INTERVIEW: ‘Hero of the Planet’  Bill McDonough calls for a rethink of carbon in the circular economy

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Updated 30 August 2020
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INTERVIEW: ‘Hero of the Planet’  Bill McDonough calls for a rethink of carbon in the circular economy

  • World-renowned sustainable design advocate explains Saudi Arabia’s leading role in global energy transition

Bill McDonough pulled no punches. “It’s a very, very serious issue. The science is clear and the signals are seriously scary. Let’s just face it,” he said during an hour-long Zoom meeting from his home in Virginia in the US.

He was talking about the threat to humanity from environmental pollution and resulting climate change, and he is well-qualified to talk about it. Called “A hero for the planet” by Time magazine, and the only recipient of the US Presidential Award for Sustainable Development, McDonough is regarded as the “father of the circular economy,” the strategy that aims to transform the lives and livelihoods of humanity — before environmental disaster does that for us.

Now McDonough has joined forces with Saudi Arabia to meet that challenge and, in particular, to determine the place of hydrocarbon fuels — the lifeblood of the Kingdom — within the coming energy transition.

“This requires massive heroic behavior. Let’s do something over the next 10 years that will astonish our children,” he said, hammering home the scale of the challenge.

That message would not be out of place in the preachings of many environmental agitators, but McDonough brings to it intellectual pedigree and a track record of pragmatic application. When he says, “I’m going to design buildings like trees,” it is much more than just a slogan.

Born in Tokyo, as a child McDonough pondered big questions like the destruction of Hiroshima by the atomic bomb, dabbling in physics, chemistry and international relations before settling on architecture as a profession.

The concept of the “circular economy” grew out of his work in regenerative building design on the “cradle to cradle” principle — the idea that human constructions should be built with future generations firmly in mind.

International recognition for his work rose steadily from the environmentally aware 1990s until publication — along with Michael Braungart — of the book “Cradle to Cradle — Remaking the Way We Make Things” in 2002.

The principles in the book were adopted by the Chinese government in its 5-year plans and by the World Economic Forum in 2014. In Davos, McDonough built a structure called the ICE House — with the help of SABIC of Saudi Arabia — to illustrate the concept of sustainable design.

That collaboration with the Kingdom was evidence of an increasingly close relationship. McDonough had earlier met Prince Abdul Aziz bin Salman, the Saudi energy minister, and found an enthusiastic listener for his ideas.

“I know this was natural to him, it was all intrinsic to his thinking. One of the most elegant parts of the dialogue is that I really enjoy working with him, talking to someone who has thought as deeply about this as he has,” McDonough said of the prince, who made energy efficiency a keystone of the Kingdom’s energy strategy.

Those conversations made him think more about the role of carbon within the circular model, which had three guiding tenets.


BIO

Born: Tokyo, 1951

Education

  • Dartmouth College,  Hanover, NH, US
  • Yale University, New Haven, CT, US

Career

  • Dean of architecture, University of Virginia 
  • Founder, McDonough Innovation
  • William McDonough & Partners
  • Relationships with several leading global universities and the World Economic Forum

Everything is a resource for something else; in nature, the “waste” of one system becomes food for another, either through biological or technical process.

Second, energy should be clean and renewable, with an emphasis on solar sources as well as wind, geothermal and other forms of energy.

Third, celebrate the diversity in local ecosystems in which design is adapted to specific circumstances in an “elegant and efficient” way.

“That is the basis of the ‘cradle to cradle’ approach — waste equals food, celebrate diversity, and use renewables, especially solar. It’s a beautiful thing,” McDonough said.

In a 2016 article in the magazine Nature, he coined the phrase that was picked up by environmental realists around the world, and especially in Saudi Arabia: “Carbon is not the enemy,” which seemed an appropriate rallying cry for a country and an economy that owes its modern development to hydrocarbons in the form of oil.

“I had this revelation when they asked me to work on it, because this is actually super-important. Carbon is actually a material in the circular economy, but it’s also a fuel, which is very unusual, so it deserves special attention. We decided to start working on this with the Saudis,” he said.

