). Other companies in the oil and gas sector may contribute further to lowering emissions by imitating Aramco’s application of efficient technologies such as peripheral water flooding and mobility geosteering that have reduced water production per every barrel and little energy use, resulting in lowered carbon emissions. It is important for local producers to have the same spirit and confidence as Aramco that that the notion of an oil and gas firm positively working to reduce the effects of climate change and global warming is possible and not a contradiction as some think (Saudi Arabian Oil Company 2020). Companies should always have the confidence that even with or without a carbon tax, they are uniquely qualified to give adequate contributions to the overall remedy. Aramco, for example, is confident that its contributions to tackle climate change are tangible expressions of the company’s ethos, promoted by the firm’s policies, of performing its operations in a manner that overcome the adverse effects of climate change (Saudi Arabian Oil Company 2020). All companies should not wait until a carbon tax is imposed on them, but should instead know that the answer to dealing with climate change is to pay attention to lowering GHGs emissions and implementing suitable measures such as investing in natural sinks that taking in carbon dioxide. Certainly, embracing measures similar approaches as Aramco that is a world leader in oil production may encourage Saudi-based companies to reduce their emissions, and may not see the need to oppose a carbon tax should it come into effect.

The cap and trade system is applicable in many parts of the world to combat excessive and unregulated emissions of GHGs. The market-based strategy is effective to control pollution by offering economic intensives for lowering the emissions of GHGs. typically an administrative institution such as the state sells or issues a given amount of permits to discharge definite amounts of GHGs at any particular time. The emitters should have permits that measure equally to their emissions, and the polluters who aspire to heighten the amount of GHGs they release into the atmosphere must acquire permits that equal the measure they hope to emit from the right institutions that sell such permits or allowances (Policy Hub 2017). The cap and trade approach harnesses the forces in the market to lower emissions cost-effectively. The strategy differs from command-and-rule techniques where the government creates performance standards and rates as it happens with a carbon tax or determines technology use for individual firms thereby making it a suitable alternative for KSA where the application of a carbon tax is yet to become strict (Policy Hub 2020). The cap and trade strategy encourages autonomy in the way it permits the market to decide a price on carbon, and the cost influences investment decisions and improves innovation in the market (Policy Hub 2020). The cap and trade system is different from a tax in the way it offers a high level of doubt about possible future emissions, but nit concerning the price rates of the emissions, which is contrary to the provisions of a carbon tax.

So far, the use of the cap and trade strategy has yielded satisfying outcome, especially in the Western world where several countries have devised structures to regulate emissions. Many European nations, for example, have managed a cap-and-trade program from as early as 2005, similar to the U.S. where several states took part in the Regional Greenhouse Gas Initiative (RGGI) in 2009 to formulate caps that would prevent excessive emissions that have potential threat to the environment (Policy Hub 2017). California is one of the American states that applied the strategy early enough and had made considerable steps by 2013 when it got an opportunity to link its program with a similar initiative in Quebec, Canada (Policy Hub 2017). The Congress affirmed the American Clean Energy and Security Act in 2009 following amplified longing to invent a national cap-and-trade arrangement. Already, the Chinese government has formed a national program but the state is still developing some concepts. The Mexicans acknowledge the importance of the cap and trade system and the government had developed a national framework that came into effect in 2018, but some adjustments are still happening to make the plan more effective. The wide application of the cap and trade strategy suggests that it has significant benefits that KSA should embrace.

Applying the cap and trade strategy also called emissions trading in an appropriate manner to combat excessive emissions may help Saudi Arabian government and oil and gas companies make significant milestone in combating the effects of climate change. Prince Abdulaziz bin Salman’s assurance during his media brief in Jeddah on September 17, 2019 that the country is working towards developing a trading scheme shows that the GCC nation may soon embrace the cap and trade system that is likely to further lower KSA’s emissions (El Gamal 2019). The application of the cap and trade strategy does not mean that applying the carbon tax would yield similar results because whereas oil and gas producers may determine how the cap impact on their emissions, that is not possible under a carbon tax where the producers must strictly adhere to the provisions set by the authorities. Nonetheless, the possibilities of implanting a carbon tax in future are high bearing in mind that the state is contemplating penalizing emitters depending on the volume of GHGs that they produce.

