Pathways to Decarbonization and Economic Diversification in Qatar

The Challenges of Climate Change Mitigation and Economic Diversification in Qatar

Qatar is a high-income, resource-rich country, with an economy based around the exploitation of its vast fossil fuel reserves, particularly natural gas. As a result of the development of liquefied natural gas (LNG) and other fossil fuel-intensive industries that started in the 1990s, Qatar’s Gross Domestic Product (GDP) grew from $18bn to $236bn (in 2024 USD) between the years 2000 and 2022 (i.e.: more than ten-fold).¹ This exceptional growth has enabled the country to achieve rapid societal development and attain high standards of living for its citizens. However, Qatar’s dependence on fossil fuel export revenues has made it vulnerable to fossil fuel price fluctuations in the short term and, in the longer term, to the growing international pressure around moving away from fossil fuels.² Moreover, the economic model of Qatar, dominated as it is by extractive and energy-intensive industries, is associated with high levels of emissions of greenhouse gases (GHGs) and pollutants, the latter significantly affecting the quality of Qatar’s environment.

The pressures put on Qatar’s current economic model by global climate change and other environmental issues were explicitly acknowledged by the government of the State of Qatar as far back as 2008, when the Qatar National Vision 2030 (QNV2030) was launched.³ QNV2030 called for the development of strategies to diversify Qatar’s economy and transform it into a more sustainable, knowledge-based economy while protecting the environment. The implementation of the vision set out in QNV2030 is articulated in the three successive National Development Strategies (NDS) that were released since; these are documents outlining specific actions that the State of Qatar is committing to on its journey towards realizing QNV2030.

Since 2008, the State of Qatar has made substantial efforts to diversify away from hydrocarbon exports and fossil fuel-intensive industries and to protect the environment. Qatar’s commitment to global climate action was already apparent in 2012, when it hosted the 18^th Session of the Conference of Parties (COP18). In 2016, Qatar became a signatory to the Paris Agreement and in 2021 it submitted to the United Nations Framework Convention on Climate Change (UNFCCC) its updated Nationally Determined Contribution (NDC),⁴ which for the first time includes quantitative GHG emission reduction targets. In particular, the NDC commits the State of Qatar to reducing its GHG emissions by 25% by 2030, relative to a baseline scenario where no new GHG mitigation measures are introduced after year 2019. Later in 2021, the Qatari government also released its first National Climate Change Action Plan (NCCAP).⁵ a document detailing a set of measures that will be undertaken to deliver the GHG mitigation targets of the updated NDC.

In 2024, the third and last National Development Strategy (NDS3)⁶ was released, which outlines a strategy and specific actions to complete the delivery of QNV2030. NDS3 clearly acknowledges that, despite the substantial efforts made so far, Qatar’s economy has largely failed to diversify and has remained substantially reliant on its fossil fuel and energy intensive industries. For this reason, NDS3 calls for renewed efforts to expand existing industries outside oil and gas and create new ones. In this regard, NDS3 is more specific than the previous development strategies in that it identifies three priority industries that Qatar will focus on: manufacturing, logistics and tourism. These industries, in the plans of policymakers, are expected to drive faster economic growth, for which NDS3 sets a 4% annual GDP growth target, higher than the previous target of 3%. NDS3 also addresses the issues of protecting the local environment and mitigating GHG emissions, for which it refers to the measures outlined in the NCCAP. Lastly, NDS3 calls for renewed efforts to foster innovation, which is critical to both the creation of a knowledge-based economy and the sustained competitiveness of the domestic industries.

It is however important to note that, ceteris paribus, faster economic growth means increased GHG emissions. Therefore, additional measures will be required to achieve the 25% GHG by 2030 compared to those indicated in the NCCAP, and even more beyond 2030 when the impact of the faster growth on GHG emissions will become gradually more substantial. The type of measures needed will clearly depend on the sectors where the additional GHG emissions will come from. As a result, long-term GHG mitigation strategies and infrastructure planning will need to be robust under the uncertainty that changes to the structure of Qatar’s economy will bring.

Assessing the Interplay Between Economic Diversification and GHG Mitigation

To assess the long-term impacts that different economic diversification trajectories may have on Qatar’s GHG mitigation efforts and derive policy-relevant insights, we have used Qatar TIMES. This is a computer model of Qatar’s energy systems, developed at the Qatar Environment & Energy Research Institute (QEERI) in collaboration with Imperial College London and Kahramaa, funded by the Qatar National Research Fund (QNRF), grant NPRP13S-0204-200250, and with support from Earthna and the Al-Attiyah Foundation. Qatar TIMES is a tool built specifically for Qatar using the TIMES modelling framework,⁷ which was originally developed at the International Energy Agency (IEA) and is used by many governments of both developed and developing countries to conduct analysis to inform their energy-environmental policies.⁸ Qatar TIMES can identify cost-effective technology pathways to achieve long-term GHG mitigation targets and, working backwards from these using an approach known as back-casting, explore the policies that would be required to enable those pathways.

