Masdar + Emsteel begin green steel production

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WHAT WE’RE TRACKING TODAY

TODAY: Masdar and Emsteel begin green steel production + Egypt’s Alkan and China’s BAIC to construct 50k capacity EV factory

Good morning, friends. It’s one of those days that’s lacking in major updates, but we have news on Masdar’s groundbreaking steel production using green hydrogen and the revival of Egypt’s EV manufacturing ambitions. Plus: We get into the differences between reforestation efforts and their efficacy.

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THE BIG CLIMATE STORY OUTSIDE THE REGION- Current Nationally Determined Contribution (NDC) plans will make the world fall very short on climate targets, according to the United Nations Framework Convention on Climate Change’s (UNFCCC) annual report (pdf). In their current form, NDC plans would see emissions fall by a meager 2.6% compared to 2019 by 2030, far off the 43% reduction to pre-2019 levels that are needed to keep global temperature rise to 1.5°C.

A radical shift is needed…: The report shows the critical need for countries to develop bolder climate plans by next year. These plans should include comprehensive emissions targets, sector-specific strategies, and credible regulations to ensure effective implementation. But NDCs are being leveraged as a “negotiating mechanism,” said Pablo Viera, who leads NDC Partnership, an NGO that advises countries on climate policies. “More money for more ambition.”

…or else we’re headed for disaster: “Greenhouse gas pollution at these levels will guarantee a human and economic trainwreck for every country, without exception,” said UNFCCC Executive Secretary Simon Stiell. “Every fraction of a degree matters as climate disasters get rapidly worse.” At the current rate, the world may hit a 2.8°C rise in temperatures, according to the report.

The story made headlines in the international press: Reuters | Bloomberg | Al Jazeera | BBC

HAPPENING THIS WEEK-

Saudi Arabia will host the Future Investment Initiative Conference from tomorrow until this Thursday, 31 October in Riyadh. The conference will gather entrepreneurs, political leaders, and decision-makers to explore investment options in AI, sustainability, energy, and more.

COP WATCH-

Egypt’s environment minister off to Cali for COP16: Egyptian Environment Minister Yasmine Fouad is heading to Colombia to attend high-level consultations at COP16 in Cali from today through to this Friday, 1 November. Fouad will attend ministerial meetings on biodiversity targets, the intersection of climate change and biodiversity, the meeting of the Intergovernmental Negotiating Committee on Plastic Pollution, and other events, the Environment Ministry said in a statement.

WATCH THIS SPACE-

#1- Egypt’s Alkan + BAIC to set up EV factory: Alkan Holdings subsidiary Egyptian International Motors and China’s state-owned auto manufacturer BAIC Group will set up an EV assembly plant in Egypt with a production capacity of 50k cars annually using 58% localized components, according to a statement.

More on the plant: The EV plant will begin production by late 2025 with 20k cars expected to be produced in the first year. Annual production volumes will hit 50k cars by the end of its fifth year. The companies are also planning to gradually increase the factory’s local component ratio from 48% to 58% over an unspecified time frame.

Talks to get EV assembly in Egypt off the ground have been ongoing for years: Al Nasr Automotive danced with auto giant Dongfeng back in 2019, only to pull out more than two years later over disagreements on imported components’ prices. In 2022, unconfirmed press reports suggested that an Al-Nasr-BAIC joint assembly factory could be in the pipeline.

Remember: The Madbouly government has been working to localize the auto industry, introducing the Egyptian Automotive Industry Development Program (AIDP) in 2022, which offers incentives to auto players to localize the sector and its feeder industries and encourage new investment in the sector.

#2- Oman’s OQ E&P shares drop on debut: Oman’s energy company OQ Exploration & Production shares closed down 8.2% on its first day of trading on the Muscat Stock Exchange, according to market data. The company’s shares fell to an intra-day low of OMR 0.36 per share, 9% below the OMR 0.39 offer price. The flopped debut is a rare instance in the Middle East IPO market of a company’s shares declining on the first day of trading, Bloomberg notes. The decline could be partially due to a global dip in crude prices, which dropped over 5% as Israeli strikes avoided Iran’s oil facilities.

#3- Ocean freight carbon emissions reach record high in 3Q 2024: Global ocean container carbon emissions hit record highs in 3Q 2024 due to the ongoing Red Sea conflict, rising freight rates, and congestion across shipping routes, according to freight rate analytics platform Xeneta. Carbon emissions for the top 13 ocean trades reached a record of 107.9 points, a 12.2% increase from the same period last year. This marks the highest emissions level recorded and only the second time the index surpassed 100 since its 1Q 2018 baseline, indicating higher emissions per tonne of cargo.