The relationship with SABIC went back to 2015, but he found his services much in demand as plans for the megaprojects of the Vision 2030 strategy advanced. He became an adviser to the Red Sea Development Company, the Royal Commission for AlUla, and for the Al-Soudah project run by the Public Investment Fund, as well as a member of the higher council of NEOM, the huge urban development planned for the Kingdom’s northwest.

Earlier this year, McDonough became an adviser and collaborator with the King Abdullah Petroleum Studies and Research Center in Riyadh, and delivered one of the keynotes for the Kingdom’s Energy Ministry at the G20 energy meeting in March.

His thinking crystallized. “The problem is not carbon — the problem is us. Carbon is an innocent element, and like I pointed out, there is the sun, there is carbon in the atmosphere, and then there is the soil, also carbon. If you say you want to be carbon free, think about it — are you saying to want to decarbonize yourself? Impossible,” he said.

He classes carbon into three kinds, and has an intricate set of slide illustrations to emphasize the point. “Living carbon,” which is an essential ingredient to human life and the basis for all agriculture. “It’s a positive thing to want to make more living carbon,” he said.

Then there is durable carbon, which is also a positive when it is an enduring form, like a building, or a city, or — the example he gave — a piece of paper, which can last for centuries in the form of a book.

Then there is the third kind — “fugitive” carbon — which he called “the big whoops.” This is the form that escapes into the atmosphere during industrial, transportation and manufacturing processes, or is washed up on a shoreline as plastic waste.

“It’s probematic to have durable carbon go fugitive,” he said.

It almost goes without saying that McDonough is a firm believer in the various international accords, especially the Paris agreement on climate change, that seek to limit, and even reverse, environmental damage by controlling output of “fugitive” carbon into the atmosphere, and these limits are built into all his models. “We have to work within those limits,” he said.

The main solution to fugitive is the process known as CCUS — carbon capture, utilization and storage — which has also become a major plank of the Kingdom’s energy strategy. CCUS techniques are implemented by Saudi Aramco and in NEOM. “What’s going on at NEOM is phenomenal and magnificent, because they’re planning on running on 100 percent renewable power,” he said. “All of a sudden they’re going to be making hydrogen with electrolysis. So we’re going to have what we call ‘green hydrogen,’ which is a magnificent prospect for the human future,” he said.

McDonough does not like the term “fossil fuels,” which he says encourages the idea that the only use for hydrocarbons is to burn them; nor does he like the phrase “hydrocarbon resources.” “Let’s just call them sources that we get from nature,” he said.

Just as important, fugitive carbon can be transformed into a variety of materials, like plastics and polymers, that are essential for human life. 

McDonough said that the work of SABIC, the Saudi petrochemical group now owned by Aramco, in this regard was “especially important.” 

Nor is McDonough a fan of those on the extreme wing of the environmental movement who say the world should stop using hydrocarbon fuels completely.

“I think the big picture for all of us in terms of social benefit, and intelligent behavior and design is that we do want inexpensive energy for everyone so they can make their lives better. We just don’t want to destroy the atmosphere,” he said.

The challenge is to meet the environmental standards most countries agree are necessary to prevent the warming of the Earth by more than 2 degrees Celsius above pre-industrial levels by the middle of the century, and McDonough believes there has to be a unified commitment on the part of humanity to meet this essential target.

McDonough has worked with the US space agency NASA on building design, producing some of the most advanced and environmentally friendly constructions in the world. “President Kennedy famously said we were going to do a moonshot, and within 10 years man was walking on the moon. I’d like to do an Earth shot. 

Let’s put Mars off for a little bit. Before I go to work on the red planet, can I come back to the blue one?” he said.

Does he think humanity can get there by 2050 and pull itself back from the brink of climate catastrophe? “I think so. I think we  have to,” he said.