In our study of GHG mitigation policy in Qatar using Qatar TIMES, we have defined and explored three GHG emissions mitigation scenarios: baseline, NDC and Paris-compatible (PC). These are described in Table 1. We have also tested their sensitivity to different ways in which the structure of the economy may evolve as a result of government efforts to diversify it; to do so, we have considered three scenario variants: NDC baseline, NDS3 manufacturing-led (MF), and NDS3 service-led (SER). These scenarios are described in Table 1 below.

Table 1: GHG mitigation scenarios (left) and economic growth variants (right) modelled with Qatar TIMES

The rationale behind having two NDS3 variants is that, while NDS3 clearly identifies the three industries previously mentioned – manufacturing, logistics and services – as the ones to prioritize, the measures to support them are yet to be designed and these will have a strong influence on the extent and rate at which each industry develops.

Qatar TIMES uses exogenous scenarios for energy service demand across all sectors of the economy over the time horizon considered, which extends to the year 2060. Energy services, such as lighting and cooling of buildings, transport of passengers and freight, and high-grade heat for industry are inputs to the production of goods and services; hence, demand for energy services is linked with the country’s GDP. Demand for specific energy services also depends on the structure of the economy. Therefore, by using specific energy service demand scenarios as an input to Qatar TIMES, we can test the impact of different economic growth and diversification trajectories on the evolution of the energy system and on the technologies needed to reduce its GHG emissions.

As for the three GHG mitigation scenarios modelled, the baseline scenario has no quantitative GHG emission reduction target. In the NDC scenario, we apply the GHG mitigation target of 25% by 2030 relative to the baseline scenario as in the updated NDC of 2021 and we extend it to 2060; this is of course not in line with the requirements of the Paris Agreement, which calls for gradually tightening GHG emission targets, and can therefore be considered as a worst-case scenario for climate action in Qatar. Lastly, the Paris-compatible scenario is one where ambition steadily increases: starting from the 25% target for 2030, GHG emissions are further constrained in the following decades until carbon neutrality is eventually reached. The GHG emission profiles associated with the 3 scenarios are illustrated in Figure 1.

Figure 1: GHG emission trajectories associated with the three scenarios modelled: Baseline, NDC and Paris-compatible.

In the NDC scenario, the majority of the required GHG emission reductions can be achieved through measures targeting the oil and gas industry and the manufacturing sector, in a way that does not significantly differ from the measures indicated in the NCCAP for the year 2030. However, putting Qatar on a path to carbon neutrality requires a very different approach, where decisive action needs to be taken to reduce emissions from all sectors simultaneously; this requires deploying a much more comprehensive and aggressive set of measures.

The two economic diversification variants considered, namely manufacturing-led growth and service-led growth, are characterized by different energy demand levels. Manufacturing chemicals and metals is more energy-intensive than the provision of services and also requires different types of energy services, such as high-grade heat and heavy goods transport, as opposed to lighting and cooling of commercial buildings and transport of passengers (which are needed for the services sector). When testing these scenario variants using Qatar TIMES, we find that mitigation costs are very sensitive to uncertainty around future economic diversification pathways: relatively minor changes in the structure of the economy can result in substantially different GHG mitigation costs. This is illustrated in Figure 2.

Figure 2: Costs of GHG emissions mitigation, relative to the baseline scenario, for the NDC and Paris-compatible scenarios and their sensitivity to different economic diversification trajectories (manufacturing-led and service-led).

As is apparent from Figure 2, the effect of different future economic diversification trajectories on GHG mitigation costs also varies over time. This is especially the case for the Paris-compatible scenario, where in the long run, the cost of abatement in the manufacturing-led variant grows significantly higher than in the case of the service-led variant. This is mainly because emissions from energy-intensive manufacturing are harder to abate, which will eventually require the use of more expensive technologies, including Direct Air Capture (DAC), to achieve carbon neutrality. It is important to note that the higher GHG mitigation costs associated with manufacturing-led growth is not in itself an indication that this economic diversification approach is less advantageous for the country. However, the higher investment costs associated with mitigating emissions from manufacturing will require adequate budgeting.

Moreover, assuming large-scale deployment of solar PV capacity but no other form of renewable or low carbon energy (such as wind or nuclear power), no major new energy efficiency measures in buildings, and no major shift in modes of transport, the pathway to achieving carbon neutrality in Qatar will rely very heavily on the deployment of Carbon Capture, Utilization, and Storage (CCUS). In the case of industry-led growth, the need for CCUS will be substantially higher than in the case of service-led growth, which also needs to be considered for planning purposes. Figure 3 compares the CCUS requirement for the NDC and Paris-compatible scenarios, in the case of the industry-led variant. It is apparent that, under the circumstances described above, the need for the CCUS is quite substantial even in the NDC scenario and grows several times more in the case of the Paris-compatible scenario.

