Cop28 focuses energy transition spotlight on UAE

28 February 2023

 

Global climate negotiators, civil society groups, entrepreneurs and journalists will descend on Dubai’s Expo City in November for the 28th Conference of the Parties (Cop28) to the UN Framework Convention on Climate Change, putting the UAE at the centre and in charge of the annual climate talks.

UAE Vice President, Prime Minister and Ruler of Dubai, Mohammed bin Rashid al-Maktoum, has said Cop28 is the most important event the UAE will host in 2023. It is hard to argue otherwise.

Cop28 is expected to follow through with the implementation of a breakthrough loss-and-damage fund to help the most vulnerable countries address climate change, which was included for the first time in a Cop agreement last year.

It will conclude the first global stocktake, an assessment of the progress each country has made against the goals of the Paris Agreement, signed in 2016 by 195 nations, with the aim of keeping the mean global temperature rise to below 2 degrees Celsius compared with pre-industrial levels.

Contrasting agendas

Under the auspices of a state whose wealth was built for the most part on oil, negotiators are expected to lock horns over the policies, technologies and funding platforms best placed to enable climate mitigation and adaptation, and to wean the world off fossil fuels.

The relevance of the UAE's leadership in this year's Cop negotiations reflects the dilemma between meeting climate targets and a world that cannot yet live without hydrocarbons

It is not the first time an Opec member will host a Cop event – Qatar and Indonesia hosted them in 2012 and 2013, respectively. However, the appointment of Abu Dhabi oil chief and UAE climate envoy Sultan al-Jaber as Cop28 president-designate caused an uproar among environment and climate advocacy groups in January.

“I thought someone from outside the conventional energy sector would have given more credibility to the event,” an independent consultant tells MEED.

Despite this, commentators have also noted the UAE’s strategic clout and potential to act as a bridge between the affluent and developed countries increasingly referred to as the global north, such as the US, EU states, Russia and Japan, and the economically challenged countries in the global south, which includes swathes of Asia, Africa and Latin America.

The UAE maintains close economic and political ties with the majority of the countries in both groups, which largely have contrasting geopolitical, economic and energy profiles, as well as climate agendas.

According to Frank Wouters, director of the EU GCC Clean Energy Network and senior vice-president of Reliance Industries, the UAE, as one of the biggest donors of official development aid (ODA), can provide credibility and leadership in the effort to mobilise badly needed global capital towards climate change mitigation and adaptation efforts.

For instance, at Cop15 in Denmark in 2009, developed countries committed to a collective goal of mobilising $100bn a year for climate action in developing countries by 2020. 

The goal was formalised at Cop16 in Mexico, and reiterated at Cop21 in France, with the timeline extended to 2025.

The latest available figure in 2020 stood at $83.3bn. “The reality is that this has not happened,” says Wouters. “So more can and should be done.”

With the UAE consistently rated among the countries with the highest ODA against gross national income, Cop28 is expected to provide further impetus to reaching this collective goal – one of the tangible outcomes most negotiators have hoped for at previous Cop events.

Low-carbon fuels as the next LNG

A seat at the table

Despite the somewhat counter-intuitive proposition of giving petroleum-exporting countries a seat at the Cop negotiating table, the move is an important one, another expert tells MEED.

Mhamed Biygautane, a lecturer in public policy at the University of Melbourne, says these countries’ involvement in early discussions and negotiations is critical for any resultant decisions to have a meaningful impact on the ground.

“Petroleum states can make or break any climate-change negotiations because their interests are obviously at stake here,” he says.  

“This is particularly the case for GCC states, whose economies rely heavily on oil rents and any reductions in oil exports will most certainly adversely affect their economies.”

Karen Young, senior research scholar at Columbia University’s Centre on Global Energy Policy, also points out the importance of considering the major difference in the politics of energy transition between national oil companies such as those based in Abu Dhabi and Saudi Arabia, and international oil companies such as BP and Shell.

“The state and the firm are linked, so energy policy … can include an emphasis on carbon capture and storage (CCS), on cleaner production and simultaneously on investments in renewables and economic statecraft – to deploy investment and technology to partner states that are both profitable and strategic in foreign relations,” Young says.

For example, the UAE has two national champions, Abu Dhabi National Oil Company (Adnoc) and clean energy firm Masdar, which in a different framework could be seen as a contradiction.

According to Young, the UAE is managing the energy transition with a goal of not just state survival, but of dominance across energy markets, technology and political ties across a broad geography.

This suggests that the UAE sees Cop28 as an opportunity not just to set a climate agenda, but also to put the country in a strong economic and political leadership position for decades.