IN OTHER GREEN FREIGHT NEWS- Zero carbon ammonia continues to face safety hurdles and cost challenges compared to alternative shipping fuels, such as menthol, biofuels, and LNG, Reuters reports. Ammonia’s major selling point is that it is zero-carbon, making it a zero-emission fuel when made from green hydrogen.

In the pipeline: The first cargo ships powered by ammonia are set to enter service in 2026. The industry is gearing up for this, with the first transfer of ammonia from one ship to another safely completed last month in Western Australia, the newswire says.

So what’s the worry? “The lack of regulation, use experience, and toxicity of ammonia on board ships constitute major safety deterrents,” mining giant Rio Tinto head of commercial operations Laure Baratgin told the newswire. Refueling vessels with ammonia has the potential to cause acute poisoning and damage to exposed organs, with the greatest risk posed by leakage during bunkering operations, the newswire explains.

High costs: For ammonia bunkering to be competitive, its associated costs will have to fall significantly, as powering ammonia-fuelled vessels can cost up to two to four times more than conventional fuels. Ships operating on ammonia engines will also rack up extra maintenance costs, as the fuel is corrosive.

The orderbook: Some 25 ammonia dual-fuel vessels have been ordered as of 2024, with shippers still hesitant due to safety risks. This pales in comparison to at least 722 LNG-fueled vessels and 62 methanol-fuelled vessels on order as of 2024.

#4- Morgan Stanley “softens” climate lending goals: Morgan Stanley has lowered its climate targets for its corporate lending portfolio, adopting a flexible global warming cap between 1.5-1.7°C, rather than a strict 1.5°C, Chief Sustainability Officer Jessica Alsford told Reuters. The adjustment reflects slow progress towards a greener economy, hindered by factors such as sluggish EV sales and energy policy challenges, with the bank planning to emphasize the need for realistic targets, said Alsford.

The new plan: The bank has set new emissions reduction targets for six sectors: Energy, power, automotives, chemicals, mining, and aviation, with a new baseline year set for 2022 instead of 2019 for better data accuracy. By 2030, the new targets aim for a 45-60% emission reduction for the power sector across its portfolio, 29-45% for auto, 13-24% for aviation, 18-28% for chemicals, and 23-31% for mining.

DANGER ZONE-

US communities threatened by intensifying wildfires: Fast-moving wildfires have been responsible for nearly 80% of US home and structure destruction due to fires over the past two decades, according to a new study published in the journal Science. The study found that from 2001 to 2020, the growth rate of these wildfires — those that burn over 4k acres in a single day — rose by 249% in the western US, threatening nearly 1.8 mn structures nationwide.

The damage is immense: These fires have destroyed over 80.7k structures and inflicted USD 18.9 bn in firefighting costs. Climate change is intensifying the speed of these fires, with hotter, drier conditions and strong winds fueling their spread, as seen in devastating incidents like Colorado's 2021 Marshall Fire and Hawaii's 2023 Lahaina Fire, Bloomberg reported.

How can communities prepare themselves? There must be a shift in focus from fire size to speed for communities to prepare for rapid fire spread, the study’s lead author Jennifer Balch told Bloomberg. Suggested protective measures include fireproofing homes, clearing vegetation, and establishing ember-resistant zones to help mitigate the impact of fast-moving wildfires. Such measures are being incorporated into housing codes and could help firefighters shift focus to fighting wildfire blazes instead of evacuating homes.

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CIRCLE YOUR CALENDAR-

Egypt will host the World Urban Forum from Monday, 4 November to Friday, 8 November, in Cairo. The forum, established by the UN and one of its largest non-legislative events, will center around the effect of rapid urbanization on communities, economies, climate change, and policies and will bring together government representatives, academics, business people, urban planners, and more.

South Africa will host the Critical Mineral Africa Summit from Wednesday, 6 November to Thursday, 7 November, in Cape Town. The summit aims to attract critical minerals investment to the continent and will be held alongside African Energy Week. The summit will be held in partnership with the Southern African-German Chamber of Commerce Partners representing Germany’s increasing investments in southern Africa.

