Abu Dhabi National Oil Company (ADNOC) committed a $15 billion investment in low-carbon projects to curb operations emissions and meet decarbonization goals.

The United Arab Emirates oil and gas giant has unveiled its multi-year action plan, allocating $15 billion for various low-carbon projects across its diversified value chain by the end of the decade.

The UAE has committed over $165 billion to transition to clean energy. It’s the first Persian Gulf state to aim for 2050 net zero emissions.

Dr. Sultan Ahmed Al Jaber, UAE Minister of Industry and Advanced Technology and ADNOC Group CEO, said:

“Cementing our strong track record of responsible and reliable energy production, ADNOC will fast-track significant investments into landmark clean energy, low-carbon and decarbonization technology projects. As we continue to future-proof our business, we invite technology and industry leaders to partner with us, to collectively drive real and meaningful action that embraces the energy transition.”

ADNOC Decarbonization Goals

As part of its sustainability goals, ADNOC plans to cut its carbon emissions intensity by 25% by 2030. This will strengthen its position as one of the least carbon-intensive oil and gas companies in the world.

ADNOC ranks in the top 5 lowest emitters in the oil and gas industry. It also has one of the lowest methane intensities (0.01%).

The UAE giant highlighted that its decarbonization goals build on its “strong track record as a leading lower-carbon intensity energy producer”. And that record includes these actions:

use of zero-carbon grid power,
committed to zero flaring as part of routine operations, and
deployed the UAE’s first carbon capture project at scale – Al Reyadah.

Middle East oil and gas firms are investing billions of dollars to scale up their hydrocarbon production capacities. But they’re also preparing to invest heavily in energy transition initiatives such as hydrogen and carbon capture and storage (CCS) projects.

The $15 Billion Projects

ADNOC said that throughout 2023, it will reveal a suite of new projects and initiatives to decarbonize operations. The company’s $15 billion investment includes:

A first-of-its-kind CCS project
Innovative carbon removal technologies
New, cleaner energy solutions (hydrogen and renewables)
Further electrification of operations
Measures to build on its policy of zero routine gas flaring
Strengthening international partnerships

The energy firm also said that it will apply “a rigorous commercial and sustainability assessment to ensure that each project delivers lasting, tangible impact”.

In December last year, ADNOC set up a new business called “Low Carbon Solutions & International Growth“. It’s in line with its goal to reach Scope 1 and 2 net zero emissions by 2050.

The new business will focus on CCS, renewables, and clean hydrogen. It will also help the company expand internationally in gas, liquefied natural gas, and chemicals.

UAE’s CCS Expansion Plan

Building on its Al Reyadah facility, which can capture up to 800,000 tonnes of CO2 annually, ADNOC also plans to deploy technologies to capture, store, and absorb CO2.

The company is also working on its next major decarbonization investment to curb emissions from its Habshan gas processing facility.

With ADNOC’s planned expansion of its CCS capacity to 5 million tonnes per annum by 2030, the UAE will be “firmly established as a worldwide hub for carbon capture expertise and innovation,” the firm stated.

Such CCS expansion represents an over 500% increase in the company’s carbon capture capacity.

ADNOC added that this plan seeks to support the scale-up of hydrogen and lower-carbon ammonia production in Abu Dhabi. They even plan to scale blue ammonia production capacity to 1 million tonnes per year at its Taziz facility.

UAE’s major energy player also confirmed that it has already delivered test cargoes of low-carbon ammonia to Europe and Asia.

The company’s expansion of its new energy portfolio will be possible via its stake in Masdar, the region’s clean energy powerhouse. ADNOC said Masdar is leading the UAE to develop a global position in green hydrogen.

Government subsidy programs in 2023 will help ensure that the global green hydrogen industry will transform from a hot table topic to a large-scale renewable power source.

Hydrogen is leading the debate on clean energy transitions, offering many uses but more so in providing renewable power. Green hydrogen, in particular, gets a lot of traction and is hailed as the energy of the future.

Meeting such a prediction needs trillions of dollars by 2050 – about $15 trillion or $800 billion of investments a year.

Major oil and power firms aim to bring huge investments to make green H2 a reality. Some of them are Shell, Adani, TotalEnergies, and ACWA Power.

While the private sector has a big role in making green H2 the future energy, the public sector also shares the same footing. A wave of government subsidies, some are already underway while others are still plans, will support the development of green hydrogen projects.

The most significant support program is most likely the U.S. hydrogen tax credits. But similar other programs are also available in the EU, UK, Germany, Canada, and India.

Several large-scale green H2 projects will reach their final investment decisions in 2023 or begin construction by the year’s end. Yet, to date, only 270 MW of green hydrogen projects are operating.

So how do all the green hydrogen subsidy programs stand this 2023?

Biggest Support for Green H2

The Inflation Reduction Act, signed into law in August 2022, offers tax credits of up to $3/kg to clean hydrogen producers for the first 10 years of a project’s lifetime. The amount of credit depends on the carbon emissions lifecycle of the project.

The tax credit can make green H2 cheaper to produce than grey hydrogen from unabated fossil fuels.

Though the US government is still revising the final details of the subsidy scheme, they’ll be up for release in the coming months. But complaints against the Act – for alleged violations of international trade rules – from affected nations may cause a bit of delay.

For instance, the EU, Norway, and Australia objected to the Act’s preferential treatment to US-made products.

Still, the US remains to be the biggest market for green hydrogen production in 2023. The tax credits are one reason for that. Plus, the $9.5 billion federal cash subsidy provided in the Infrastructure Investment and Jobs Act for clean H2 development.

The program includes $8 billion to fund at least 4 regional clean hydrogen hubs. The law defines the hubs as:

“networks of clean hydrogen producers, potential clean hydrogen consumers, and connective infrastructure located in close proximity”.

The goal is for those hubs to form a national clean hydrogen economy. It also pushes to cut the cost of green hydrogen to less than $2/kg by 2026 (from more than $5/kg today).

Estimates show that the cost of green H2 made through water electrolysis will decrease by 2050 to even less than blue H2.

Global Subsidies for Green Hydrogen

EU’s CCfD

The European Commission revealed its Carbon Contracts for Difference (CCfD) subsidies for green hydrogen through its Innovation Fund. The program supports a complete switch from natural gas to renewables in producing H2.

Under the CCfD scheme, the EU governments will pay end users, not the producers, a certain amount for not emitting carbon. And that includes the money saved from not paying a carbon price and a top-up subsidy to hit the strike price (cost of producing H2) as detailed in the CCfD.

The program aims to help the bloc achieve its goal of producing 10 million tonnes of green H2 by 2030 and importing another 10 MT by the same period.

The final details of this EU’s green hydrogen subsidy were due last year, but disagreement from the EP delayed it. A new draft proposal needs final agreement by all member states and the EP.

UK’s CfD

Same with the EU, the UK has also devised its own Contracts for Difference (CfD) subsidy scheme for clean hydrogen by the end of 2022. It will support up to 1 GW of green hydrogen projects with two rounds in 2023 and 2024. They have to be under construction or operational by 2025.

UK’s CfD also needs finalization, but it will help lower the price of making green H2 and scale it up. The government will shortlist green hydrogen developers showing interest in its subsidy program in early 2023.

Meanwhile, the Scottish government announced in December last year its $112 million Green Hydrogen Fund, calling for H2 project proposals early this year. The goal is to install 5GW of clean H2 by 2030 and 25GW by 2045.

Germany, Canada, and India

Germany’s H2Global green hydrogen subsidy program (for H2 imported into the EU only) is, by far, the most advanced scheme. It is a double-auction scheme: one for green ammonia and the other for green methanol and H2-based sustainable aviation fuels. It’s supported by an initial €900m ($959m) funding.

A special firm owned by the German government, the Hydrogen Intermediary Network Company (HintCo), will buy green hydrogen or its derivatives from international producers. Then HintCo can sell it to European customers.

And any cost difference between the purchase agreements and supply contracts will be made up from the government subsidy.

Germany aims to complete the auctions by mid-2023 but won’t launch the supply auctions until 2024-25.

For Canada, the scheme works differently from European models.

The Canadian government will introduce in the Spring a new tax credit of as much as 40% for H2 production. This program mirrors the US H2 tax credit system in which the credit depends on various factors. It will run until 2030 but is up for public consultation to finalize details.

While for the Indian government, it plans to mandate the use of green H2 in industrial sectors such as steel, oil refining, fertilizer, and cement production.

Part of that goal is a $2 billion incentive program that will most likely be officially revealed in April. This will make the country another major green hydrogen player in 2023.

The world’s acceleration to corporate Net Zero has come under fire. Some critics argue that carbon offsets are a scam, but there are several key points to consider in the debate. 

Firstly, carbon offsets are a legitimate and effective way for individuals and companies to reduce their carbon footprint and mitigate their contribution to climate change.
Secondly, carbon offset programs are regulated by third-party organizations that verify the validity and effectiveness of the offsets purchased. 
Lastly, carbon offset projects often provide additional benefits beyond reducing carbon emissions, such as supporting renewable energy development and improving local economies.

By definition, carbon offsets are valuable certificates that are issued when carbon is removed or prevented from entering the atmosphere. That’s done through carbon removal technologies, by pumping CO2 into rocks, or even by planting trees.

In fact, producing and selling carbon offsets is becoming a lucrative business in the U.S., and first movers have a big advantage. Small farmers, ranchers, and landowners can earn extra income by optimizing their operations to produce carbon offsets.

Carbon Offset Market Size

When checking for legitimacy of markets, following capital flows and transactions provides clues. There are two main emissions markets – the compliance carbon market and the voluntary market. 

The transaction volume in the compliance market totaled $851 billion in 2021, while the voluntary market grew to $2 billion the same year.

Source: Global Carbon Credit Corp, Corporate Presentation August 2022

The Voluntary Carbon Market is one of the fastest growing markets in global capital. It has grown from nearly $300 million in 2019 to an estimated $1.8 billion in 2022.

Corporate Footprint: Carbon Offsets and Net Zero Plans

The arguments that carbon offsets are a scam are not shared when looking at corporate net zero pledges. According to Katusa Research, the number of companies that publicly declared net zero targets reached 3,152 in November 2022.

Companies like Netflix, for example, have excellent net zero and emissions reduction plans:

“By the close of 2022, Netflix will achieve net zero greenhouse gas emissions. To reach this goal, we are working towards reducing our internal emissions by 45% below 2019 levels by 2030”

There are many other global companies that disclosed their net zero targets and how to get there. UK’s Royal Mail, Stellantis, Pfizer, Levi’s, Del Monte Foods, among many others, have pledged to hit net zero.

Companies Selling Carbon Offsets

Consider one Tesla’s sources of revenue (and profit) has been the sale of carbon offsets. In Q1-2022 for example, Tesla earned $679 million in carbon credit sales.

A company that emits a certain amount of carbon dioxide through its operations can offset those emissions by buying carbon credits. They come from a project that reduces carbon emissions elsewhere, such as a renewable energy project.

Offsetting allows the company to neutralize its carbon emissions and reduce its overall impact on the environment.

Carbon Offset Regulation

A farmer can’t just create thousands of carbon offsets from his or her land by planting trees. There is a stringent carbon verification process and typically performed by one of the larger global services – like Verra and Gold Standard.  

Carbon offset programs are regulated by third-party organizations that verify the validity and effectiveness of the offsets purchased. For example, the Carbon Offset Integrity Standard (COIS) is an international standard that ensures carbon offset projects are real, permanent, and additional. 

This means that the offsets purchased represent real, verifiable reductions in carbon emissions, and that the reductions would not have occurred without the offset project.

Verified carbon offsets are definitely not a scam. Let alone the benefits they offer that can be environmental, social, and economic.

Extra Benefits of Offsets

Carbon offset projects often provide additional benefits beyond reducing carbon emissions.

For example, many carbon offset projects support the development of renewable energy, such as wind and solar power. This not only reduces carbon emissions, but also helps to diversify the energy mix and reduce reliance on fossil fuels. 

In addition, carbon offset projects can also provide economic benefits to local communities by creating jobs and supporting economic development. For instance, a carbon offset project may involve planting trees in an area where employment is scarce, providing employment  opportunities and supporting the local economy.

With all these points, can we still say that carbon offsets are a scam? We don’t think so; not all carbon offsets are a scam even if some of them may be. 

Otherwise, the BMO would not be confident in projecting that the market will grow 17.4x by 2050, relative to its 2020 traded volumes. And as more players and money are flooding the voluntary carbon market, its value seems to grow even more.

The banking industry stands out from other sectors in its capacity to help firms transition to a low-carbon economy through the major banks’ $5.5 trillion climate commitment to finance and invest in sustainable projects.

In a report by the International Energy Agency, investments in new coal mines, oil and gas wells had to end immediately for the world to meet its Paris climate goal of limiting warming to 1.5 degrees Celsius.

Yet, fossil fuel financing from the world’s biggest banks amounted to $4.6 trillion U.S. dollars in the 6 years since the 2015 Paris agreement. $742 billion was for fossil fuel financing in 2021 alone.

At the COP27 summit, negotiators estimated that up to $6 trillion has to be invested each year in renewables and decarbonization until 2030 to reach net zero emissions by 2050.

Two major UK banks, Barclays and HSBC, pledged a total of US$2 trillion, with $1 trillion each, by 2030. While another two large US banks, JPMorgan Chase ($2.5 trillion) and Citigroup ($1 trillion), have committed a total of $3.5 trillion last year to sustainable initiatives by the same decade.

Banking on Climate & Sustainable Financing

Banks are not just providing capital to firms that innovate climate change solutions. Other activities include:

advising clients on the transition to net zero such as mergers and acquisitions,
asset disposal, and
financing of green projects.

A UK major bank Barclays revealed that it aims to allot $1 trillion of its funds by the end of 2030 for sustainable financing. It will be primarily to support firms that transition to a low-carbon economy. It will also be to ramp up its debt and equity capital markets to meet its climate goals.

Barclays said that it will focus on providing advisory services and deliver financing to firms to help expand their green technologies.

The $1 trillion climate pledge will involve green mortgages, sustainable financing structures, and financing for renewable energy firms.

Part of its climate commitment, the major bank is also ramping up its equity capital investments after seeing success in this space. To date, it has invested £84 million in scaling up startups that innovate renewable energy storage solutions.

Its new investment will center on prominent decarbonization technologies such as hydrogen and carbon capture. These technologies are critical to helping carbon-intensive sectors transition to lower carbon use. Common areas include energy and power, real estate, and transportation.

This new climate commitment marks a big increase from the bank’s goal to provide sustainable investments from £175m by 2025 to £500m by 2027. The $1 trillion pledge starts from 2023.

Barclays is not the only financier that’s ramping up its funding to help the world decarbonize.

Other major banks are also updating and increasing their climate commitment to stir up the transition. But some of them are struggling to weather big criticisms that most are still financing new fossil fuel projects. HSBC is one example.

HSBC Climate Policy Update

Europe’s largest bank HSBC updated its climate policy saying it will no longer offer new lending or capital market financing for new oil and gas fields or related projects.

The banking giant has also said it plans to provide up to $1 trillion in sustainable financing and investments by 2030. A responsible investment lobby group welcomed HSBC’s move, remarking:

“HSBC’s announcement sends a strong signal to fossil fuel giants and governments that banks’ appetite for financing new oil and gas fields is diminishing. It sets a new minimum level of ambition for all banks committed to net zero. We urge major banks like Barclays and BNP Paribas to follow suit.”

However, HSBC will still provide financing and advisory services to existing fossil fuel projects. But that should be “in line with current and future declining global oil and gas demand”.

And while it will do the same to energy sector clients, it will assess the firms’ plans in relation to clean energy transition.

Last October, Britain’s largest domestic bank Lloyds Bank also announced the same intention. It will no longer provide direct financing to fossil fuel projects as part of its new climate policy.

More Climate Commitment from US Major Banks

U.S. major banks are also catching up to the trend. JPMorgan Chase & Co. and Citigroup, in particular, are two examples. The chart shows their sustainable finance budget from 2016 to 2020, along with other large financiers.

Source: Rainforest Action Network (RAN), 2021

JPMorgan Chase announced last year that it will spend $2.5 trillion over 10 years, until 2030. The bank will use its finances for “long-term solutions that address climate change and contribute to sustainable development.”

Likewise, Citi also committed $1 trillion for sustainable finance by 2030. That is an extension of its environmental finance targets from $250 billion by 2025 to $500 billion by 2030. The fund will be for renewable energy and clean technology, green buildings, and sustainable agriculture and land use.

While they have different amounts in climate commitment, all major banks share the same goal – speed up the transition to a sustainable, low carbon economy.