Energy transition critic Saudi Arabia to remain in Paris climate accord: official

Middle East oil giant Saudi Arabia is still committed to the Paris climate agreement, a senior official told S&P Global Commodity Insights, despite its misgivings with how the energy transition is being administered globally and President Donald Trump's plans to withdraw the US from the accord.

Better to stay in the Paris agreement and influence climate negotiations from within, the government official said, asking not to be named, adding that the full impact of the US' withdrawal, which would not take effect until 2026, remains to be seen.

"We didn't join the Paris agreement because of the US, and we're not going to leave because of the US," the official said, adding that Saudi Arabia has made significant investments in renewables, hydrogen and nuclear and views itself as a leader on the clean energy front, even with its status as the world's largest oil exporter.

The kingdom has been accused at UN COP climate summits of stymieing efforts to include language mentioning a phaseout of oil, gas and coal in the negotiated texts, with energy minister Prince Abdulaziz bin Salman and Saudi Aramco CEO Amin Nasser decrying net-zero plans and anti-fossil fuel campaigns as unrealistic.

Those sentiments dovetail with those of Trump, who immediately after taking office Jan. 20 signed an executive order taking the US out of the Paris accord, which commits countries to cooperate on efforts to limit emissions that contribute to climate change and keep global warming to below 2 degrees Celsius.

He made the same move during his first term in 2017, though it took three years for the US -- the world's second largest emitter of greenhouse gases -- to officially leave due to UN rules. No other countries followed suit, and Trump's successor Joe Biden reversed the decision on his first day as president in 2021.

Trump has made no secret of his plans to push for more oil and gas production, saying "we will drill, baby, drill" in his inaugural address and calling the Paris agreement a "rip-off."

Saudi Arabia, where oil revenues accounted for about half of GDP in 2023, has said that removing access to affordable energy from fossil fuels would destabilize the world economy. OPEC, the oil exporters group where Saudi Arabia plays an influential role, has forecast no peak in oil demand through at least 2045.

Aramco has said it intends to maintain its 12 million b/d of crude production capacity, even with OPEC and its allies having implemented major output cuts to shore up the market, including a quota of 8.98 million b/d for Saudi Arabia that is in place through April.

Saudi green investments

And yet, Saudi Arabia itself has committed to a 2060 net-zero target and has been among the world's leading investors in clean energy and low-carbon fuels. Investment bank Goldman Sachs has estimated Riyadh will spend some $235 billion on renewables, hydrogen and carbon capture through 2030, when the country aims to source at least 50% of its electricity from solar and wind.

Much of its decarbonization strategy relies on carbon offsetting and capture technology that has yet to gain widespread commercial viability, with environmental group Climate Action Tracker saying the country "has not yet provided a clear emissions reduction pathway to net zero."

Saudi officials have said they remain confident that the world will continue to need oil in the decades to come, with Aramco's cost of production giving it a major advantage in the market long-term. But its clean energy initiatives are an insurance policy to diversify its economy.

"Saudi Arabia is determined to produce every ounce, every gram, every molecule ... of our resources," Prince Abdulaziz said at a minerals forum in Riyadh on Jan. 17, citing the need for "energy security, affordability and sustainability."

Despite Trump's move, many observers and people involved in climate change negotiations say they do not expect progress on global commitments to be undone by a US withdrawal, as the economics of the energy transition have changed since his first term.

However, many still do not expect progress on climate action globally to be undone by a Trump-led government as the economics of the transition has changed since 2016 when he was first elected.

"We've been here before," said Simon Stiell, executive secretary of the UN Framework Convention on Climate Change, responding to Trump's decision.

"The door remains open. The world is undergoing an energy transition that is unstoppable. Last year alone over $2 trillion was invested in the transition and that compares to $1 trillion in fossils fuels. So, the signal is clear that the transition has gathered significant momentum. A lot has happened in the last eight years," he said on a panel at the World Economic Forum in Davos on Jan 21.