Azerbaijan will host the United Nations Climate Change Conference or Conference of theParties (COP29) from Monday, 11 November to Friday, 22 November, in Baku. The annual conference brings together governments, world leaders, and other stakeholders to advance the Paris Agreement and negotiate ways to fight climate change. The United Nations Framework Convention on Climate Change’s objective is to “stabilize greenhouse gas concentrations in the atmosphere at a level that would prevent dangerous anthropogenic interference with the climate system.”

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

Masdar and Emsteel commence operations at green steel plant

Masdar + Emsteel’s green steel plant comes online: UAE’s Masdar and Emsteel’s pilot program to produce steel using green hydrogen as a fuel is now fully operational, according to a statement. The project uses energy from green hydrogen to extract iron from iron ore – an energy-intensive step essential to steelmaking. The renewable hydrogen used in the project has been certified by Avance Labs and validated by Bureau Veritas.

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This has been in the works: Masdar partnered with Emsteel — formerly known as Emirates Steel Arkan — to develop a pilot green hydrogen plant to decarbonize the UAE’s steel sector last year. The pilot project could potentially cut carbon emissions in the steel-making process by 95%, the companies said at the time.

Emsteel has other decarbonization ventures: The company partnered with Japan’s JFE Steel and Itochu Corporation last year to conduct feasibility studies for a greener iron ore processing facility in Abu Dhabi. The plant was expected to begin production in 2H 2025. Emsteel and Finnish climate tech company Magsort also completed pilot testing on a decarbonization initiative aiming to slash 15% of the emissions from Emsteel’s Al Ain Cement Factory. Magsort can reduce 3-17% — depending on the type of furnace used — of CO2 emissions from the steel-making process.

The region has big green steel plans: Oman-based Vulcan Green Steel — a subsidiary of Jindal Shadeed — commenced construction on the country’s first green steel plant in the Duqm Special Economic Zone. In September, Saudi Arabia’s solar developer Desert Technologies signed an agreement with Indian multinational conglomerate Essar Group to supply renewable energy solutions for the latter’s planned USD 4.5 bn flat steel complex in Ras Al Khair.

Reforestation is more than just planting lots of trees

Why reforestation efforts are necessary for vulnerable communities: Deforestation led by human activities is an imminent threat to the environment and the global carbon cycle. The destruction can disrupt water cycles, leading to decreased precipitation and reduced river flow. The Amazon rainforest is particularly vulnerable, with research indicating that at least 80% of its trees are needed to maintain the hydrological cycle. Deforestation in the tropics has already led to a 10% reduction in precipitation over the Amazon and an even higher reduction in the South Asian Monsoon region.

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Reforestation could help reverse the impact: Reforestation can benefit climate-vulnerable areas by enhancing their resilience to natural disasters and mitigating climate change impacts. Trees play a role in stabilizing soil, reducing erosion, and preventing landslides, which are common issues in vulnerable regions. Their root systems help anchor the soil, while their canopies slow down rainfall, reducing runoff and the risk of floods.

And more: Reforestation can also create natural barriers against strong winds and storms. Replanting trees could reduce greenhouse gas concentration which mitigates global warming in climate-vulnerable areas that are more susceptible to rising temperatures and extreme weather events.

In perspective: The Amazon rainforest — the world’s largest — is home to an estimated 15k tree species, 3k fish species, and 1.3k bird species. Despite this incredible richness, deforestation has claimed around 17% of its area. Preserving the rainforest could help bring in USD 8.2 bn annually with revenue, including returns from sustainable industries operating within the rainforest, like rubber and timber. This is against an annual loss of USD 422 mn if deforestation continues in the rainforest.

Tropical rainforests are significantly more efficient at capturing carbon dioxide than boreal and temperate forests combined, according to the 2023 Atlas of Sustainable Development Goals by the World Bank. Deforestation caused by factors like logging and wildfires has released an average of 8.1 bn tons of CO2 annually over the past two decades — nearly half the CO2 that forests remove from the atmosphere, severely undermining the forests’ ability to remove CO2, according to the data.

There’s more than one path to regeneration: While tree-planting initiatives have gained popularity, they can sometimes do more harm than good, according to a study (pdf) published in Nature Journal. Monocultures, or planting only one type of tree, can cause ecosystem imbalances, reducing biodiversity and making forests more susceptible to diseases. A more informed approach that considers the deep connections between trees, people, animals, and microbes is needed. Some call this approach “natural regeneration,” where forests are allowed to regrow as naturally as possible. This includes using local knowledge and ensuring that tree-planting efforts are well-researched and implemented.