EBRD supports Africa’s largest onshore wind project in Egypt with $275m loan

Updated 57 min 58 sec ago
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EBRD supports Africa’s largest onshore wind project in Egypt with $275m loan

  • 1.1 GW wind farm in Egypt will reduce annual CO2 emissions by more than 2.2 million tonnes
  • Loan to Suez Wind consists of $200 million A loan from the EBRD and $75 million in B loans from Arab Bank and Standard Chartered

JEDDAH: The European Bank for Reconstruction and Development is supporting Egypt in launching Africa’s largest wind farm, backed by a $275 million syndicated loan.

The loan to Suez Wind consists of a $ 200 million A loan from the EBRD and $ 75 million in B loans from Arab Bank and Standard Chartered, the international financial institution said in a press release.

It added that the initiative is being co-financed by the African Development Bank, British International Investment, and Deutsche Investitions- und Entwicklungsgesellschaft, as well as the OPEC Fund for International Development and the Arab Petroleum Investments Corporation.

The wind farm in the Gulf of Suez will have an installed capacity of 1.1 gigawatts, delivering clean, renewable energy at a lower cost than conventional power generation. It is expected to produce over 4,300 GWh of electricity annually and reduce CO2 emissions by more than 2.2 million tons per year, supporting Egypt’s energy sector alignment with its commitments under the Paris Agreement.

Rania Al-Mashat, Egypt’s minister of planning, economic development, and international cooperation, said that her country is committed to advancing its renewable energy ambitions, aiming to derive 42 percent of its energy mix from renewable sources by 2030, in line with their nationally determined contributions.

“Through our partnership with the EBRD, a key development partner within the energy sector of Egypt’s country platform for the NWFE program, we are mobilizing blended finance to attract private-sector investments in renewable energy,” said Al-Mashat, who also serves as governor of the north African country to the EBRD

The minister added: “So far, funding has been secured for projects with a capacity of 4.7 gigawatts, and we are working collaboratively to meet the program’s targets to reduce Egypt’s fuel consumption and expand clean energy projects.”

Managing Director of the EBRD’s Sustainable Infrastructure Group, Nandita Parshad, expressed pride in the bank’s role as the largest financier of the landmark 1,100-megawatt wind farm in the Gulf of Suez, which is also the largest onshore wind farm in EBRD’s operational countries to date.

“Egypt continues to be a trailblazer for large-scale renewables in Africa: first with the largest solar farm and now the largest windfarm on the continent. Great to partner on both with ACWA power and to bring new partners in this project, Hassan Allam Utilities and Meridiam,” she said.

Suez Wind is a special project company jointly owned by Saudi energy giant ACWA Power and HAU Energy, a recently established renewable energy equity platform that the EBRD is investing in alongside Hassan Allam Utilities and Meridiam Africa Investments.

The EBRD, of which Egypt is a founding member, is the principal development partner in the republic’s energy sector under the Nexus of Water, Food, and Energy program, launched at COP27. This wind farm is one of the first projects within NWFE’s energy pillar, advancing progress toward the country’s 10-gigawatt renewable energy goal.

It plays a vital role in supporting Egypt’s efforts to decarbonize its fossil fuel-dependent power sector and achieve its ambitious renewable energy targets.

Since the EBRD began operations in Egypt in 2012, the bank has invested nearly €13.3 billion in 194 projects across the country. These investments span various sectors, including finance, transport, and agribusiness, as well as manufacturing, services, and infrastructure, with a particular emphasis on power, municipal water, and wastewater projects, according to the same source.

Last month, EBRD announced it was supporting the development and sustainability of Egypt’s renewable-energy sector by extending a $21.3 million loan to Red Sea Wind Energy.

The loan was established to fund the development and construction of a 150-megawatt expansion to the 500-megawatt wind farm currently being constructed in the same region.


UAE non-oil sectors push GDP growth to 4% in 2024: CBUAE

Updated 36 min 29 sec ago
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UAE non-oil sectors push GDP growth to 4% in 2024: CBUAE

  • Growth is projected to accelerate to 4.5% in 2025 and 5.5% in 2026
  • Non-oil GDP growth is forecast to remain robust, expanding by 4.9% in 2024 and 5% in 2025

RIYADH: The UAE economy is expected to grow by 4 percent in 2024, driven by robust performance across key non-oil sectors, according to official projections. 

