UAE construction strives to decarbonise
29 June 2023
There are several reasons for the UAE construction sector to decarbonise. The most compelling stand in stark contrast to each other. On one hand, the industry is a significant contributor to the national economy. On the other, it is one of the biggest contributors to global greenhouse gas (GHG) emissions.
This discrepancy makes it inevitable that the industry will have to adopt more sustainable practices.
“Can UAE construction truly achieve decarbonisation? Yes, in the long term,” says Craig Thackray, vice president – environment MEA at US-based consultancy Aecom.
“Today, it is more a matter of when this would be realistically achievable.”
A report by the Arab Monetary Fund in 2022 highlights that the construction sector contributed almost $39bn to the UAE’s GDP in 2021, accounting for 9 per cent of the nation’s $402.9bn GDP that year.
The sector is also linked to every other major sector in the UAE: it is the starting point for industries through the construction of physical environments and supporting infrastructure.
In the UAE, construction is synonymous with innovation and growth, enabling world-class projects such as the Burj Khalifa, Palm Jumeirah, Louvre Abu Dhabi and Dubai Metro.
As the country’s real estate sector enjoys demand growth, its construction players reap the benefits. Recent months have seen project announcements including Al-Habtoor Group’s estimated AED9.5bn ($2.6bn) residential developments, the AED1.2bn Upper House project by Dubai Multi Commodities Centre in partnership with Ellington Properties and the $5.4bn mixed-use Dubai South project announced by Azizi Developments. All of these represent major opportunities for contractors and their suppliers.
Environmental impact
Against all its positive contributions, however, weighs the construction industry’s negative impact on the environment.
The built environment is responsible for almost 40 per cent of global carbon emissions annually. This includes both operational carbon, which is emitted during daily use, and embodied carbon from the building materials themselves.
The World Bank estimates that about 70 per cent of global GHG emissions come from infrastructure construction and operations such as power plants, buildings and transport.
A report from the Global Alliance for Buildings & Construction during the 27th UN Climate Change conference (Cop 27) in 2022 highlights that, despite increasing investment in boosting energy efficiency and lowering energy intensity, the building and construction sector’s energy consumption and carbon dioxide (CO2) emissions have rebounded since the Covid-19 pandemic.
With rising real estate demand there comes increasing pressure from sustainability-focused investors. Property consultancy JLL notes that 63 per cent of leading real estate investors strongly agree that “green strategies can drive higher occupancy, higher rents, higher tenant retention and overall higher value”. This means that investors are actively seeking more sustainable ventures.
In a bid to stay ahead of the curve, over the past decade the UAE has introduced regulations and standards to incentivise sustainable development. These include Dubai’s green building rating system (Al-Sa’fat) and the Dubai building code, which integrates some sustainability principles; Abu Dhabi’s Pearl rating system (Estidama); and Ras al-Khaimah’s green building regulations (Barjeel) and green public procurement guidelines. More are expected to follow.
“Sustainability is on the strategic agenda in the UAE construction sector,” says Tamara Bajic, associate director – strategy and advisory at engineering consultancy AESG.
“Driven by operational expenditure reduction and green financing schemes, and supported by the UAE’s Net-Zero by 2050 pathway, a growing number of businesses are demonstrating their commitment to decarbonisation.”
Bajic says that developers are driving decarbonisation by investing in low-carbon construction materials and building envelopes; designing for solar energy utilisation; thinking upfront about operational emissions; and planning energy-efficient mechanical, electrical and plumbing systems.
Challenges arise during the implementation process, however, as well as in aligning project requirements with a contractor or supplier’s “decarbonisation maturity”, says Bajic.
At present, in the UAE market there is a lack of visibility into the sustainability processes of suppliers, and limited availability of low-carbon materials and technological solutions. “In most cases, developers cannot directly control emissions from construction activities as they are dependent on outsourced construction contractors,” adds Bajic.
Procurement teams can play a role in spotting the data blind spots and building sustainable procurement systems. “This will be key to influencing the contractors’ business models to take into account product life cycle emissions and activities performed on the construction site, and to implementing carbon-reduction initiatives,” she says.
However, reluctance remains when it comes to overhauling entrenched industry practices, notes Aecom’s Thackray.
“Change within the construction industry is a challenge as the magnitude required is significant and the proposed implementation time is limited,” he says.
Financial barriers also limit the implementation of decarbonisation measures, but this is slowly changing in light of recent commitments made by financial institutions and large clients in the UAE. First Abu Dhabi Bank has committed to lending, investing, and facilitating $75bn in sustainable finance by 2030, while Abu Dhabi Commercial Bank plans to provide AED35bn in green finance by 2030. Meanwhile, Abu Dhabi National Oil Company (Adnoc) is supporting decarbonisation by allocating $15bn for projects focused on clean power, carbon capture and storage and energy efficiency.
“Carbon-reduction initiatives are not necessarily costly if we are looking at the long-term goals,” says Bajic. “In most cases, the carbon reductions have a highly positive impact on the operational expenses, and offer fast returns.”
Working together
As changes are introduced in the industry, and the shift towards the use of sustainable building materials and cleaner fuels picks up pace, it is important to take into account the current footprint of new and existing developments, says Bajic.
“Clients and consultants can then identify initiatives that support decarbonisation and prioritise them by conducting a cost/benefit analysis to understand what is achievable within the company’s absorption capacity.
“This needs to be followed up with clear minimum sustainability requirements for new projects, as well as with incentives to support the scale-up of new technologies and access to renewable energy infrastructure.”
Thackray says that governments and clients can facilitate change through incentivisation schemes to provide tangible benefits to contractors.
“There needs to be a combination of incentives – this includes financiers and organisations establishing contract provisions to drive sustainable practices,” he says.
“Government regulation would be the most effective incentive, however, as failure to comply would have significant consequences. Legislative requirements can thus drive meaningful change to meet sustainability targets.”
Ultimately, the construction industry must take a whole life cycle approach to its projects, from design and procurement through to construction, operations and end-of-life.
“The opportunities lie in the multi-level approach and collaboration for decarbonisation,” says Bajic.
“Once the decarbonisation initiatives are drafted across the value-chain, the involved players must identify areas of collaboration and co-create the delivery of sustainable projects together with designers, architects, suppliers, contractors, and also governments and financial institutions.”
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The UAE’s Emaar Properties and Dar Al-Arkan and Qatar’s Ezdan Holding have also all seen slides of more than 15%. Kuwait’s Mabanee, which rose by 22%, is the one exception in the sector.
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Mouwasat Medical Services, MBC Group, Nahdi Medical and Saudi Logistics Services fell out of the list entirely on the same trajectory. Each had reported FY2025 earnings rises before the decline. What corrected was the valuation, not the operations.
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Regional repricing
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The Royal Commission for Makkah City and Holy Sites has awarded six real estate development deals. The projects, which cover a total land area exceeding 2.7 million square metres (sq m), will require a total investment of SR13.3bn ($3.5bn).
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Saudi property dreams: Read the January 2026 MEED Business Review
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