Greenwashing fears

Significantly, 2022 was a year of record profits for global and national oil majors, as the war in Ukraine depressed supply and inflated prices.

 Aramco earns $42.4bn profit in third quarter

While oil firms around the world will continue to invest in renewables, some experts say they are likely to reinvest a significant amount in conventional hydrocarbons development due to robust oil demand, regardless of climate objectives.

This has reinforced fears of widespread greenwashing, or oil majors walking back on their net-zero targets, an issue commonly raised by advocacy groups at Cop events.

“Greenwashing is real, but ultimately it is not a useful framework,” says Young. “There is oil demand. There will continue to be oil demand. What matters is how we produce and transport it and, simultaneously, with purposeful government policy, reduce demand by creating incentives to use renewable energy and increase the costs of continuing to use oil.”

Biygautane also says stronger monitoring and international conventions with more powers for sanctions and penalties are necessary to deter businesses within and outside the hydrocarbons industry from making promises they will not honour.

Another expert points out the urgent need to focus on deploying clean technologies other than renewable energy, and to decarbonise sectors other than power, such as transport and buildings, along with the need for a bigger focus on transmission and distribution within the power sector.

“The major shortcoming remains in ensuring the required financing is there, which requires collective action from governments, corporates, financing and development institutions, in addition to individual behaviour and action,” says Jessica Obeid, academy associate at think tank Chatham House’s energy, environment and resources programme in London.

“It takes a village to achieve a serious sustainable transformation of our energy systems … requirements are many and efforts are only a few,” she says.

Resource allocation

For the GCC states, where historical data has pointed to a significant discrepancy between hydrocarbons production and clean energy investments, this will mean more resource allocation is required.

For example, data from regional projects tracker MEED Projects shows that the value of wind, solar and waste-to-energy generation contracts equates to a mere 10 per cent of the $254bn-worth of contracts awarded across the GCC states’ oil and gas sectors over the past 10 years, excluding investments made by GCC-based investors and developers overseas.

When it comes to projects in the advanced procurement stage, the ratio of renewable energy projects more than doubles, at 24 per cent against the value of oil and gas schemes. 

This provides a positive market signal that could further improve if a portion of the GCC economic vision-related renewable energy schemes, carbon capture, utilisation and storage (CCUS) and clean hydrogen projects move into procurement.

While this improvement may not prove to be enough to appease all climate change advocates, the clear policy convergence on clean hydrocarbons production between the UAE, Oman, Saudi Arabia and, to a lesser extent, Kuwait, is

significant. It could help to further drive the gradual uncoupling of their economies from fossil fuels over the coming years or decades. 

Columbia University’s Young concludes: “Which states ride the coattails of the UAE in this Cop and its subsequent agenda will be interesting to watch.” 

Technology and teamwork are critical if a low-carbon future is to be secured, says Mubadala's Saed Arar

Spotlight on the UAE

The UAE has been building up its green and clean energy base and working on energy transition objectives for some time. It set an energy diversification agenda in 2017 and was the first Middle East country to declare a target of net-zero carbon emissions by 2050. 

The Abu Dhabi Energy Department has launched regulations covering waste-to-energy, electric vehicles and clean energy certificates, along with energy-efficiency initiatives that include building retrofits. 

The UAE’s clean energy installed capacity, including three units of the Barakah nuclear power plant, stood at 7.6GW as of December. It is also finalising its green hydrogen roadmap.

Pragmatic transition

The growing number of new projects involving Masdar, which Al-Jaber chairs, forms part of the UAE’s pragmatic energy transition strategy. This involves developing and expanding nuclear and renewable energy and hydrogen capacity in addition to expanding its hydrocarbons output.

Adnoc and Abu Dhabi National Energy (Taqa) have taken control of Masdar, whose operations have been split into separate renewable energy and green hydrogen businesses. The firm aims to have 100GW of renewable installed capacity and 1 million tonnes of green hydrogen by 2030.

“Adnoc is the only national oil company (NOC) to pursue renewable merger and acquisition, buying into the H2Teeside hydrogen project in the UK alongside BP,” notes Kavita Jadhav, research director, corporate research at UK-based Wood MacKenzie. “Its investments in low-carbon energy will increase, and it may also make further international acquisitions in hydrogen; CCUS; and solar, in a wave that could be similar to the rush of activity seen in the UK and Europe in the run-up to Cop26.”

Jadhav predicts the UAE and wider Middle East could have a similar eureka moment to the Inflation Reduction Act in the US, which promises a boom time for hydrogen, CCS and solar.

“A lot can happen when you have the spotlight on you,” she says.

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Jennifer Aguinaldo
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