The Central Bank of the UAE’s Quarterly Economic Review for December indicates that growth will be supported by sectors including tourism, transportation and financial services, as well as insurance, construction, real estate, and communications. 

Looking ahead, growth is projected to accelerate to 4.5 percent in 2025 and 5.5 percent in 2026, as the country continues to benefit from economic diversification policies aimed at reducing its dependence on oil revenues. 

Non-oil GDP growth is forecast to remain robust, expanding by 4.9 percent in 2024 and 5 percent in 2025. 

The report attributed this growth to strategic government policies aimed at attracting foreign investment and promoting economic diversification. 

In the second quarter, non-oil GDP grew by 4.8 percent year on year, compared to 4.0 percent in the first quarter, supported by manufacturing, trade, transportation and storage, and real estate activities. 

In September, the CBUAE revised its GDP growth forecast for the year upward by 0.1 percentage points, citing expected improvements in the oil sector. 

Initially projecting a 3.9 percent growth for 2024, the central bank adjusted the figure to 4 percent. In its second-quarter economic report, the CBUAE forecasted a growth rate of 6 percent for 2025. 

The UAE’s 16 non-oil sectors continued their steady growth in the third quarter of the year, with wholesale and retail trade, manufacturing, and construction being key contributors. 

The manufacturing sector has benefited from increased foreign direct investment, aligning with both federal and emirate-level strategies. 

The first nine months of the year also saw strong performance in the construction sector, reflecting significant investment in infrastructure and development projects. 

Non-oil trade exceeded 1.3 trillion dirhams ($353.9 billion) in the first half of the year, representing 134 percent of the country’s GDP, a 10.6 percent year-on-year increase. 

This growth underscores the success of the UAE’s economic diversification agenda and its comprehensive economic partnership agreements with various countries, which have strengthened trade relationships and driven exports.

The UAE has set ambitious economic targets to diversify its economy and reduce dependence on oil revenues.  

Under the We the UAE 2031 vision, the country aims to double its GDP from 1.49 trillion dirhams to 3 trillion dirhams, generate 800 billion dirhams in non-oil exports, and raise the value of foreign trade to 4 trillion dirhams.  

Additionally, the UAE plans to increase the tourism sector’s contribution to GDP to 450 billion dirhams. 

Oil production averaged 2.9 million barrels per day in the first 10 months of the year and is forecasted to grow by 1.3 percent for the year, with further acceleration to 2.9 percent in 2025.  

The fiscal sector also performed strongly in the first half of the year, with government revenue rising 6.9 percent on a yearly basis to 263.9 billion dirhams, equivalent to 26.9 percent of GDP.  

This increase was fueled by a significant 22.4 percent rise in tax revenues. Meanwhile, the fiscal surplus reached 65.7 billion dirhams, or 6.7 percent of GDP, marking a 38.8 percent increase from the 47.4 billion dirhams surplus, or 5.1 percent of GDP, recorded in the first half of 2023.  

Government capital expenditure surged by 51.7 percent year on year to 11 billion dirhams, reflecting the UAE’s commitment to advancing large-scale infrastructure projects and enhancing the country’s economic and investment landscape.

In the private sector, economic activity remained robust, with the UAE’s Purchasing Managers’ Index reaching 54.1 in October this year, signaling continued optimism among businesses driven by sustained demand and sales growth.

Dubai’s PMI stood at 53.2 in October, closely aligning with the national average, indicating consistent growth in the emirate’s non-oil private sector.

Employment and wages also showed strong performance, with the number of employees covered by the CBUAE’s Wages Protection System rising by 4 percent year-on-year in September. 

Average salaries increased by 7.2 percent yearly during the same period, reflecting strong domestic consumption and sustainable GDP growth.  


Saudi Arabia, Iraq to propel digital cooperation amid top ministerial meeting

Updated 34 min 29 sec ago
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Saudi Arabia, Iraq to propel digital cooperation amid top ministerial meeting

  • Discussions focused on exploring new opportunities for joint investments in the field
  • Two parties shed light on importance of integrating efforts to develop the digital environment, empower capabilities, and raise the level of collaborations

RIYADH: Digital partnerships between Saudi Arabia and Iraq are on track to prosper after a top ministerial meeting between the two countries.

