Global CO2 emissions from fossil fuels hit record high

Global CO2 emissions from fossil fuels hit record high

A recent proliferation of analysis on carbonisation or decarbonisation is taking a proportion of the write-ups worldwide. This article on Global CO2 emissions from fossil fuels will hit a record high this year is very detailed and is worth reading. Here it is below.

The featured image above is Credit: Robert Timoney / Alamy Stock Photo

Analysis: Global CO2 emissions from fossil fuels hit record high in 2022

 

Global carbon dioxide emissions from fossil fuels and cement have increased by 1.0% in 2022, new estimates suggest, hitting a new record high of 36.6bn tonnes of CO2 (GtCO2).

The estimates come from the 2022 Global Carbon Budget report by the Global Carbon Project. It finds that the increase in fossil emissions in 2022 has been primarily driven by a strong increase in oil emissions as global travel continues to recover from the Covid-19 pandemic. Coal and gas emissions grew more slowly, though both had record emissions in 2022.

Total global CO2 emissions – including land use and fossil CO2 – increased by approximately 0.8% in 2022, driven by a combination of steady land-use emissions between 2021 and 2022 and increasing fossil CO2 emissions. However, total CO2 emissions remain below their highs set in 2019 and have been relatively flat since 2015.

The 17th edition of the Global Carbon Budget, which is published today, also reveals:

    • The remaining carbon budget keeping warming below 1.5C will be gone in nine years, if emissions remain at current levels.
    • The increase in global fossil emissions in 2022 was driven by a small increase in US emissions and a larger increase in Indian and rest-of-the-world emissions. Chinese emissions saw a small decline, while EU emissions remained largely unchanged from 2021.
    • Most of the increase in emissions was from oil. Coal saw a slight increase in emissions – somewhat smaller than might have been expected given the global energy crisis – while gas emissions remained flat and emissions from cement saw a slight decline
    • Global CO2 concentrations set a new record of 417.2 parts per million (ppm), up 2.5ppm from 2021 levels. Atmospheric CO2 concentrations are now 51% above pre-industrial levels.
    • The effects of climate change have reduced the CO2 uptake of the ocean sink by around 4% and the land sink by around 17%.

Global emissions remain relatively stable

The Global Carbon Project estimates that global emissions of CO2 – including land use and fossil CO2 – will remain relatively high at 40.5GtCO2 in 2022, but still below their 2019 peak of 40.9GtCO2.

The authors note that these emissions “are approximately constant since 2015” due to a modest decline in land-use emissions balancing out modest increases in fossil CO2.

The 2022 report includes small revisions to emissions estimates from previous years. The new figures suggest that emissions in recent years have been a little higher than those reported in the 2021 budget. The largest changes are in land-use emissions, which account for approximately three quarters of the upward revision in the 2022 budget over the past decade.

The figure below shows 2022 (solid blue line), 2021(dashed blue) and 2020 (dashed red) global CO2 emissions estimates from the Global Carbon Project, along with the uncertainty (shaded area) of the new 2022 budget. The new 2022 budget lies roughly halfway between the old 2020 budget (which showed continued growth in emissions) and the 2021 budget (which showed flat emissions).

Annual total global CO2 emissions – from fossil and land-use change – between 1959 and 2022 for the 2020, 2021 and 2022 versions of the Global Carbon Project’s Global Carbon Budget, in billions of tonnes of CO2 per year (GtCO2). Shaded area shows the estimated one-sigma uncertainty for the 2022 budget. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.While the apparent flattening of emissions in the 2022 budget is better than a world of increasing emissions, this good news comes with a few important caveats.

First, to meet global climate targets of limiting warming to well-below 2C, emissions do not just need to stabilise. They need to decline rapidly, reaching net-zero emissions in the latter half of the 21st century. As long as emissions remain significantly above zero, the world will continue to warm.

Second, the uncertainties surrounding land-use emissions remain quite high. Therefore, it is hard to rule out a scenario where these emissions have actually continued to increase over the past decade. Further research and data collection is needed to provide a better picture of trends in global land-use emissions in recent years.

The figure below breaks down global emissions (black line) in the 2022 budget into fossil (grey) and land-use (yellow) components. Fossil CO2 emissions represent the bulk of total global emissions in recent years, accounting for approximately 91% of emissions in 2022 (compared to 9% for land-use). This represents a large change from the first half of the 20th century, when land-use emissions were approximately the same as fossil emissions.

Global CO2 emissions (black line) separated out into from fossil (grey) and land-use change (yellow) components between 1959 and 2022 from the 2022 Global Carbon Budget. Note that fossil CO2 emissions are inclusive of the cement carbonation sink. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.Global emissions from land-use are expected to be approximately 3.9GtCO2 in 2022. This is a slight decline from 2021 emissions, but the large uncertainty in the estimate makes it difficult to be confident in year-to-year changes.

Three countries – Indonesia, Brazil and the Democratic Republic of the Congo – are responsible for approximately 60% of global land-use emissions. Land-use change emissions over time from those three countries (along with their estimated uncertainties) are shown in the figure below.

Annual CO2 emissions from land-use change in Indonesia (blue line), Brazil (yellow), and the Democratic Republic of the Congo (red) from 1959 through 2021.
Annual CO2 emissions from land-use change in Indonesia (blue line), Brazil (yellow), and the Democratic Republic of the Congo (red) from 1959 through 2021. Figure from the Global Carbon Project.

The Global Carbon Project finds that approximately half of the global emissions from deforestation (~6.7GtCO2 per year) are counterbalanced by reforestation (~3.5GtCO2 per year), while peat drainage and fires make a smaller contribution to emissions of around 0.8GtCO2.

The apparent decline in the net land-use emissions is likely driven by growing removals from reforestation, the report says.

Modest increase in fossil emissions despite declines in China

Despite a relatively modest increase of 1.0% in 2022 (with an uncertainty range of 0.1% to 1.9%), global fossil CO2 emissions will likely surpass the pre-pandemic high in 2019 to set a new record at 36.6GtCO2.

This represents a continued recovery in global emissions from the declines during the Covid-19 pandemic in 2020, as well as a failure of hopes that a “green recovery” could start taking emissions on a downward trend.

