The Power of Numbers: How the Circular Carbon Economy Index Helps Policymaking

Saudi Arabia recently announced a doubling of its previous international emissions reduction and removal target, along with an ambitious 2060 net-zero target.

The Kingdom aims to achieve these targets through the circular carbon economy approach. The CCE was a centerpiece of Saudi Arabia’s G20 presidency in 2020. The concept was endorsed by G20 leaders as a voluntary, holistic, integrated, and pragmatic approach to managing emissions while promoting economic growth. It is based on four pillars: Reducing, recycling, reusing and removing carbon, and its ultimate goal is to enable net-zero emissions in line with a climate-safe, resilient and prosperous world.

In Saudi Arabia, the Ministry of Energy has already started preparing the ground for the CCE transition. It has identified dozens of related technologies where implementation can be scaled up, ranging from renewable energy sources to energy efficiency to carbon dioxide removal and reuse applications. The ministry has also developed national metrics and performance indicators to measure current performance and future progress toward the CCE. A national CCE strategy is also expected to be launched soon.

The CCE approach is not intended for use in Saudi Arabia only. It accommodates different national circumstances and priorities: One country may be better suited to prioritize solar energy, whereas another one may have sizable forests it can conserve and expand as natural carbon sinks. Yet others may decide to invest in large-scale hydrogen production to diversify their exports, and many can benefit from capturing and storing carbon permanently underground. In simple terms, CCE is a framework for examining a wide variety of emissions reduction, avoidance and removal approaches together to identify strengths and weaknesses, and opportunities and challenges related to implementation.

So how can the CCE be applied in practice in different country contexts? At KAPSARC, we set out to tackle this question by developing an index that allows for measuring and comparing countries on different dimensions and areas of CCE. The purpose of this Circular Carbon Economy Index is to put forward common metrics that can be applied to any country. It has two parts: One measures countries’ current CCE performance and the other maps the enabling factors that help countries accelerate their CCE transitions. In total, the index comprises 47 quantitative indicators.

The first edition of the CCE Index includes the G20 member countries and leading oil producers — in total 30 countries. As with most indices, it ranks countries based on how well they fare on both dimensions: Present performance and future potential. The top countries in the 2021 CCE Index that receive the highest total score from these two parts are Norway, the UK and Germany. All three currently engage in a broad range of carbon circularity activities.

They, like other leading countries in the index, display good energy efficiency performance, generate a reasonable amount of clean energy, have high electricity access rates, and are investing in major hydrogen and carbon capture and storage projects. On the enablers’ side, leading countries receive the highest scores in all key enabling areas, which include policy and regulation, technology and innovation, finance, business environments and energy security.

The purpose of this Circular Carbon Economy Index is to put forward common metrics that can be applied to any country.

Mari Luomi

Country rankings like this have their pros and cons. Rankings allow for simplified messages that are easy to understand. From policymakers to media to individual citizens, everyone is keen to know how their country compares with others. However, composite indicators like the CCE Index are never meant to serve only this purpose. When well constructed, they contain valuable information for policymakers that go far beyond a simple number.

Taking the example of Saudi Arabia, its total rank among the 30 countries is 15. This alone only gives a general idea of where the Kingdom stands in comparison with its G20 and major oil-producer peers. But where does this number come from? One part of the score comes from how Saudi Arabia is performing on, and engaging with, the various CCE activities. In this area, it ranks eighth. Here, the country’s scores are influenced positively by a large green hydrogen capacity pipeline, conservation of the country’s existing natural carbon sinks, and progress made in recent years in switching from liquid fuels to natural gas in the power sector.

Despite significant progress in energy efficiency, the Kingdom’s score, measured by the energy intensity of the economy, remains slightly below the global average. Also, Saudi Arabia still has the further potential to expand the role of clean energy in its energy mix. Here, the new 50-50 percent renewables and natural gas target in the power sector will make a major contribution in the coming years.

In the area of CCE transition enablers, the Kingdom ranks 18th. It ranks above the global average in two of the five dimensions measured in the index: The enabling business environment and energy security, and the overall socioeconomic context.

In the area of policies and regulation, a higher coverage of key biodiversity area protection policies, more frequent international emissions reporting, and climate change policy are the areas that can contribute to boosting the Kingdom’s position in future index editions.

In the area of technology, knowledge and innovation, further raising the levels of research and development outputs, including academic publications and clean energy patents, as well as increasing international high-technology exports and imports, could increase scores in the future.

Finance and investments are perhaps among the most crucial enablers for CCE transitions. Here, green sukuk from the Public Investment Fund, investments in clean energy projects, and the planned Riyadh Voluntary Exchange Platform for offsets and carbon credits will provide a crucial boost for the Kingdom to realize its climate ambitions and transition toward a CCE.

The CCE Index also includes an add-on that enables additional comparisons among oil-producing countries. Here, Saudi Arabia achieves high scores across all performance indicators, ranking third. It ranks in the top five on four of these indicators, including on the carbon intensity of oil production.

The CCE Index is just one example of how data-based tools can enable policy-relevant comparisons across highly different countries. It is, however, crucial to keep in mind that indices like this are the sum of their components: The CCE Index consists of 47 indicators, which were carefully selected in dialogue with national and international stakeholders and experts. There is scope to further develop these indicators, as new and better data becomes available.

The CCE Index should therefore be seen as a conversation-starter on ways to measure the CCE and a tool intended to help governments and societies fulfil their ambition of reaching a net-zero world.

• Mari Luomi is a policy-oriented social scientist who has been studying climate change, energy transitions, and sustainable development policy in the Gulf and globally for close to 15 years.