Muscat – Oman’s infrastructure has borne the brunt of tropical storms in the last decade and continues to face severe risks of floods, storm surges and rising sea level. At the heart of the growing environmental problems is climate change, which the Central Bank of Oman (CBO) says presents a significant challenge and risk to the financial system of the sultanate.
‘There is growing awareness and concern about the implications of climate change on the financial stability of Oman as it poses two major types of risks. The first is its direct physical impact leading to damage of infrastructure and property, and the second is the transition risks such as changes in climate policy, technology and consumer and market sentiments,’ CBO stated in its Financial Stability Report 2022.
According to Oman’s Second National Communication 2019 Report submitted to the United Nations Framework Convention on Climate Change, the sultanate has a substantial amount of vulnerable urban infrastructure loc-ated in close proximity to flood- prone areas, or subject to coastal inundation and storm surge associated with sea-level rise.
‘With climate change, Oman’s low-lying urban areas along the coast will be vulnerable to flooding from the combined impact of sea-level rise and storm surge associated with extreme weather events.’
Additionally, hydrocarbon-dependent countries like Oman are exposed to a challenge from the drive to reduce carbon footprint, CBO stated.
A large part of Oman’s GDP relies on the production and export of hydrocarbons that are a major source of greenhouse gases. ‘Therefore, besides the climate risks faced by all other countries, phasing out carbon emissions would entail a need for massive changes in the structure of the economy.’
Assessment of climate risks remains a challenge because of the difficult-to-predict shocks and significantly long time horizon spanning over decades for modeling and analysis of transition risks. ‘Nevertheless, CBO continues to keep a close eye on the climate change risks and strives to expand its capability to formally incorporate these risks in its assessment of financial stability.’
Climate change is a concern that Oman is working on seriously and therefore has committed to a low carbon economy and reducing its greenhouse gas (GHG) emissions, according to the sultanate’s Nationally Determined Contribution (NDC) submitted to the United Nations Framework Convention on Climate Change.
In the second NDC, which the sultanate submitted in 2021, Oman has committed to slow down GHG emission growth and reduce these by seven per cent in 2030, compared to the Business-As-Usual scenario. Through its Intended Nationally Determined Contributions, the sultanate is currently engaged to reduce its absolute GHG emission by two per cent by 2030.