However, despite continued increases in fossil CO2 emissions, the rate of growth has slowed noticeably over the past decade.

The Global Carbon Project points out that “the latest data confirm that the rate of increase in fossil CO2 emissions has slowed, from +3% per year during the 2000s to about +0.5% per year in the past decade”.

The figure below shows global CO2 emissions from fossil fuels, divided into emissions from China (red shading), India (yellow), the US (bright blue), EU (dark blue) and the remainder of the world (grey).

Annual fossil CO2 emissions for major emitters and rest-of-the-world from 1959-2022, excluding the cement carbonation sink as national-level values are not available. Note that 2022 numbers are preliminary estimates. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.The US will likely see emissions increase by around 1.5% in 2022, driven by a strong rise in gas emissions (+4.7%), a modest rise in oil emissions (+2%) and a strong decline in coal emissions (-4.6%).

The European Union (EU) is likely to see a 0.8% decline in emissions in 2022, driven by lower gas use associated with Russia’s attack on Ukraine and the resulting global energy market disruption.

EU demand for gas may be down by as much as 10% this year, while emissions from coal are expected to increase by close to 7% as it substitutes for high-cost gas.

In China, emissions declined by around 0.9% in 2022, primarily driven by continued lockdowns associated with Covid-19 that slowed both industrial activity and economic growth.

Chinese emissions show declines in emissions from oil (-2.8%), gas (-1.1%) and cement production (-7%), only showing a slight increase in emissions from coal (+0.1%). The Global Carbon Project notes that cement, in particular, played a large role in declining Chinese emissions due to a slowdown in the property market. (See Carbon Brief’s recent detailed analysis by Lauri Myllyvirta of China’s Q3 2022 emissions.)

Indian emissions are projected to increase by 6% in 2022, mostly due to a large (+5%) increase in coal emissions as well as higher (+10%) oil use as the transport sector recovers from pandemic declines.

The rest of the world (including international aviation and shipping) is projected to see a 1.7% increase in emissions, driven by a rise in coal (+1.6%), oil (+3.1%) and cement (+3%). Gas emissions in the rest of the world are projected to decline very slightly in 2022 (-0.1%).

The chart below shows total emissions for each year between 2019 and 2022, as well as the contributions from major emitters and the rest of the world countries. Annual emissions for 2019, 2020, 2021 and the estimates for 2022 are shown by the black bars. The coloured bars show the change in emissions between each set of years, broken down by country. Negative values show reductions in emissions, while positive values reflect emission increases.

Annual global CO2 emissions from fossil fuels (black bars) and drivers of changes between years by fuel (coloured bars), excluding the cement carbonation sink. Negative values indicate reductions in emissions. Note that the y-axis does not start at zero. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.Global fossil CO2 emissions are now approximately 0.9% higher than in 2019. While emissions in the US, EU and the rest of the world remain below pre-pandemic levels, emissions in China are now 5.8% above 2019 levels and are 9.3% above 2019 levels in India.

The figure below shows how global and national emissions in the years 2020 (blue bars), 2021 (yellow) and 2022 (red) compare to 2019 emissions.

Percent change in CO2 between 2019 and 2020, 2021 and 2022 for the world as a whole and for major emitting countries/regions. Note that global emissions are inclusive of the cement carbonation sink, but national inventories are not. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.The Global Carbon Project also notes that emissions declined over the past decade (2012-21) in 24 nations despite continued domestic economic growth, bringing hope in long-term decoupling of CO2 emissions and the economy.

Belgium Croatia Czech Republic Denmark
Estonia Finland France Germany
Hong Kong Israel Italy Japan
Luxembourg Malta Mexico Netherlands
Norway Singapore Slovenia Sweden
Switzerland United Kingdom USA Uruguay

The 24 nations where emissions have declined over 2012-21. Source: Global Carbon Project.These 24 countries represent around a quarter of global CO2 emissions. Fifteen of these countries also had significant declines in consumption-based emissions, which account for emissions embodied in the import and export of goods.

Coal and gas hits record high emissions

Global fossil fuel emissions primarily result from the combustion of coal, oil and gas.

Coal is responsible for more emissions than any other fossil fuel, representing approximately 40% of global fossil CO2 emissions in 2022. Oil is the second largest contributor at 32% of fossil CO2, while gas and cement production round out the pack at 21% and 4%, respectively.

These percentages reflect both the amount of each fossil fuel consumed globally, but also differences in CO2 intensities. Coal results in the most CO2 emitted per unit of heat or energy produced, followed by oil and gas.

The figure below shows global CO2 emissions from different fuels over time. While coal emissions (grey shading) increased rapidly in the mid-2000s to support the unprecedented growth of the Chinese economy, it has largely plateaued since 2013. However, coal use increased significantly in 2021 and modestly in 2022, causing 2022 to slightly edge out 2014 and set a new record of 15.1GtCO2.

By contrast, gas (blue) and oil (red) emissions have steadily grown prior to the pandemic. Gas rapidly recovered from Covid-19 disruptions, setting new all-time records for emissions in both 2021 and 2022. Oil emissions, by contrast, still remain below pre-pandemic 2019 highs as travel has not fully recovered from its severe drop during the pandemic.

Annual CO2 emissions by fossil fuel from 1959-2022, excluding the cement carbonation sink. Note that 2022 numbers are preliminary estimates. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.Global coal emissions are projected to rise by around 1% in 2022, relative to 2021 levels, driven primarily by increases in India, the EU and the rest of the world, despite continued declines in coal use in the US.

Oil emissions are projected to rise by around 2.2% in 2022, compared to 2021. This has been caused by continued recovery of the transport sector from pandemic-related disruptions, though it will remain below 2019 levels.

Gas emissions are expected to decline slightly by around 0.2%, driven primarily by large declines in gas use in the EU associated with high energy costs due to the war in Ukraine.

Cement emissions are projected to decrease by around 1.6%, caused largely by declines in Chinese cement production for construction.

The total emissions for each year between 2019 and 2022, as well as the change in emissions for each fuel between years, are shown in the figure below.

Annual global CO2 emissions from fossil fuels (black bars) and drivers of changes between years by fuel (coloured bars), excluding the cement carbonation sink. Negative values indicate reductions in emissions. Note that the y-axis does not start at zero. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.