Saudi Arabia’s Minister of Communications and Information Technology, Abdullah Al-Swaha, met with his Iraqi counterpart, Hayam Al-Yasiri, during her visit to Saudi Arabia. The discussions focused on exploring new opportunities for joint investments in the field, according to the Saudi Press Agency.

The meeting also tackled ways to further stimulate entrepreneurship that supports innovation and encourages the growth of the digital economy.

This falls in line with the Kingdom’s objective to position itself as a global leader in artificial intelligence and digital transformation under Vision 2030. Goals include increasing the digital economy’s gross domestic product contribution from 14 percent in 2022 to 19.2 percent by 2025, digitizing 92 percent of government services, and raising the information and communication technology sector’s GDP share to 4 percent.

It also aligns with Iraq’s ongoing efforts to develop a digital transformation strategy to support the private and public sectors and drive economic growth.

During the meeting, the two parties also shed light on the importance of integrating efforts to develop the digital environment, empower capabilities, and raise the level of collaborations in priority areas such as AI as well as infrastructure development.

Earlier this month, as officials convened in Riyadh during the 19th Internet Governance Forum, Saudi Arabia also explored partnership opportunities with Germany, Japan, and France in emerging technologies, AI, and digital infrastructure.

Held from Dec. 15 to 19 at the King Abdulaziz International Conference Center, the UN-organized forum assembled global leaders to endorse global digital cooperation and address emerging challenges related to Internet governance.

At the forum’s opening at the time, the Kingdom revealed the Riyadh Declaration, a commitment to developing inclusive and responsible AI technologies in an attempt to address global challenges and drive economic value. 

In November, Saudi senior tech diplomat Deemah Al-Yahya, the secretary-general of the multilateral Digital Cooperation Organization, held talks with Iraq’s prime minister, Mohammed Shia’ Al-Sudani, about support for Baghdad’s plans to develop its digital business and AI sectors. 
 
The two sides discussed Iraq’s digital transformation strategy and the need to create and develop a workforce with the tech skills required to help grow the Iraqi economy effectively, SPA said at the time.


Aramco secures prime ratings for $10bn commercial paper program from Moody’s and Fitch

Updated 31 min 48 sec ago
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Aramco secures prime ratings for $10bn commercial paper program from Moody’s and Fitch

  • Moody’s assigned a Prime-1 short-term issuer rating to the energy giant
  • Fitch Ratings awarded an F1+ short-term rating

RIYADH: Saudi Aramco’s robust financial standing has been reaffirmed by Moody’s and Fitch, with the agencies assigning strong ratings to the energy giant’s newly established $10 billion US Commercial Paper Program.

Moody’s assigned a Prime-1 short-term issuer rating to the energy giant and reaffirmed its Aa3 long-term issuer rating with a stable outlook, reflecting the company’s ability to meet financial obligations. 

Meanwhile, Fitch Ratings awarded an F1+ short-term rating, highlighting Aramco’s strong intrinsic capacity for timely payments and financial resilience. 

Aramco has established a $10 billion US Commercial Paper Program to issue notes with maturities of up to 270 days. 

Commercial paper is an unsecured, short-term debt instrument issued by corporations, typically used to cover receivables or meet short-term financial obligations, such as funding new projects. 

“Aramco has excellent liquidity. Its consolidated cash balance and operational cash flow are more than sufficient to meet the group’s debt maturities, investment commitments and dividends over the next 12 to 18 months,” said Moody’s. 

As of Sept. 30, the company had $69 billion of cash and cash equivalents. 

The credit rating agency also projected that Aramco is expected to generate $180 billion in funds from operations through March 2026, sufficient to cover $16 billion in debt maturities, $85 billion in capital spending, and $140 billion in dividends over the same period. 

The report also noted that the energy company maintains undrawn $10 billion multi-tranche revolving credit facilities, set to expire in April 2029. 

