COP28 Spotlights the Middle East’s Pivotal Role in Global Decarbonization and the Imperative for Diversified Energy Strategies

Wood Mackenzie’s Middle East Energy Transition Outlook (ETO) report highlights the unique challenges facing the region due to its abundant oil and gas reserves, resulting in remarkably low domestic energy prices. The report, part of Wood Mackenzie’s research series, explores potential outcomes for the Middle East’s energy sector. Currently, the region relies heavily on hydrocarbons, constituting 97% of its energy mix, with renewables expected to reach just 15% by 2050 in the base case.

Despite this, the report emphasizes the opportunity for the Middle East to become a key player in the global energy transition. Countries like Saudi Arabia and the United Arab Emirates are aiming to lead in carbon capture, utilization, and storage (CCUS), as well as low-emission fuels like hydrogen, ammonia, and methanol.

However, the report notes that despite ambitious targets, the region’s emissions are projected to remain at around 2 billion tonnes of CO2 by 2050. The transition to renewables faces challenges, with electric vehicle penetration expected to reach only 6% by 2050 due to policy gaps and the low cost of petrol.

To achieve net-zero emissions, Wood Mackenzie suggests the Middle East must electrify its industrial sector, deploy new technologies, electrify 75% of its road transport fleet, and ensure increased power demand comes from fully decarbonized sources. Carbon capture and nature-based solutions are highlighted as crucial for achieving this goal.

The report also acknowledges the region’s efforts to diversify its economy, with some countries investing in petrochemical production and low-carbon hydrogen. Policymakers are increasingly considering renewables as a solution, driven by concerns over supply security amid geopolitical conflicts.

Despite challenges, the Middle East remains a major player in the LNG trade, with natural gas expected to play a key role in the energy transition. By 2050, most gas-fired power capacity will likely need to be equipped with CCUS or use low-carbon fuels to support a renewables-heavy power grid.