The global carbon ‘budget’

Every year, the Global Carbon Project provides an estimate of the “global carbon budget”.

This budget is based on estimates of the release of CO2 through human activity and its uptake by the oceans and land, with the remainder adding to atmospheric concentrations of this greenhouse gas.

(This differs from the commonly used term “remaining carbon budget”, referring to the amount of CO2 that can still be released in the future while keeping warming below global limits of 1.5 or 2C.)

The most recent budget, including estimated values for 2022, is shown in the figure below. Values above zero represent anthropogenic sources of CO2 – from fossil fuels and cement (grey shading) and land use (yellow) – while values below zero represent the growth in atmospheric CO2 (bright blue) and the ocean (dark blue) and land (green) “carbon sinks” that remove CO2 from the atmosphere.

In short, any CO2 emissions that are not absorbed by the oceans or land vegetation will accumulate in the atmosphere. While observations of both emissions and carbon sinks have improved over time, the budget does not fully balance every year due to remaining uncertainties, particularly in sinks. On average, the budget imbalance is close to zero, but some individual years may have more emissions than sinks or vice versa.

Annual global carbon budget of sources and sinks from 1959-2022. Fossil CO2 emissions include the cement carbonation sink. 2022 numbers are preliminary estimates. Data from the Global Carbon Project; chart by Carbon Brief using Highcharts.The atmospheric CO2 concentration increased 2.5 parts per million (ppm) in 2021 and is projected to increase by around 2.5ppm in 2022, resulting in global atmospheric concentrations of 417.2ppm on average for the year.

This represents an increase in atmospheric CO2 of around 51%, relative to pre-industrial levels.

As the chart below illustrates, the fraction of CO2 emissions that end up in the atmosphere varies from year to year. The grey dashed lines shows that around 47% of total CO2 emissions have remained in the atmosphere each year over the past decade, with the remainder being taken up by ocean and land sinks.

Fraction of anthropogenic CO2 emissions accumulating in the atmosphere from 1959 through 2021.
Fraction of anthropogenic CO2 emissions accumulating in the atmosphere from 1959 through 2021. Figure from the Global Carbon Project.

The ocean carbon sink grew rapidly over the past two decades, absorbing approximately 26% of global emissions in 2022. The land sink has also continued to increase and is projected to absorb around 31% of global emissions in 2022. These sinks are expected to grow as CO2 emissions increase, as the amount of CO2 absorbed by both the ocean and land scales proportional to atmospheric concentrations.

The new Global Carbon Budget report warns that climate change has already reduced the CO2 uptake of the ocean sink by around 4% and the land sink by around 17%, compared to a theoretical world without climate change.

If emissions continue to increase, the portion of global emissions remaining in the atmosphere – that is, the airborne fraction – will grow, making the amount of climate change the world experiences worse than it otherwise would be.

.

.

 

Exploitation of Phosphate and Iron in Algeria

Exploitation of Phosphate and Iron in Algeria

In the face of new global changes, what is the exploitation of phosphate and iron in Algeria?  University professor, international expert Dr Abderrahmane MEBTOUL elaborates.


At the last Council of Ministers, debates turned to the recovery of iron and phosphate deposits appropriateness. This is not novelty; as a young advisor to the Minister and Industry and Energy between 1974/1977, we discussed such projects within the framework of many studies. Furthermore, since then, how have all these studies in both foreign exchange and Dinars with no conclusive results cost? 

The commercialisation of both iron and raw phosphate and derivatives depends as much on the strategy of a few global firms as on internal strategic management. Other factors like the cost of operations as well as the growth of the world economy play an essential role here. 

Exploitation of Phosphate and Iron in Algeria

The case of phosphate– As much as for iron, or energy-intensive cement units, the essential input is natural gas having to make arbitrage between the transfer price on the international market and the transfer to the units to generate a high added value. So the cost price of a tonne of ammonia at 4 Dollars/mmBTU would be 114 Euros per tonne, and on the contrary at 7 Dollars, we will have 200 Euros per tonne with a decrease in the last ten years of 10/15% depending on the geographical area. The price of derivatives is wildly fluctuating the urea fertiliser having been quoted between July and September at about 260 Euros per tonne. The increase in the world’s population and the demand for food are a determining factor in the growth of the phosphate market. Competition in the global market is very intense and relatively integrated, with the presence of limited vital players who get a significant share of global revenues. Key speakers include Russia’s Eurochem Group AG and PJSC PhosAgro; Canadian Agrium Inc. and Potash Corp. of Saskatchewan Inc. Norwegian Yara International ASA; C.F. Industries Holdings Inc. and Mosaik Co.; India’s Coromandel International Ltd.; Moroccan giant OCP S.A. and Israel Chemicals Ltd. According to a U.S. geological survey on phosphate rock 2019, mining production (+ réserves) en 2018 thousand tonnes is distributed as U.S. réserves 27,000-production (1,000,000) – Algéria réserves 1,300- production (2,200,000); the Global Total réserves being 70,000 (70,000,000).  

The price per tonne of raw phosphate fluctuates; April 2020 $72.50 per tonne, in March 71.88, in April $70.75, in May at $72.90, and in June/July 2020 $75,000 per tonne, having been rated in October 2019 at $77.50 for sheet metal, in January 2020 at $72.50 per tonne. According to the World Bank, the general and medium-term trend in phosphate prices remains downward, and crude phosphate would trade in 2020 at around US$80-85 per metric ton, DAP around US$377.5 per metric ton and TSP at nearly US$300 per metric ton. According to the global rating agency, phosphate rock prices remained on average at $100 per tonne (at no charge onboard) in 2019/2020 and prices per tonne of phosphate rock (at no charge onboard) remained at $110 in the long run. Thus, if Algeria exports three million tonnes of raw phosphate annually at an average price of $100, a very optimistic assumption about world prices, at constant prices 2020, for 30 million Tonnes, it would get three billion Dollars and less than 2.5 billion Dollars at current prices. It must be said that in this sector, the expenses are very high (depreciation and salary expenses in particular) a minimum of 40%, thus making the net profit to about 1.8 billion Dollars for a price of $100 and less than 1.4 billion dollars for a price of $70. In the event of an association with an international partner, the net profit remaining for Algeria would be slightly more than 900/700 million dollars for both scenarios. We are far from profits in the field of hydrocarbons. To increase net profit, it is, therefore, necessary to embark on highly capital-intensive processing units with massive investments and medium-term profitability with the export of noble products, in the E.U., fertiliser/urea sold at more than 350 Euros per tonne in 2014. It was rated on an annual average in 2017 at 270 Euros per tonne. In April 2018, it was at 260 Dollars and at the beginning of May 220 to 250 Dollars per metric ton. In general, prices are very volatile, assuming perfect knowledge of the international stock market in order to avoid large losses in the event of low forecasts. Also, for a sizeable exportable quantity, this requires for Algeria, hefty investments and profitability in the medium term not until 2023/2025 if the project is in operation in 2020. Moreover, for a sizeable exportable quantity, this requires a partnership with international firms.