But no clear golden rule: Scientists explored the cost-effectiveness and climate benefits of two reforestation methods, tree plantations, and natural regeneration, according to research (pdf) published in Nature. Tree plantations involve planting and later harvesting trees, generating revenue from timber sales, while natural regeneration allows forests to regrow naturally, with revenue primarily from carbon credits. The study found no clear winner between the two methods, suggesting a mix of both is necessary for optimal climate benefits.

Some efforts are underway: The Great Green Wall project aims to reforest a belt of land across the Sahara Desert, potentially preventing desert expansion and increasing arable land. Another project — Western Australia's Gondwana Link — reconnects small patches of forest to minimize species’ risk of extinction.

The Tropical Mountain Alliance (TMA)has successfully restored 427 acres of forest in coastal Ecuador since 2008, utilizing a variety of reforestation methodologies that integrate mixes between the above two main approaches. These methods range from Natural Regeneration (NR), which includes no human intervention, relying on the ecosystem's innate ability to heal itself, to Assisted Natural Regeneration (ANR), where minimal human intervention helps accelerate forest recovery. TMA's efforts have also included Enrichment Planting (EP), which includes selectively planting certain trees to fill in spatial gaps or replenish threatened species, and Plantation-style reforestation (PS), which is the most aggressive and expensive intervention for severely degraded sites.

Delayed planting is better for cattle pastures: Another approach highlighted is Delayed Planting (DP), in which planting the native trees is postponed after an initial period of native vegetation that creates the needed soil and microclimate conditions for reforestation. This method has proven particularly effective in reforesting cattle pastures, significantly reducing labor costs and increasing seedling survival rates.

ALSO- Nurse Cropping (NC) is also another method that attempts to “hack nature” to create long-term favorable conditions, and it involves planting fast-growing pioneer species alongside slower-growing target species.

Biodiversity is also being tackled: TMA's reforestation strategies also incorporate Applied Nucleation (AN), which plants small clusters of trees to serve as focal points for natural forest succession while depending on insects and animals as seed dispersers and pollinators, and Farmer Managed Natural Regeneration (FMNR), a sustainable land restoration technique. These methods, along with Permaculture and Regenerative Agroforestry, aim to restore ecosystems, increase biodiversity, and achieve sustainable food production. TMA's comprehensive approach demonstrates the potential for innovative reforestation techniques to combat deforestation and promote environmental sustainability.

Funding reforestation programs has come a long way: Traditional financial institutions have long deemed reforestation projects unbankable, said the Green Fund Alliance's co-founder Tai Aracen. The primary challenges include long time horizons for tree maturity, high upfront costs, perceived high risks from factors like forest fires and pests, and the complexity of measuring ecosystem impacts. These hurdles created a significant funding gap, making it difficult for reforestation projects to attract necessary investments. Blended finance models address that by combining public, private, and philanthropic capital. These models reduce risks and enhance the attractiveness of reforestation projects for commercial investors.

The World Bank is financing reforestation efforts: The World Bank also partnered with HSBC to structure a USD 200 mn outcome bond for Mombak's – a Brazilian company focused on large-scale native reforestation projects – efforts of re-establishing around 25 forests in the Brazilian Amazon region. The project will plant over 30 mn trees of over 100 native species, covering 70k acres. The carbon credits generated by these projects will be sold through spot market sales and offtake agreements, partially linking the bond's financial returns to measurable environmental outcomes.

Rolling out outcome bonds: The lender also launched the USD 225 mn Amazon reforestation-linked outcome bond to support reforestation efforts in the Amazon. Maturing in 2033, this 9-year bond links investors' returns to measurable reforestation outcomes. The bond also mobilized approximately USD 36 mn in additional capital for Mombak. The bond guarantees a lower return than regular World Bank issuances with the differential supporting reforestation projects, the bank said.

Oman + Iraq have their own reforestation plans: Oman completed 90% of the first phase of the Oman Green Belt Project — which aims to plant 45k trees in Dhofar by the end of the year. The reforestation efforts — which come as part of a bigger plan to plant 10 mn wild trees in the country — target areas already affected by desertification and low vegetation with plans to expand to new sites in future phases. Iraq is seeking to raise international aid of around USD 100 mn to launch reforestation efforts and bolster food security.

There are other global efforts to address deforestation: The European Commission sealed a provisional agreement in 2022 to reject products that come from deforested lands. This includes coffee, beef, palm oil, timber, cocoa, rubber, charcoal and soy — generally in their pure form, but also including their derivatives. The commodities and products that fall under this category will no longer be imported or sold in the EU.