Saudi Arabia should emulate other countries that are seeking to cut their production in terms of barrels per day if it aspires to achieve reduced emissions, and if it seeks to put tougher measures on firms that produce oil and gas in large volumes. Even though such reductions could affect the company’s and country’s profits, they help to combat the emissions that could cause severe effects to the environment. Lowering the number of barrels produced per day is only possible when the country is investing on other areas or diversifying the economy to lessen its chances of suffering the effects of reducing production. It is encouraging that KSA already has plans to venture into other areas in a bid to reduce its dependence on oil, and proper leadership and policy creation will help to cut production and the same time maintain or even increase the national revenue generation.

Saudi Arabia can utilize the opportunities presented by the alternatives to carbon taxes (ACT) that are more likely to succeed in the Kingdom compared to a carbon tax. Taylor, Paiva and Slocum (2016) write that whereas carbon taxes are often perceived as a way of mitigating excessive emissions of GHGs with the aim of lowering environmental impact, ACT presents more appealing features because hydrocarbon producers have the opportunity to directly invest a particular amount per unit emitted into renewable energy structures and systems such as wind firms. The oil and gas generators enjoy more autonomy under the guidance of ACT because they uphold ownership of the most imperative assets and re-invest an enormous fraction of returns from these properties to further broaden the renewable forms of energy (Taylor, Paiva & Slocum 2016). The suggestion by Taylor, Paiva and Slocum (2016) may considerably assist oil and gas producers to gradually transform from the utilization of fossil fuels to renewable forms of energy, keeping away the job cuts associated with the unexpected alterations in the oil and gas sector. Taylor, Paiva and Slocum (2016) who evaluates Athabasca oil sands as a case study discovers that ACT are effective, and encourage producers across the oil and gas sector to embrace such strategies. The scholars urge future researchers to perform more studies to inform more companies how they can benefit from the technique that is increasingly taking the place of a carbon tax that some, including many operators in the KSA, consider being oppressive and demanding.

Above all, there is need for good organizational governance in Saudi Arabia, as it is in the Muslim world. Bhatti and Bhatti (2009) who attempt to present the legal challenges of Islamic corporate governance (ICG) recommend that in order for the Islamic market to prosperously develop, proper corporate leadership is essential and also in line with Sharia law guidelines and the ideal spirit of Islam. Good business control according to Bhatti and Bhatti (2009) is necessary in both the monetary and commercial sectors. Bhatti and Bhatti (2009) think that the current expansion in Islamic investment and enlargement of Islamic corporations has far prevailed over the ability of regulators to form or agree upon the appropriate form of business leadership. Business leaders, particularly in the oil and gas sector, need to develop and embrace an ICG strategy that is appealing and in line with the international principles and standards as well as being in accordance with Sharia law (Bhatti & Bhatti 2009). Leaders in the oil and gas sector are likely to regulate their impact on the environment by developing governance structures that focus on limiting gharar or uncertainty and unfair businesses practices that could have devastating effects such as the pollution that is likely to occur due to excessive emission of carbon. Developing good corporate governance structures will encourage capital development, create incentives to participate in value-maximizing behaviors, lower the capital cost, and foster stronger markets (Bhatti & Bhatti 2009). More fundamentally, the governance structures are likely to advocate for regulated emissions because of the existence of stricter measures if they urge individual worker to be responsible, transparent, and who make judgment with integrity, which are all principles important to Sharia law. Wogan, Carey and Cooke (2019) who perform a study with the objective of identifying a range of mitigation policies to help Saudi Arabia manage its GHGs emissions that would assist in the policymaking processes ahead of the state’s communication regarding its second NDC in mid-2020, discovered that a continued application of current policies and corporate governance practices will escalate power sector emissions come 2030 by approximately 70%. Wogan, Carey and Cooke (2019) recommend, therefore, that other than rationalizing price of fuel inputs which is essential to lowering the amount of carbon emissions, it is essential to adopt managerial approaches that would promote the realization of the set goals and objectives. Nonetheless, failing to develop an effective structure to overcome the governance issues as it appears to be a problem among Saudi Arabian organizations because firms must conform to the Sharia law, may derail the attempts to lead oil and gas companies in a way that prevents unregulated emissions of GHGs, and may further make it hard to embrace stricter measures such as the application of a carbon tax.