The Case of Iron –  For September 20, 2020, iron is priced at 90 Euros per tonne, stainless steel 1921 Euros per tonne, steel 4520 Euros per tonne, aluminium 1364 Euros per tonne, scrap 148 Euros per tonne, zinc 1817 Euros per tonne, copper 5289 Euros per tonne, lead 1509 Euros per tonne.

As proof, in April 2019, the price of stainless steel was at an average of 2,598 Euros per tonne, rose by 2.8% year-on-year with stabilisation in May 2020 to 2600 Euros per tonne, being in high demand on the world market, depending on its destination and its applications, classified in four categories. Aluminium was at 1,460 Euros per tonne, down 9.4% month-on-month and 20.9%. The price of lead was at $1,658 per tonne, down 4.4% on a month-on-month basis and 14.5% year-on-year. The price of zinc was at 1,903 Euros per tonne, stable over one month and down 35.1% year-on-year. Furthermore, in November 2019, the price of steel was at $5,400 per tonne, down 23.6% year-on-year, and in May 2020, 4,740 Euros due to the coronavirus outbreak. In April 2020, the price of iron stood at $85 per tonne, down 4.7% month-on-month and 9.6%. International agencies estimate the world’s iron reserves at between 2018/2019, 85,000 million tonnes (M.T.). Australia leads with 23,000 MT, followed by Russia 14,000 MT, Brazil 12,000 MT, China 7,200 MT, India 5,200 MT, United States 3,500 MT, Venezuela 2,400 MT, Ukraine 2,300 MT, Canada 2,300 MT and Sweden 2,200 MT, Algeria according to Algerian reserves data would be about 3000 Tonnes but with exploitable deposits, estimated between 1,500 and 2,000 MT. The main iron ore producing countries are Australia: 39.8% (with 879 MT)- Brazil: 19.8% (with 436 MT) – China: 8.6% (with 191 MT) – India: 7% (with 154 MT) – Russia: 4.6% (with 101 MT) – Ukraine: 3.3% (with 73 MT) – South Africa: 3,2% (with 69 MT) – Iran: 2.6% (with 57 T – Canada: 2.2% (with 49 MT) – United States: 2% (with 44 MT) – Sweden: 1.2% (with 27 MT) – Kazakhstan: 0.6% (with 13 MT) – Other countries: 5.1% (with 113 MT) (Source: Natural Resources Canada). Steel is a fundamental product to our way of life and is essential for economic growth, the 10 largest producing countries between 2017/2018 are: China: 831,728,000 Tonnes, Japan: 104,661,000 T India: 101,455,000 T United States: 81,612,000 T Russia: 71,491,000 T   South Korea: 71,030 T, Germany: 43,297,000 T Turkey: 37,524,000 T,  Brazil: 34,365,000 T and Italy: 24,068,000 T. In April  2020, copper was $5,058 per tonne, down 21.4% year-on-year. Evolution has not fundamentally changed since 2018. At a favourable price of $100 per tonne crude iron, for export of 30 million tonnes, we will have gross revenue of $3 billion. However, with this amount and more than 50% of expenses (the operating costs are very high), we are left with a net of the remaining $1.5 billion. This amount is to be shared with the foreign partner that in case of 30 million T, would be less than 800 million Dollars. This is because the exploitation of Gara Djebilet’s iron will require large investments in power plants, transmission networks, rational use of water, distribution networks that are lacking because of the remoteness of the sources of supply while avoiding the deterioration of the environment because the units are very polluting. Therefore, as with phosphate, only the transformation into noble products can provide greater added value for export. Because of the oligopolistic structure of the mining industry, at the global level, the only solution, if we want to export these noble products, is a win-win partnership with the reputable firms that control the segments of the international market that will not accept the restrictive 49/51% rule with bureaucratic burdens, with decisions taking place in real-time at the international trade level.

It is a question of avoiding the mistakes of the past by serious evaluations in terms of profitability and without a solid partnership, it is futile to penetrate the global market let alone the mining sector controlled by some international firms.

In the case of gold mines, let us avoid the unfortunate experience, with a massive liability, with the  Australian company, Gold Mining of Algeria (GMA)  where reserves of 173 tons have not increased one iota since 2007. All this raises the problem of mastery of strategic management. Like this drift of car assembly where we have now seen that it was a set for currency transfer traffic, going to predictable bankruptcies, after having perceived considerable financial and fiscal benefits. Like this utopia of dozens of cement complexes where we are currently witnessing the underuse of production capacity, the risk of plants cooling if storage is long-lasting, would increase the costs. The situation would result in unusable products for construction, except for those with points of support in Africa through their subsidiaries; otherwise, it would be difficult for other units to export, where, contrary to some discourse not based on any serious market research, market shares are already taken with many complexes being realised at the level of the Mediterranean basin. For this case, new construction methods worldwide are being saved from concrete round, cement and energy and as in Germany, is to use concrete to build roads often returning cheaper than imported bitumen. Algeria needs a strategic vision in which industrial policy must fit, in order to adapt to the new global sectors driven by perpetual innovation. Let us avoid utopias: Algeria will continue for many years to depend on hydrocarbons, with other raw materials making just an average profit to invest in democratic institutions, education, digital and energy transition. No country in the world that has relied solely on raw materials has succeeded in its development. Since the world is a world and this proves true with the fourth global economic revolution 2020/2030/2040 the prosperity of different civilisations has always rested on good governance, work and theoretical and applied research, a country without its elite being like a soulless body.  

ademmebtoul@gmail.com

Second Great Recession highly unlikely: Report

Second Great Recession highly unlikely: Report


At its December 2019 12th edition in Dubai, the Arab Strategy Forum affirmed that a Second Great Recession highly unlikely: Report. This gathering run under the theme of ‘Forecasting the Next Decade 2020-2030’ concluded that after all, it’s business as usual with no ad-hoc surprises at all.