Fitch echoed similar confidence, noting that Aramco’s financial profile is bolstered by its conservative financial policies, low production costs, and strong pre-dividend free cash flow. 

“Its business profile is characterized by large-scale production, vast reserves, low production costs and expansion into downstream and petrochemicals,” said Fitch Ratings. 

It added: “We expect state support to be forthcoming, although historically the company’s robust financial position has not necessitated government support. Saudi Arabia has provided support to other government-related entities in the past.” 

Assigning an Aa3 baseline credit assessment rating to Aramco, Moody’s stated that the positive rating reflects the company’s proven track record in executing large-scale projects, significant downstream integration, conservative financial policy, and strong financial flexibility, supported by its low production costs. 

“These characteristics provide resilience through oil price cycles and also help balance carbon transition risk, which is a material credit consideration for oil and gas companies,” added Moody’s. 

Both agencies emphasized the strong link between Aramco’s ratings and those of the Saudi government. 

Moody’s highlighted that Aramco’s Aa3 rating reflects the Kingdom’s solid credit standing, recently upgraded to Aa3 by Moody’s in November. The agency added that any changes in the sovereign rating would directly impact Aramco’s ratings. 

Moody’s gives Aa3 ratings to countries which have a very low credit risk and hold the best ability to repay short-term debt. 

“An upgrade of the sovereign rating would likely lead to an upgrade of Aramco’s rating if it maintains prudent financial policies and robust credit metrics. Negative pressure on the sovereign rating will lead to negative pressure on Aramco’s rating,” said Moody’s in the latest report. 

Similarly, Fitch noted that Saudi Arabia’s A+ sovereign rating, affirmed in February, underscores the Kingdom’s strong capacity for financial commitments and its ability to provide support to Aramco if needed. 

Both agencies acknowledged Aramco’s capacity to adapt to market conditions, particularly its ability to adjust dividend commitments in response to oil price fluctuations. In 2024, Aramco delivered a base dividend of $81.2 billion, supported by its strong operating cash flow. 


Oil Updates — prices rise in thin pre-Christmas trade

Updated 24 December 2024
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Oil Updates — prices rise in thin pre-Christmas trade

  • Solid economic prospects for the US are also supporting prices

LONDON: Oil prices rose on Tuesday, reversing the prior session’s losses, buoyed by slightly positive market outlooks for the short term and stronger US economic data, despite thin trade ahead of the Christmas holiday.
Brent crude futures were up 33 cents, or 0.5 percent, to $72.96 a barrel, and US West Texas Intermediate crude futures rose 29 cents, or 0.4 percent, to $69.53 a barrel at 07:22 a.m. Saudi time.
FGE analysts said they anticipated the benchmark prices would fluctuate around current levels in the short term “as activity in the paper markets decreases during the holiday season and market participants stay on the sidelines until they get a clearer view of 2024 and 2025 global oil balances.”
Supply and demand changes in December have been supportive of their current less-bearish view so far, the analysts said in a note.
“Given how short the paper market is on positioning, any supply disruption could lead to upward spikes in structure,” they added.
Some other analysts also pointed to signs of a positive outlook for oil over the next few months.
“The year is ending with the consensus from major agencies over long 2025 liquids balances starting to break down,” said Neil Crosby, Sparta Commodities’ assistant vice president of oil analytics, in a note. “The EIA’s STEO (short-term energy outlook) recently shifted their 2025 liquids to a draw despite continuing to bring back some OPEC+ barrels next year.”
Solid economic prospects for the US, the world’s largest oil consumer, are also supporting prices.
New orders for key US-manufactured capital goods surged in November amid strong demand for machinery, while new home sales also rebounded, in a sign that the US economy is on a solid footing toward the year-end.
In the shorter term, traders are looking for indications of US demand from the crude oil and fuel stockpiles data due from the American Petroleum Institute industry group later on Tuesday.
Analysts polled by Reuters estimated on average that crude inventories fell by about 2 million barrels in the week to Dec. 20 in a sign of healthy demand. The Energy Information Administration is due to release its data on Friday.