Chapter VI – The Role of International Regulation in Easing Emissions in KSA

Saudi Arabia should take advantage of its membership in some of the international treaties and regulations defining how to relate with the environment, including the production and management of GHGs, a practice that may ultimately pave way to the installation of the carbon tax structure. Fortunately, Saudi is a signatory to some of the international treaties that guide environmental practices, and being more keen on the provisions of such guidelines may encourage state authorities to install guidelines that tax GHGs emitter who surpass certain thresholds.

OPEC

The OPEC (Organization of the Petroleum Exporting Countries) has 14 countries as its permanent affiliates and they all generate large quantities of crude oil and its products (OPEC 2020). The intergovernmental organization was formed in 1960 in Baghdad by five original members, including Venezuela, Iraq, KSA, Kuwait, and Iran, but moved its headquarters to Austria, Vienna in 1965 (OPEC 2020). The group that had 14 members as of 2014 contributed for approximately 44% of oil production worldwide and hold about 80% of the planet’s authenticated oil reserves, thereby offering OPEC a significant influence over global oil prices that were in the past determined by a group of multinational oil firms (OPEC 2020). The intergovernmental organization aspires to bring together and coordinate the petroleum policies of its membership and strengthen oil markets to create a secure, regular, effective, and economic supply of gas and petroleum to buyers. The group seeks to secure a steady income to generators, and a satisfying return on capital to those who invest in the petroleum sector. OPEC offers appropriate information about global market to its present members (OPEC, 2020). The organization now encourages its members to embrace effective ways of combating excessive emission of carbon to evade the adverse effects of climate change.

KSA can acquire vital insight into suppressing its carbon emissions by being a member of OPEC that is committed to helping its members reduce adverse impact on the environment. The intergovernmental organization constantly reminds its members that climate change is a real problem affecting everyone in the world, and even ranks the issue as one of the major issues facing mankind today and in the future. Saudi Arabia can make considerable steps towards restraining the emission of GHGs if it adheres to OPEC’s call to abide by the provisions of the Paris Agreement that is implemented based on the guidelines and objectives of the United Nations Framework Convention on Climate Change (UNFCCC). The KSA can make tremendous steps towards cutting carbon emissions by following the Paris Agreement’s objective, which is to maintain the escalation in global average temperatures below 2⁰C, and to pursue further reduction to below 2⁰C, acknowledging that this would significantly lower the impacts and risks of climate change (OPEC 2020). OPEC persistently advises its affiliates to be on the forefront of realizing the goals and objectives of the Paris Agreement and create a secure future for all generations. KSA’s Minister of Energy, Prince Abdul Aziz Bin Salman said during his address at the International Carbon Capture and Utilization Conference on February 25, 2020 in Riyadh that although the task of lowering global GHGs emissions is difficult, it is necessary to develop and deploy solutions that appropriately alleviate the challenge of GHGs emissions while fostering prosperity now and in the coming years. Abdul Aziz Bin Salman urged Saudi Arabians during the meeting organized by OPEC to embrace the 4Rs outlined in the Circular Carbon Economy that encourage large emitters of GHGs to reduce by lowering the amount of carbon infiltrating the system and utilizing nuclear power and renewable forms of energy, recycle and reuse by utilizing carbon emissions to run helpful emissions and applications such as carbon dioxide to chemicals and various other materials, and to remove by removing carbon from the systems through direct air capture and carbon capture and storage.

The directives by OPEC and Saudi Arabia’s commitment to adhere to the provisions present valuable information that may help members to minimize carbon emission, but do not put emphasis on installing carbon tax structures, which could derail the attempts to enforce such regulations. The OPEC Bulletin Commentary for April 2019 does not give any indication on the importance of enforcing the carbon tax other than urging its members to rely on the guidelines of the 2030 Agenda for Sustainable Development and the Paris Agreement. Saudi Arabia also does not seem to be committed to applying the tax as it appears through its presentations in OPEC meetings (OPEC 2020). Abdul Aziz Bin Salman sounded pessimistic during his address at the ICCUS conference when he said that the present magnitude, speed, and scope of the initiatives to lower GHGs emissions will not be enough for the international community to combat the issue of climate change, or to minimize emissions to levels that must be attained in the appropriate time frame. He does not mention anything concerning Saudi Arabia’s plans to instill a tax structure, and instead champions for the adoption of the Carbon Capture, Utilization and Storage (CCUS) that he terms as offering high-impact solutions (OPEC 2020). CCUS is an effective approach because it is a tried and applied technology that improves global energy and environmental systems in several parts of the world, but does not entail imposing tax on major emitters (OPEC 2020). The International Road Transport Union (IRU) that works in collaboration with OPEC feels that its members are being unfairly being penalized by state fuel taxation regulations, which derail the attempts to impose carbon tax. The IRU believes that such imposition undermine the operations of its members who are already bearing the effects of high levels of government restrictions. Unless OPEC and its affiliates put emphasis on imposing carbon tax as a way of regulating excessive GHGs emissions Saudi Arabia and the rest of the Gulf States may still not be prepared to implement the tax that is considerably effective in managing excessive emissions.