DUBAI — The global economy is not likely to witness another Great Recession-style collapse, despite several indicators to the contrary in recent months, according to a newly-published report by the Arab Strategy Forum in partnership with Good Judgement Inc., the world’s leading geopolitical and economic forecasting institution.

Global Growth



Titled ‘11 Questions for the Next Decade’, the wide-ranging and far-reaching findings and themes of the report, will be discussed in depth by former ministers, decision-makers and politico-economic thought leaders, including former US Vice President Dick Cheney, at the 12th edition of the annual Arab Strategy Forum in Dubai on Dec. 9 at the Ritz Carlton, Dubai International Financial Centre.

The ‘state of the world’ style report– tackles 11 vital mega-trends and questions that will define the global social, political and economic landscape in the 10 years ahead. Unlike previous editions, this year’s report looks to predict the future leading up to 2030 – a crucial time for many Middle Eastern economies whose visions are set to come to fruition by that year.

‘11 Questions for the Next Decade’ analyses 11 major political and macro-economic situations – or ‘mega-trends’ as the report terms them – and their likely consequences to determine where the world is headed, come 2030. Topics covered range from the global recession to the fragmentation of superpowers and Brexit to the Iranian regime and America’s anticipated fall from dominance, to the emerging US-China tech war and the prospective ‘splinternet’, water scarcity in the region and the growing crop of gas fields in the East Mediterranean region.

Qualitative and quantitative feedback and data was garnered for the report’s 11 sections following rounds of discussions on Good Judgement’s online platform, with a series of ‘ignition questions’ posed to ‘Superforecasters’ – 150 experts from diverse backgrounds, such as political scientists, economics researchers, scholars, and subject-matter experts in professions ranging from finance to intelligence, to management and medicine. The ignition questions for each topic seek answers to the issues at the heart of major economic change in the years ahead. The Superforecasters’ answers serve as indicators and monitors of predicted change based on the outlined global mega-trends.

Mohammad Abdullah Al Gergawi, President of the Arab Strategy Forum, said: “The report provides answers to the most pressing questions today, these outcomes will have a significant impact on regional and global policies. It explores a range of scenarios that will support the decision-makers of today and tomorrow to guide progress and prosperity for generations to come.

“Unlike previous years, this year’s reports predict the future of the region and the world over the next decade in the context of the current events that will have a major impact. They provide an up-to-date analysis of the increasing need for decision-makers to understand future scenarios on which to base their plans.”

As the world’s first platform for forecasting geopolitical and economic events, both regionally and globally, and targeting the most influential leaders and decision-makers in the Arab world and beyond, the Arab Strategy Forum will provide invaluable insights from the world’s foremost thought leaders on the crucial topics addressed in the report and elsewhere. Below is a list of the mega-trends, their related ignition questions, and a brief summary of the findings from the ‘11 Questions for the Next Decade’ report.

• Will the world avoid another Great Recession through 2030?

Based on current global economic performance records and data from the last 100 years of economic cycles, the report sought to find out whether the next recession will be a repeat of the Global Financial Crisis / Great Recession (2007-2009) or whether we are likely to see a return to an earlier pattern of a brief economic downturn followed by resurgent and steady growth.

The report’s Superforecasters said there is a 76 per cent chance that the world will not undergo another global financial crisis similar to the one in 2007 in the next decade, citing central banks’ improved technological ability to adapt and steer skidding economies out of difficulty. In their analysis of the last 100 years’ of business cycles, the Superforecasters concluded that the Great Recession was an outlier rather than the expected norm.

• Will China, Russia, or a G7 country leave the World Trade Organization by 2030?

Considering the emerging tendency of two, or a group of countries, setting out to establish new regional trading systems, such as the US-backed Trans-Pacific Partnership or the Russian-backed European-Asian Economic Union, the report noted that such new trading entities pose a populist threat to long-established global trading systems.

It goes on to rule out the possibility of China, Russia or one of the G7 countries withdrawing from the World Trade Organization by 2030, as doing so would cost more than the gains are likely to be worth in the long run. However, considering the relentless pressure on the WTO in the face of populism, the post-World War II trading body faces a big challenge in maintaining its status and platform in the next 10 years.

• Will China, Russia, the US, or the EU lose 0.5% or more of its territory or population before 2030?

After the fall of empires in the 20th century, the question lingers over whether countries and blocs will fragment in the 21st century. The Superforecasters anticipate a 5% likelihood that the EU will lose 0.5% or more of its territory or population before 2030, a 2% likelihood that Russia or China will, and 1% likelihood that the United States will. Though the uncertainties and problems hanging over the United Kingdom are mainly considered ‘peaceful’, market volatility and decreased consumer confidence could have an impact on the EU’s territory and population in the next decade. The Superforecasters also said that a split or fragmentation in China or Russia, will only occur through a violent disruption.

• Will the US economy be ranked 1st, 2nd or 3rd in 2030?

Despite being the largest economy in the world since the beginning of the 20th century, the US’s position as the world’s number one is under threat from the formation of a multipolar system and the emergence of several countries and regions that contribute today to the international community.

The report claims that there is a 65 per cent chance that the US will still be the world’s largest economy a decade from now, and a 33 per cent likelihood it will be second, after China.

The most prominent countries competing with the United States, in terms of nominal GDP, the report adds, are China, the European Union bloc, and India. And, as the US economy shrinks to the size of other countries, it will be less able to influence other nations of the world.

• Will OPEC’s share of global crude oil production remain above 33% in 2030?

