$50bn climate change pledge critical to UAE’s oil reduction

Reuters

The UAE’s big-ticket promise to pledge a further $50 billion to abate global climate change must be wisely planned to deliver a meaningful path towards a sustainable economy, according to experts. 

“[Such investments] are likely to generate the most efficiency if allocated to reduce the reliance of productive sectors on hydrocarbons which will further diversify and develop a sustainable economy,” said Rola Abu Manneh, chief executive of the UAE division of Standard Chartered bank. 

“This means moving towards sustainable economic development, which includes the greening of the economy and ensuring the UAE’s continued role as a regional leader that is committed to reaching net zero, as well as once again acting as a regional prime mover in transitioning away from over reliance on hydrocarbons. 

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“Furthermore, it will be a significant boost for key sectors such as tourism and transportation and will enable the UAE to become a major player in the green sustainable supply chain.”   

UAE President Sheikh Mohamed joined heads of state from 17 economies accounting for 80 percent of global gross domestic product, population, and greenhouse gas emissions at an online meeting earlier this month. 

During the meeting – the Major Economies Forum on Energy and Climate, hosted by US President Joe Biden – the UAE ruler said the Emirates had invested more than $50 billion in renewable energy projects across 40 countries and plans to double that over the next decade. 

Climate change is an issue of “grave importance” that must be addressed through global cooperation and collaboration, Sheikh Mohamed said, adding that the UAE is on track to submit its revised NDC (Nationally Determined Contribution) – a global action plan to cut emissions and adapt to climate change effects by 2030.  

The country’s latest pledge represents a sizeable and significant public investment – “one of the biggest announcements of its kind in the world”, noted Joel Michael, founder and chief executive at consultancy Oceans & Us, and sustainability advisor to New Zealand Trade and Enterprise. 

“This [the UAE] is one of the places that experiences heat at its maximum; it is also a major logistics hub, and we know logistics is one of the biggest carbon emitters. That is why the $50 billion is much-needed and very welcome,” he told AGBI. 

The investment will likely be used to support startups and innovation in the UAE, rather than projects overseas – in a similar way to Tesla founder Elon Musk’s $100 million Carbon Removal X Prize, Michael added.

Musk’s prize launched in April and challenges entrants to find ways to remove large amounts of heat-trapping carbon dioxide from the air or oceans and store it away for years to come. 

“At present, much of the innovation in the low-carbon sector in the UAE is coming from existing, established companies for whom funding is not an issue, and it is centred on electric vehicles, agritech and food wastage reduction,” said Michael.

There is significant untapped opportunity to bring new innovations to market, he explained. 

Other commentators were sceptical of how far the $50 billion would stretch, particularly in a country where fossil fuels remain a major contributor to national gross domestic product. 

Hans Josef Fell, founder and president of Berlin-based think tank the Energy Watch Group, said: “$50 billion – if it is actually invested – would give a boost to renewable energy development, especially in terms of technologies, and prices would drop significantly, [incentivising mainstream consumer take-up]. 

“Nevertheless, as long as the UAE continues to invest substantially more than these $50 billion in fossil energies, even this $50 billion would fizzle out in terms of climate protection and would not put the world on the path to climate protection. 

“Only the end of all fossil investments would achieve this,” Fell stressed. 

Critics have argued that the UAE is struggling to meet objectives to grow its non-oil economy and reduce dependence on fossil fuels.

The planned Masdar City in Abu Dhabi, first unveiled in 2006, was intended to be one of the world’s most sustainable and low-carbon urban communities, but it has yet to be built due to funding and other challenges. 

The UAE is still pumping oil and the sector accounts for around 30 percent of GDP and 50 percent of fiscal revenues – although the country is one of the most diversified economies in the region. 

A report by Standard Chartered, published in April, concluded that the UAE alone would require $681 billion of investment to finance its transition to a net-zero economy.

Emerging markets as a whole need to invest $94.8 trillion – a sum higher than their annual global GDP and additional to the capital already allocated by governments under current climate policies – to transform their economies in time to meet long-term global warming targets. 

Of this figure, private investors could contribute $83 trillion but alternative financial institutions are urgently needed to finance green projects, the report warned. 

While the UAE’s pledge is significantly below the figure cited in the report, it is a strong indicator of the country’s ambition to further cut reliance on hydrocarbons and develop a more sustainable economy, according to Abu Manneh.  

“The initial announced investment is certainly considered a significant step towards positioning the UAE as a leading diversified economy,” she said.

“The government’s systemic investments dedicated to meeting its net zero commitment further enhances the country’s track record as the regional standard setter. 

“Globally, we are facing immense climate change challenges that have the potential to severely impact our economies – including desertification, sea level rise and threats to water and food security.  

“Therefore, investments such as the ones announced by the UAE, are urgently needed to mitigate risk and expand the economies’ ability to adapt.”