UN COP24

The UN Climate Change Conference that happened in 2018 in Kotawice from 2-15 December 2018 is often termed as COP24. The international conference also referred to as the Katowice Climate Change Conference paved way for the proper implementation of the Kyoto Protocol and the Paris Agreement that are equally instrumental in advocating for better ways of addressing climate change. The UNFCCC COP24 in Poland that included approximately 20 thousand participants from at least 190 nations presented a good opportunity for the participants to contribute towards global GHG emissions even further but it appeared that major oil producers such as Kuwait, the Kingdom of Saudi Arabia, Russia and the U.S. joined forces to sideline the attempts by the IPCC to achieve a global warming of 1.5⁰C (Bradshaw, Graal & Connolly 2019). The report by IPCC failed to pass during because unanimous approval was needed, thereby resulting in a situation where the major oil producers who ought to have backed it advocating for prolonged usage of hydrocarbons, but in a more responsible way that does not put the environment at considerable risk. KSA’s Minister of Energy, Industry and Mineral Resources (Khalid Al-Falih) offered a remark disapproving meeting’s purpose regarding the intention of the Paris Agreement of 2015 contending that the objective of the pact was aimed at strengthening global approach on climate change without harming sustainable development and affecting the attempts to lower poverty (Bradshaw, Graal & Connolly 2019). The Minister reinstated that the intent of the Agreement was to be attained through paying attention to lowering GHG emissions instead of outlawing or restraining sources of energy such as fossils, adding that the onslaught is focused on the oil and energy sectors (Bradshaw, Graal & Connolly 2019). The remarks by the Saudi Arabian Minister received the backing of America following the declaration by the U.S. National Statement that attempts to regulate global climate and all the conversations aimed at achieving the set goals and objectives should not only consider the aspirations the members have but also the reality in today’s world. Whether accepted or not, the findings and recommendations by the IPCC report clarified the magnitude of the problems facing humanity arguing that bolder approaches are necessary to prevent fatal consequences due to climate change (Bradshaw, Graal & Connolly 2019). KSA may make considerable steps towards implementing tougher measures towards restricting carbon emissions, including the imposition of a carbon tax if the country pays more attention to the provisions of the UN COP24, and may also maintain its discharge below certain levels considering that fossil fuels remain a vital part of daily operations, and is even expected to be equally essential in future.

Paris Agreement

Saudi Arabia already develops measures to abide by the provisions of the Paris Agreement as directed by OPEC, which could create the urge to adopt the carbon tax. The Agreement signed in 2016 brings together 197 signatories that all work towards lowering carbon emissions to lower the effects of climate change (Wogan, Carey & Cooke 2019). The Paris Agreement that was developed in 2015 had considerable impact on multinational corporations to deal with climate change and its effects. Adhering to the provisions of the Paris Agreement offers Saudi Arabia with a good chance to embrace the much stiffer carbon tax because under the agreement, each nation must develop a plan, and adequately report on the efforts it is making to alleviate global warming. The Agreement does not force any of its signatories to set strict specifications that must be achieve within particular dates, but urge the countries to make considerable progress towards lowering emissions that surpass past targets.

Several factors, however, could affect the attempts by Saudi Arabia adopt carbon tax because of the proposals of the Paris Agreement. Although many people and groups lauded the agreement, including United Nations Secretary General Ban Ki-moon and the former president of France, Francois Hollande criticism has also emerged. James Hansen who worked for NASA as a climate change consultant and scientist, for example, voiced his dissatisfaction that most of the agreement comprises of aims and promises, but lacks the necessary commitment. Hansen termed the Paris Agreement as a fraud that lacks a definite plan on how to regulate and suppress GHGs emissions (Wogan, Carey & Cooke 2019). The Paris Agreement provides some room for the implementation of penalty gradation such as the carbon tax, but the lack of a binding enforcement structure continues to discourage leading polluters such as KSA and Iran from implementing the tax. Furthermore, the allegations by some leading emitters such as China, Russia, South Korea, and India that they can cut their carbon emission assiduously and voluntarily without any binding measures to estimate and regulate carbon dioxide at any level from the state to the factory, and without any fiscal manipulation or pressure make it harder to impose the carbon tax on Saudi Arabian companies (Wogan, Carey & Cooke 2019). The members of the Paris Agreement, therefore, should focus on achieving concrete outcomes that would help to lower emissions in the most effective way possible, including pushing for imposition of carbon tax on major violators.

Implementation of carbon tax, the Paris Agreement, UN COP24

A suitable and practical way to implement the carbon tax, the terms of the Paris Agreement and UN COP24 would be to engage major oil and gas producers in the sensitization process regarding what these regulations mean, and their possible benefits to individual companies, Saudi Arabia, and the entire world. The government should engage the stakeholders in high profile meetings and conventions where they discuss the benefits of applying the regulations rather than dwelling on how such policies strain their production capacities. Another effective measure to implement the carbon tax and the international agreements is to create institutions that oversee the implementation, financing, appraisal, and performance in the respective areas. Such institutions should be strict, as well as collaborative to avoid resistance from operators in the oil and gas sector. Finally, ensuring that all stakeholders adhere to the set rules and regulations may play a fundamental function in hastening the implantation of a carbon tax, as well as the provisions of the Paris Agreement and UN COP 24. Saudi Arabia is already on the right tract in regulating emissions, and should adhere to all measures that would make it possible to implement the carbon tax and the international pacts.

Chapter VII – Conclusion

The study illustrates that whereas there are some opportunities that may permit the application of the carbon tax in KSA, several factors impend the initiatives put in place, which could delay or even suppress the application of the oil pricing strategy that could help to regulate excessive GHGs emissions. The oil and gas producing companies in Saudi Arabia have to conform to the international standards set to guide how firms impact on climate change, and is faced with the task of creating frameworks that guide how oil and gas companies emit GHGs to the atmosphere. Saudi Arabia already has several initiatives aimed at curbing excessive emissions of GHGs, including a proposed structure to apply a carbon tax. The country has made some strides in ensuring companies adhere to the set rules and regulations, but several impediments derail the efforts and the initiatives to impose a carbon tax. Operators must adhere to the set carbon law, and the country follows the guidance of the Saudi Vision 2030 that outlines the structure for achieving reduced GHG emissions. Aramco provides vital assistance in curbing emissions by using technology to generate oil and gas in a way that do not put the environment at risk, and to conduct researches that enlighten other operators what needs to happen to cut GHG emissions that have adverse effects on climate change. Aramco collaborates with other players, including SABIC that manages one of the biggest carbon recycling plant in KSA. Saudi Arabia is among some of the GCC countries that still emit large volumes of GHGs that contribute to climate change and increased global warming, and it is worrying that emission is set to increase in the coming years. The large volumes of GHGs could possible slow the initiatives to impose stricter measures major emitters, and unless the stakeholders review and follow up on the set guidelines, the country may not yet implement a carbon tax. Another factor that could disrupt the application of a carbon tax is some of the leading operators in the Saudi Arabian’s oil and gas sector such as Armaco are vehemently opposing the placement of tougher measures to curb emission of large volumes of GHGs. Such companies complain that the government already burdens them with several other taxes and imposing the carbon levy would wreck their attempts to progress. Nonetheless, several factors indicate that there is room for the introduction of tougher measures on major GHGs emitters, including the imposition of a carbon law such as the country’s affiliation with several international treaties that are becoming more resilient on curbing adverse effects on the environment. However, some of the international guidelines such as OPEC, UN COP24, and the Paris Agreement appear to be ineffective in the way they do not offer strict guidelines regarding the imposition of a carbon tax. The frameworks offer numerous publications on the importance of addressing climate change and appear to be affective in the way they urge members to develop better and more effective ways of restraining GHGs that are arguably the leading cause of climate change and global warming. It is upon Saudi Arabia to find the most effective ways of combating emissions beyond unacceptable levels and the country and world’s future state of the environment will depend on the effectiveness of the adopted measures.

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