The Organization of Petroleum Exporting Countries (OPEC) currently holds a share of about 40 per cent of the world’s crude oil production. But the future of the organization and its domination is likely to be called into question, with the emergence of hydraulic fracturing and new oil discoveries outside the Middle East and North Africa.

There is a 90 per cent chance that OPEC will supply more than a third of the world’s crude oil supply in 2030. However, its fiscal revenue is likely to result in a decline in its production. Given its resilience and adaptation to multiple challenges in past decades, including wars, revolutions and global recessions, the organization is viable in a carbon-free world, but new and innovative adaptation measures are needed later, the report pointed out.

Cyberattacks

• Will a cyberattack shut down a major infrastructure system in a G7 country for 1+ days before 2030?

The Superforecasters see a 66 per cent likelihood of a cyberattack shutting down a major infrastructure system in a G7 country for at least one day before 2030. Outside of the G7, there are countries perhaps more vulnerable. “It will be worth monitoring these situations as harbingers of larger-scale attacks elsewhere. For instance, in the Philippines, government hearings recently raised concerns that China could remotely ‘turn off power’ in the country,” the report noted.

• Will Lebanon be involved in a major military conflict by 2030?

After the discovery of the East Mediterranean gas fields off the coast of Cyprus, Lebanon and Egypt, questions have arisen over whether the East Mediterranean gas fields will enhance the stability of the region or pose a security risk. The report said there’s a risk that offshore gas fields could escalate tensions between nations over disputed drilling rights, but potential energy revenues are worthwhile, and will lead to a strengthening of the region’s economic stability, as well as the internal stability of the concerned countries and reduce risks of war.

• Will water scarcity cause a deadly conflict between Jordan & Israel, Egypt & Ethiopia, or Turkey & Iraq before 2030?

Water scarcity is unlikely to drive any regional conflict in the MENA region over the next decade, the report stated. There is a small, 1 per cent chance of a conflict on the flow of water between Jordan and Israel, according to the Superforecasters. Meanwhile, the chance of a conflict between Egypt and Ethiopia or Turkey and Iraq during the next decade will reach 3per cent.

• China-US tech war and peace

Will a ‘splinternet’ – with one Internet led by the US and one led by China – be avoided as of 2030?

The Superforecasters offer an 80 per cent chance that a ‘splinternet’ – one Internet led by the United States and one led by China — will not be in place by 2030. “Information will continue to flow across global networks, even as other types of political or ideological information will be blocked,” the report pointed out.

Iraq’s Dire Fiscal Crisis

Iraq’s Dire Fiscal Crisis

Kirk H. Sowell describes in Carnegie Endowment for International Peace, how a newly appointed government finds it challenging to make ends meet through Iraq’s Dire Fiscal Crisis. In effect, like most oil-exporting countries of the MENA region, Iraq has to come to terms with the changing fundamentals of the world economy as aggravated by the pandemic.

Iraq’s Dire Fiscal Crisis


2 November 2020

Iraq’s Dire Fiscal Crisis

Iraq’s Prime Minister inherited a series of fiscal crises. As his interim government struggles to avert a complete economic collapse, austerity measures may come at the expense of much-needed reforms.

Since taking office, Iraqi Prime Minister Mustafa al-Kadhimi has faced a series of fiscal and security crises amid collapsing public services and protests. The collapse in global oil prices due to the coronavirus pandemic and the Saudi-Russia oil price war caused Iraq to face an internal solvency crisis as early as June. This fiscal crisis has short and long-term implications. In the short-term, Baghdad continuously struggles to pay public sector salaries, which required the state to borrow from the Central Bank over the summer. With low oil revenue, the state’s monthly profits are covering just over 50 percent of its expenses. In the longer-term, Iraq faces a looming macro-fiscal state collapse—potentially within the next year.

The state is struggling to cover its monthly expenses. Over successive governments, the size of the public sector has grown to the point that Iraq needs to spend more than its total revenue on basic payments—public sector salaries, pensions, food aid, and welfare—to keep a majority of Iraq’s population out of destitution. In 2019, oil revenue averaged $6.5 million per month, and with modest non-oil revenues (largely customs, well less than $1 billion per month), this covered operational expenses with a small amount left over for capital spending. Since the recovery of oil prices after the March collapse, Iraq’s monthly oil revenues have averaged just over $3 billion/month, hitting a high of $3.52 billion in August. In testimony before parliament in September, Finance Minister Ali Allawi revealed[1] that with revenues at these levels, the government was still borrowing 3.5 trillion Iraqi Dinars (IQD) — just over $3 billion—from the Central Bank each month.

On October 10, as Iraq’s cash crunch became more acute, Allawi explained that state employee compensation rose from 20 percent of oil revenues in 2005 to 120 percent today. To help the public understand why the government of such an oil-rich country was broke, he explained that a government of this size should have at least $15 to 20 billion in funds to pay monthly expenses on an ongoing basis, but when this government took office, only about $1 billion was available.[2] This is in part due to weak revenues, the result of low oil prices and Iraq’s adherence to OPEC’s limitations on oil exports. In the past, Iraq’s oil exports have reached 3.5 million barrels per day (bpd), yet they decreased to 2.5 million bpd in recent months. Prominent figures, including former oil minister Ibrahim Bahr al-Ulum, have argued in favor of leaving the OPEC agreement unilaterally. Yet Allawi, speaking before Parliament, explained that while he agreed that OPEC’s quota formula was unfair, Iraq needs the OPEC agreement to keep oil prices from collapsing. More recently, according to the Iraq Oil Report, the government has signaled that it may try to thread the needle by increasing exports by 250,000 barrels per day to satisfy critics—an amount above its quota, but still about 750,000 barrels per day below peak production, and thus hopefully too small an increase to incur Saudi retaliation.

Iraq’s monthly oil revenue to collapsed from $6.2 billion in January to just $1.4 billion in April. The figure recovered to $2.9 billion in May and has gradually improved since, but in August was still just $3.5 billion. Since the government only had about $3 billion in expendable reserves in May, it became clear that Iraq could not pay state employees in June. Salaries over the summer were paid as money became available. As late as July 28, the prime minister’s spokesman admitted that employees at the Culture & Antiquities Ministry (apparently the lowest priority), were still waiting to be paid.