Figure 3: CO₂ capture volumes (Mt/year) required in the NDC and Paris-compatible scenarios (manufacturing-led variant), broken down by source. Capture of CO₂ from both industrial processes and the atmosphere is considered.

Insights from Our Analysis on Long-term GHG Mitigation Policy and Infrastructure Planning

Our analysis shows that, in future updates of its NDC, Qatar will need to increase the level of ambition quite significantly if it wants to get onto a path towards achieving carbon neutrality. Moreover, Qatar will need to take decisive action across all sectors in a timely manner, as the transformation that the energy system will have to undergo is characterized by long lead times. Such lead times are dictated by the long lifetime of energy infrastructure, the significant changes that would be required in consumer behavior – for example, even introducing strong incentives, it could take several years for most new car buyers to decide to adopt electric vehicles – and the transformation of the policy and regulatory framework around all this.  The problem of long-term GHG mitigation in Qatar is compounded by the fact that the structure of the economy – and, consequently, the contribution that different sectors make to overall emissions – will evolve too, and it will do so in a way that is hard to predict. This makes GHG mitigation policymaking and infrastructure planning an even more complex exercise.

To deal with all this complexity in an effective manner, we recommend that policies to mitigate GHG emissions and diversify the economy are developed in a coordinated fashion, taking a long-term perspective and using all available tools to assess their system-wide impacts, including energy systems models such as Qatar TIMES. It is important that resources are allocated and new infrastructure is planned with the dual goals of mitigating GHG emissions and diversifying the economy in mind. Having a clear sense of the scale at which key technologies such as solar PV and CCUS will be needed, when and in which sector and process, allows planning their future deployment and that of related infrastructures, such as power transmission lines and CO₂ pipelines, in a more robust way. Moreover, it is also critical to recognize the importance that energy efficiency technologies and behavioral changes will have in supporting the achievement of these dual goals: these will not only make it more cost-effective to achieve GHG emission mitigation targets but will make Qatar’s economy more competitive as well. Lastly, clean technology, particularly CCUS, will be crucial to Qatar’s GHG mitigation efforts and is an area where Qatar could develop a competitive advantage. Therefore, promoting clean technology innovation in strategic areas such as CCUS also needs to be a strong focus of Qatar’s economic diversification policy.

Endnotes

¹ World Bank Group, “GDP (current US$) – Qatar,” 2022, https://data.worldbank.org/indicator/NY.GDP.MKTP.CD?locations=QA.

² International Energy Agency (IEA), “World Energy Outlook 2024,” https://iea.blob.core.windows.net/assets/04f06925-a5f4-443d-8f1a-6daa31305aee/WorldEnergyOutlook2024.pdf.

³ State of Qatar General Secretariat for Development Planning, Qatar National Vision 2030, (Doha, Qatar: Planning and Statsitics Authority, July, 2008), 32, https://www.psa.gov.qa/en/qnv1/Documents/QNV2030_English_v2.pdf.

⁴ State of Qatar Ministry of Municipality and Environment (MME), Nationally Determined Contribution (NDC), (Doha, Qatar: MME, August, 2021), https://www.mme.gov.qa/pdocs/cview?siteID=2&docID=23348&year=2021.

⁵ State of Qatar Ministry of Environment and Climate Change, Khuttat Al-’mal Al-Wataniyya Liltaghayyur Al-Manakhi 2030 [Qatar National Climate Change Action Plan – 2030], (Doha, Qatar: MECC, September, 2021), https://cdn-website-prod.azureedge.net/static/wp-content/uploads/2022/09/NCCAP-Consolidated_digital-ar2.pdf.

⁶ State of Qatar Planning and Statistics Authority (PSA), Third Qatar National Development Strategy 2024-2030, [Doha, Qatar: PSA, January 10, 2024], https://www.psa.gov.qa/en/nds1/nds3/Documents/QNDS3_EN.pdf.

⁷ TIMES (the name is an acronym for The Integrated MARKAL-EFOM System) is an open-source model generator that allows to build bottom-up, technology-rich models for local, national, multi-regional, or global energy systems and explore their dynamics over a long time-horizon. The model user provides estimates of end-use energy service demands (e.g., car road travel; residential lighting; heat requirements in industry; etc.), existing stocks of energy equipment in all sectors, characteristics of present and future technologies and primary energy sources. The model then determines how to supply the energy services at minimum total cost by making decisions on energy equipment investment and operation over the relevant time horizon.

⁸ Richard Loulou, Documentation for the TIMES model, Part I. Energy Technology Systems Analysis Programme, Documentation (Paris, France:  International Energy Agency, July, 2016), 9,  https://iea-etsap.org/docs/Documentation_for_the_TIMES_Model-Part-I_July-2016.pdf.