KSA to manufacture green energy tech locally

RENEWABLES-

The Saudi government signed a combined SAR 49 bn-worth of renewables and energy infrastructure agreements at the Energy Localization Forum in Riyadh last week. The total includes 14 agreements in the renewables sector worth SAR 14.4 bn and another 14 agreements in the energy infrastructure sector totaling SAR 34.6 bn, the Saudi Energy Ministry said.

The details: The agreements include two major energy storage systems worth SAR 9 bn that included China Electric Power Equipment and Technology Co., Al Gihaz Contracting Co., and the Saudi Electricity Company.

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CARBON MARKETS-

Adaverse invests SAR 1.69 mn in TGE: KSA’s Web3 and blockchain fund Adaverse is set to invest SAR 1.69 mn in fully localized Web3 sustainability startup Tharawat Green Exchange (TGE ), according to a press release. The proceeds will mainly be allocated towards blockchain development, sales and marketing, and securing Vera certification for TGE’s carbon credits. TGE is carving a niche in Saudi Arabia, connecting carbon offset purchasers with local nurseries and land projects through a blockchain platform to aid Saudi Arabia achieve its goal of planting 10 bn trees by 2040.

SUSTAINABILITY-

Adnec Center Abu Dhabi plans to go green: Adnec Group signed an agreement with the Emirates Water and Electricity Company (Ewec) to secure 100% of Adnec Center Abu Dhabi's electricity needs using Ewec’s renewable energy sources, according to the Abu Dhabi Media Office. The move will make Adnec Center Abu Dhabi the first and largest event venue in the Middle East to be powered by clean energy.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

Iran public transport to add 10k EVs: 10k electric vehicles are expected to join Iran’s public transport fleet by late March 2025, Managing Director of Mapna Group said on the sidelines of the Iran International Electricity Exhibition. Mapna is now working on adding charging infrastructure to support the expansion in big cities. (Tehran Times)

China solar industry on a market high

Chinese solar stocks surge on regulation speculation: Shares in Chinese solar manufacturers soared last week amid speculations about government measures to address oversupply, Bloomberg reported on Friday. Speculative news that the Industry and Information Technology Ministry might introduce rules to limit polysilicon production drove the shares up, with companies like Xinjiang Daqo New Energy seeing a 48% increase, while Trina Solar and Xinyi Solar Holdings surging by 35% and 32%, respectively. Analysts from Daiwa Capital Markets and Citigroup, however, remain skeptical about the long-term impact of these potential policy changes.

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An industry outlook: The solar sector has shown signs of recovery despite recent struggles due to industry overcapacity largely driven by Chinese producers. The anticipation of significant policy changes, including the possible retirement of less-efficient polysilicon plants, has fueled investor optimism. Analysts from Tebon Securities suggest that improving risk appetite could create more investment opportunities in the sector. However, some investors, like Ginny Chong from Mondrian Investment Partners, caution that profit margins remain under pressure, and the overall industry capacity is still expected to rise.

India’s Waaree Energies sales skyrocket on debut: Shares of Indian leading solar panel maker Waaree Energies surged 75% soon after a USD 514 mn initial public offering, Bloomberg reports. The successful IPO — which was 70x oversubscribed — values the company at INR 431.8 bn (USD 5.1 bn), with about 287 mn shares outstanding.

OTHER STORIES WORTH KNOWING ABOUT THIS MORNING-

Rwanda sees surge in hybrid vehicle imports: Tax exemptions in Rwanda on hybrid and electric vehicles have led to a substantial increase in imports, with hybrid car imports rising 237x from 2021 to 2024, reaching over 7k vehicles, The East African reports, citing Rwanda Revenue Authority data. The policy, costing Rwanda around Rwf 14 bn (USD 10.36 mn) in foregone tax revenue, aims to ease the financial burden of acquiring EVs and hybrids.
Germany to limit solar subsidies amid rising costs from oversupply: The German government plans to tighten solar subsidy eligibility to address rising costs on the government. Solar oversupply has recently led to negative power prices during high-sun periods, which forced the government to field higher-than-expected feed-in tariffs. Under a new draft law, solar installations built before 1 January, 2026, with more than 90 KW of capacity, will no longer be eligible for feed-in tariffs The capacity threshold will continue to further drop gradually each year until it hits 25 KW by 2028. The subsidy bill could reach as much as EUR 20 bn this year. (Bloomberg)

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