The government saw this crisis coming and began preparing the public for austerity. Finance Minister Allawi made multiple public appearancesdescribing Iraq’s situation as dire and arguing for radical reform. In particular, he predicted that the government, while protecting base salaries, would make large cuts to employee benefits and other costs. On June 9, the cabinet followed through when it voted to implement a series of austerity measures, including cutting benefits, cutting unessential spending, and capping income from “double-salary” payments.[3] Kadhimi’s advisor Hisham Daoud described the new policies as “not enough but only a start” toward reform.

Kadhimi, with no electoral base or political base of his own, has faced the fiscal crisis with a weak hand. This became clear when Parliament overwhelmingly rejected the government’s austerity policies on June 10, one day later. Even MPs friendly to the government described the government’s measures as premature, suggesting that they should try to raise revenue through customs first. Parliament eventually passed a borrowing law on June 24 to allow the government to borrow just enough to make basic payments. This law, however, prohibited the government from cutting benefits. Previously, the cabinet had the authority to cut benefits because, unlike salaries set by law, benefits were set by previous cabinet decrees. Thus, Parliament made the long-term problem worse.

In July, protests resurged in Baghdad as a result of the fiscal crisis. The shortage of money caused Iraq’s electricity shortage to worsen dramatically. Outgoing Electricity Minister Luay al-Khatteeb attributed the decline to two factors: lack of maintenance and the suspension of planned electricity projects.

The government has a few possible, but politically difficult, fixes at its disposal. They could cut the subsidy of roughly $1 billion per month to private electricity consumption, which exists because the ministry only collects a fraction of consumer payments. Finance Minister Allawi pointed out that “people don’t pay their electricity bills” and that “95 percent” of consumption costs was absorbed by the state, asserting that “electricity is not a constitutional right.”[4] Yet such an effort will recall former prime minister Haider al-Abadi’s experience trying to extract electricity payments in 2017, which precipitated a strong protest movement. So far, Kadhimi has shown no sign of pushing the issue. His published comments during a cabinet meeting devoted to the electricity issue focused on “reducing bureaucracy” and improving maintenance, sidestepping the fact that maintenance workers have to be paid.

Iraq’s fiscal crisis comes on the heels of the political crisis of the outgoing government, which left the country without a budget for most of 2020. In such cases, Iraqi law allows the government to spend one twelfth of the previous year’s actual spending each month. Since this year’s revenues have been low, it never had the money to spend that much and simply spent what it had on basic payments. In September, the government released a budget for 2020 and the planned deficit was large—well over 100 percent—so as with past budgets much of the deficit will likely not be spent. The total anticipated revenues are 67.4 trillion dinars, or $57 billion, compared with proposed expenditures of 148.6 trillion dinars, or  $125.7 billion. Oil revenue in 2019 was $78.5 billion yet is projected to be just $49.3 billion for 2020. The government withdrew the bill just two days after it arrived in parliament.

In September the government ran out of money, having used up the borrowing authority from the June bill.[5] Given the population’s overwhelming dependence on state salaries, this brought the short-term financial problems to the fore. Furthermore, Parliament refused to authorize the new borrowing authority Allawi sought because the government had not submitted a “reform plan.” Thus in early October the government released a “White Paper” reform plan. The plan draws a broad and long path to reform that does not directly address the immediate crisis, except to the extent that its publication formally satisfies Parliament’s precondition for new borrowing.

An important part of Allawi’s efforts was his advocacy of Iraq accepting an International Monetary Fund “Stand-By Agreement” (SBA) which might be the only way to prevent a fiscal collapse next year. The agreement would also require spending cuts that parliament has already rejected. Allawi stressed that the IMF would not require cuts to programs protecting the poor, but rather to public sector compensation that, in Allawi’s view, Iraq needed to cut anyway.[6]

This set the stage for a new debacle as the government then sent a new borrowing law to Parliament only to condemn it. A member of Parliament on the Finance Committee criticized the figures in the bill as irresponsible.[7] Given the parliament’s role in aggravating the crisis, this was grandstanding. The looming parliamentary elections, due no later than 2022 and possibly earlier, are driving the political theater. Parliament will presumably pass an amended version of the government’s borrowing bill to allow the government to pay salaries. In the meantime, with salaries being paid late, disposable income is squeezed, further damaging an already weak economy. But Iraq could face a much worse scenario in 2021, as the IMF’s updated forecast for Brent oil prices projects $46.70 per barrel. Iraq’s Central Bank, which rescued the government over the summer, relies on a steady flow of dollars from oil revenues and given current prices range from $40 to $45, reserves are gradually declining. According to financial analyst Ahmed al-Tabaqchali, at current oil prices the Central Bank can continue to print money to fund the government “for about eight or nine months.”[8]  

In terms of immediate steps, at a minimum, a devaluation of the Iraqi dinar (long pegged at 1,182 to the dollar) seems likely in 2021. This would relieve some pressure on the Central Bank and make the government’s expenses cheaper (since its income is in dollars), but it would also drive up inflation over time. The bigger threat is that by mid-to-late 2021, the Central Bank will no longer be able to support the government, forcing austerity through non-payment of operational expenses, including salaries.

It is clear that the government needed to adopt a policy of cutting public sector expenses while increasing its capital investment in agriculture and industry and devoting more resources to education and health. Kadhimi’s reform measures in June were too little, too late.  Still, the austerity that Parliament has resisted will be inevitable if oil prices do not rise dramatically in the months to come. A key priority from an international point of view is that the IMF, as a condition for its loans, impose upon Iraq the reforms for which Allawi has been advocating and which parliament has so rejected. It does not seem likely that reform will come to Iraq by any other means.

Kirk H. Sowell is the publisher of the biweekly newsletter Inside Iraqi Politics (www.insideiraqipolitics.com). Follow him on Twitter @uticarisk.

[1] See 2:13:00.

[2] In most of these comments, Allawi gives the figures in Iraqi dinars. I have converted them to dollars. Thus, he said, for example, that the Finance Ministry had 1.3 trillion IQD when he came into office. This is slightly over $1 billion.

[3] When a family received a payment for a deceased breadwinner and receives another government benefit.

[4] Discussion begins around 1:06:00.

