MENA economies hoping for a rebound in oil prices to prop up their reeling economies are likely to be disappointed as a report warns oil producers are significantly over-estimating future demand for plastics.
The Carbon Tracker report said oil-producing countries were betting on $400bn worth of future petrochemical demand based on consumption in the plastic industry that is not likely to take place.
Instead of growing, plastics demand for fossil fuel is likely to slacken as the world starts to tackle plastic waste and governments act to hit climate targets, the report found.
It pointed to a report by the Pew Charitable Trust that said it was seeing “a stagnation in demand in developed markets and a leapfrog in emerging markets”.
“As has been seen in other areas of the energy system, OECD plastic demand is stagnating at the same time as emerging market leaders are looking for alternative solutions to plastic,” the Carbon Tracker report said.
Governments in Europe and China are already trying to cut plastics waste and are likely to increasingly use taxes, bans and recycling to do so.
In July the EU proposed a tax on unrecycled waste plastic, while China has similar plans and has already started to ban certain types of plastic.
China has also largely closed down its industry for importing and processing plastic waste, which was once the biggest in the world.
For the MENA region and oil-dependent economies of the GCC countries, the report could hardly come at a worse time.
GCC countries are already struggling with the economic fallout from the coronavirus pandemic and low oil prices.
In July the IMF said it expected GCC economies to shrink by 7.6% this year. The IMF said the Saudi Arabian economy – the largest in the Arab world – would contract by 6.8% this year.
If the predictions outlined in the Carbon Tracker report and others prove to be correct, initiatives across the region such as the Saudi Vision 2030, along with similar projects in the UAE which aim to diversify economies away from fossil-fuel dependence, are likely to be particularly important.
“A further critical element that will dim the rosy petrochemical demand picture painted by incumbents is the effects of global policy action to tackle climate change,” said the report.
It noted that plastic releases roughly twice as much CO2 as producing a tonne of oil through its lifecycle.
“Continuation of current growth rates would see the carbon footprint of plastics double by the middle of the century,” the report said.
“It is simply delusional for the plastics industry to imagine that it can double its carbon emissions at the same time as the rest of the world is trying to cut them to zero.”
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