Cities across the Middle East are experiencing an infrastructure boom, driving the demand for steel, cement, petrochemicals, and aluminum. However, the production of these essential materials faces significant decarbonisation challenges. Globally, the industrial sector accounts for one-quarter of CO2 emissions, a share that is expected to rise.1 It contributes even more significantly in some regions, accounting for 46% in the UAE.2 With increasing pressure to align with the Paris Agreement’s climate targets, finding sustainable solutions has become imperative in the Gulf Cooperation Council (GCC) region. This article explores the barriers, opportunities, and solutions in decarbonising heavy industries in the GCC.
Challenges in Decarbonising GCC’s Heavy Industries
The GCC’s heavy industries are vital to the region’s economy but face complex decarbonisation challenges primarily related to their production processes.
In many heavy industries, production processes require high temperatures—often generated by burning fossil fuels—and involve carbon-intensive chemical reactions. Steel, cement, and petrochemical production operate at around 1,000°C and above, producing substantial emissions through blast furnaces, calcination, and steam cracking processes. For example, a study found that in the UAE, 525kg of the total 709kg of CO2 produced per ton of cement was attributable to calcination, which relies on coal.3 As a result, decarbonising these heavy industries often requires changing the production processes entirely.
Another challenge specific to the region is the large quantities of water the industry consumes, though it contributes less to emissions. The GCC region overall accounts for 40% of the world’s desalination capacity,.4 which is almost entirely powered by fossil fuels.5 Desalination – which produces 70% of the country’s water – is one of KSA’s six target sectors for decarbonisation.6 Industrial needs account for 8% of KSA’s total water consumption.7 In addition, the GCC’s climate necessitates energy-intensive cooling and air purification for industrial processes.
Industrial centers are spread across the GCC, often requiring emissions-intensive transport networks. While existing railways connect some industrial clusters, trans-peninsular and GCC-wide railways are still under construction.8 Moreover, although the region experiences significant international demand for industrial products, its primary export markets are overseas.
Policy and Green Technology Innovation for Heavy Industries
GCC countries have implemented ambitious policy frameworks to promote sustainability. Saudi Arabia’s Green Initiative aims for net zero emissions by 2060, with 50% of power generation from renewable sources by 2030.9 The UAE recently enacted a comprehensive legal framework to improve energy efficiency, increase the use of renewables, protect natural carbon sinks, and expand carbon capture, utilisation, and storage (CCUS) in support of its net zero goal by 2050.10 Similarly, Oman’s Vision 2040 targets generating 30% of its electricity from renewable sources by 2030 and developing green hydrogen to position the country as a significant player in the global market.11
Green technologies are being pioneered in the region. The world’s largest green hydrogen plant in NEOM, Saudi Arabia, is expected to produce over 200,000 tons of green hydrogen per year by 2026 in the form of green ammonia, enabling its efficient transport to other markets.12 CCUS is expanding across the region. The Uthmaniyah Carbon Dioxide Enhanced Oil Recovery project in Saudi Arabia captures 800,000 tons of CO2 annually. At the same time, the Al Reyadah facility in Abu Dhabi is the world’s first fully commercial CCUS facility for the steel industry.13 Gigawatt-scale low-carbon power generation is underway in the UAE. The Barakah Nuclear Energy Plant and Mohammed bin Rashid Al Maktoum Solar Park will generate 5.6 GW and 5 GW by 2030, respectively. Emirates Global Aluminium in Dubai uses part of that solar power to produce 40,000 tons of green aluminum, making the UAE the first to use solar energy for aluminum production.14 The same company is prototyping a new smelting technology, improving efficiency by 22% and reducing emissions by 12%.15 Meanwhile, Vulcan Green Steel is pushing for low-emission steel production in Oman. It integrates the entire value chain from its iron ore mine in Cameroon to production processes in Oman using direct-reduced iron and electric arc furnaces to manage emissions.16
The GCC’s Potential for Global Leadership
As these initiatives demonstrate, the GCC has the potential to become a global leader in industrial decarbonisation. The region has strategic competitive advantages: vast renewable energy potential, financial capacity, an existing industrial base, and relative proximity to large off-takers in Europe and East Asia. To realise this potential, the GCC should focus on these critical initiatives:
- A regional task force to harmonize decarbonisation strategies across GCC states:
.This task force could be a multi-stakeholder partnership with representatives from the government, industry, academia, and international organisations. This would aim to break down barriers to the trade of renewable energy and green products. The GCC Interconnection Authority, which successfully linked the electricity grids of six countries, could serve as an example.17
- Given the potential of green hydrogen in the region, a GCC green hydrogen alliance should be established to collectively invest in and develop green hydrogen infrastructure by focusing on shared pipelines, R&D, and export strategies. This could reduce costs, mitigate risks, and help establish the GCC as a global leader in green hydrogen production. A similar alliance could be instrumental in advancing CCUS initiatives.
- Green financing mechanisms, such as a GCC green fund supported by sovereign wealth funds: low-interest loans, grants, or equity investments in projects that meet stringent sustainability criteria could help finance large-scale GCC-wide decarbonisation projects.
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- Cross-border industrial ecosystems to create symbioses and further drive circular integration among various industries: Some already exist, but expanding them in scope, scale, and especially geography could amplify the benefits of circularity.18
In conclusion, the GCC is pivotal in redefining its heavy industries. By leveraging its abundant renewable resources, financial strength, and strategic location, the region can emerge as a global leader in sustainable industrial practices. The path is daunting, yet within these challenges lie immense opportunities – for innovation, economic growth, and a more sustainable planet. Even traditional industries can pivot towards sustainability, setting a precedent for global change with the GCC at the forefront.
By Giuseppe Bonaccorsi, Managing Director and Partner, BCG; and Miklos Veszpremi Consultant, BCG
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