[5] Testimony by the finance minister and discussion of the budget starts at 1:38:00.

[6] In the previously cited video from Parliament on September 8, he refers to the IMF briefly around 2:25:00, then again around 2:48:00, and once more near then end of the four-hour video in response to an MP attacking the IMF option.

[7] The reading begins at 00:09:00 and the comments referred to in the text follow.

[8] Author interview conducted on October 28, 2020 via Skype.More on: 

The Arab World’s Perfect COVID-19 Storm

The Arab World’s Perfect COVID-19 Storm

Nasser Saidi describes in a Project Syndicate article The Arab World’s Perfect COVID-19 Storm. The author holds that this recent pandemic analysed here impacts will be significant. It is perhaps the first time that these are equally shared not only throughout the MENA region but the world at large. Any differences will, however, be in the manner with which this pandemic is specifically confronted locally. Read on for a better perspective view of the GCC region’s future.

March 24, 2020 

In the face of the COVID-19 pandemic, policymakers in the Gulf Cooperation Council states are rolling out stimulus measures to support businesses and the economy. But the camel in the room remains oil, especially the immediate impact on demand of the Chinese and global economic slowdown.

BEIRUT – Middle Eastern and Gulf Cooperation Council (GCC) economies are heading toward a recession in 2020 as a result of the COVID-19 pandemic, collapsing oil prices, and the unfolding global financial crisis.

The fast-spreading global pandemic – with Europe its new epicenter – is generating both supply and demand shocks. The supply shock results from output cuts, factory closures, disruptions to supply chains, trade, and transport, and higher prices for material supplies, along with a tightening of credit. And the aggregate-demand shock stems from lower consumer spending – owing to quarantines, “social distancing,” and the reduction in incomes caused by workplace disruptions and closures – and delayed investment spending.

The two largest Arab economies, Saudi Arabia and the United Arab Emirates, are proactively fighting the spread of COVID-19, for example by closing schools and universities and postponing large events such as the Art Dubai fair and the Dubai World Cup horse race. Likewise, Bahrain has postponed its Formula One Grand Prix.

Saudi Arabia has even announced a temporary ban on non-compulsory umrah pilgrimages to Mecca, and has closed mosques. Because religious tourism is one of the Kingdom’s main sources of non-oil revenue, the umrah ban and likely severe restrictions on the obligatory (for all Muslims) hajj pilgrimage will have a large negative impact on economic growth.

True, policymakers across the GCC are rolling out stimulus measures to support businesses and the economy. Central banks have focused on assisting small and medium-size enterprises by deferring loan repayments, extending concessional loans, and reducing point-of-sale and e-commerce fees. And GCC authorities have unveiled stimulus packages to support companies in the hard-hit tourism, retail, and trade sectors. The UAE has a consolidated package valued at AED126 billion ($34.3 billion), while Saudi Arabia’s is worth $32 billion and Qatar’s totals $23.3 billion. Moreover, policymakers are supporting money markets: Bahrain, for example, recently slashed its overnight lending rate from 4% to 2.45%.

But the camel in the room remains oil, especially the immediate impact on demand of the Chinese and global economic slowdown. The International Energy Agency optimistically estimates that global oil demand will fall to 99.9 million barrels per day (bpd) in 2020, about 90,000 bpd lower than in 2019 (in the IEA’s pessimistic scenario, demand could plunge by 730,000 bpd). Indeed, successive production cuts had already led to OPEC’s global market share falling from 40% in 2014 to about 34% in January 2020, to the benefit of US shale producers.

The weakening outlook for oil demand has been exacerbated by the Saudi Arabia-Russia oil-price war, with the Saudis not only deciding to ramp up production, but also announcing discounts of up to $8 per barrel for Northwest Europe and other large consumers of Russian oil. Although the Kingdom’s strategic aim is to weaken shale-oil producers and regain market share, the price war will also hit weaker oil-dependent economies (such as Algeria, Angola, Bahrain, Iraq, Nigeria, and Oman), and put other major oil producers and companies under severe pressure. Indeed, in the two years after oil prices’ last sharp fall, in 2014, OPEC member states lost a collective $450 billion in revenues.

That episode prompted GCC governments to pursue fiscal consolidation by phasing out fuel subsidies, implementing a 5% value-added tax (in the UAE, Saudi Arabia, and Bahrain), and rationalizing public spending. Nonetheless, GCC countries continue to rely on oil for government revenues, and their average fiscal break-even price of $64 per barrel is more than double the current Brent oil price of about $30 per barrel. The UAE and Saudi Arabia have estimated break-even prices of $70 and $83.60, respectively, while Oman ($88), Bahrain ($92), and Iran ($195) are even more vulnerable in this regard. More diversified Russia, by contrast, can balance its budget with oil at $42 per barrel.

The near-halving of oil prices since the start of 2020, the sharp fall in global growth, and the effects of the COVID-19 pandemic will put severe strains on both oil and non-oil revenue. As a result, GCC governments’ budget deficits are likely to soar to 10-12% of GDP in 2020, more than double earlier forecasts, while lower oil prices will also result in substantial current-account deficits.

Governments will respond by cutting (mostly capital) spending, magnifying the negative effect on the non-oil sector. Some countries (Kuwait, Qatar, and the UAE) can tap fiscal and international reserves, while others (Oman, Bahrain, and Saudi Arabia) will have to turn to international financial markets.

But will GCC governments be able to borrow their way out of this phase of lower oil prices? Global equity and debt markets currently are close to meltdown; with investors fleeing to safe government bonds, liquidity is drying up.

The GCC countries will suffer a negative wealth effect, owing to losses on their sovereign wealth funds’ portfolios and net foreign assets. And, given bulging deficits and the prospect of continued low oil prices, sovereign and corporate borrowers will find it harder and more expensive to access markets. The ongoing financial crisis will therefore exacerbate the effects of the oil-price shock and the pandemic.

The pandemic itself is still unfolding, and its eventual global impact will depend on its geographical spread, duration, and intensity. But it is already clear that in the coming weeks, there will be heightened uncertainty about global growth prospects, oil prices, and financial-market volatility. And as the pandemic continues its deadly march, the GCC economies – like many others – will be unable to avoid recession.

%d bloggers like this: