meed-logo

line1 line2 line3
SIGN IN / REGISTER

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.”

https://image.digitalinsightresearch.in/uploads/NewsArticle/10937444/main.gif
Mehak Srivastava

Register for MEED's guest program now to access this article.

Click here to register
Exclusive from Meed
Related Articles
  • Hormuz crisis revives 1970s-style energy shock

    5 May 2026

    Commentary
    Colin Foreman
    Editor

    Read the May issue of MEED Business Review

    The conflict with Iran is threatening to recalibrate the global energy system. The effective closure of the Strait of Hormuz has caused an energy security crisis reminiscent of the shocks of the 1970s – both in scale and in its potential long-term implications.

    The 1973-74 energy crisis, triggered by an Opec oil embargo, sent prices soaring and altered the trajectory of the global economy. It spurred the creation of the International Energy Agency, the development of strategic petroleum reserves and a wave of energy-efficiency policies. It also cemented energy-for-security arrangements between the West and the Gulf – relationships now being tested again by the latest conflict.

    Today’s disruption – 11 million barrels of oil a day and around 20% of global liquefied natural gas (LNG) shipping capacity – creates a deficit that far exceeds the roughly 5 million barrels a day removed from the market in 1973. 

    While the shocks of the 1970s ushered in a decade of stagflation and a lasting shift towards diversified supply, the current crisis could accelerate demand destruction and a pivot towards energy sovereignty.

    The story is a developing one. From Vietnam’s cancellation of LNG projects in favour of renewables to the surge in electric vehicle adoption across Europe, the perceived unreliability of traditional supply routes is forcing an unprecedented reorientation of capital. 

    The Middle East – long the indispensable heartbeat of global industry – now risks sustained challenges to its market share as producers in the US, Russia, Africa and South America develop new projects unencumbered by reliance on the Strait of Hormuz.

    The structural changes taking root in 2026, like those in 1974, will outlive the conflict itself. Even a swift cessation of hostilities may not allow markets to return to their pre-conflict norms. 

    READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here

     

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16685390/main.gif
    Colin Foreman
  • Brookfield to double down on Gulf investment

    5 May 2026

    Brookfield CEO Bruce Flatt has said the asset and alternative investment management company intends to increase its investments in the Gulf, despite the ongoing conflict in the region.

    When asked whether the war is changing the way he thinks about the Gulf region during an interview with CNBC at the Milken Institute Global Conference on 4 May, he said: “No, short answer no – in fact, [we’re] doubling down, we are doing more.

    “When you find great businesses, countries, great people, and the market offers you an opportunity to invest when others are not, it is always the best opportunity in the world, so we are doing more. We have been there for 25 years; we are continuing to do all of the investments we have there, and we are going to do more.”

    Flatt suggested the current period of geopolitical stress could accelerate long-term economic strengthening across the Gulf, arguing that governments and businesses will respond by investing in self-sufficiency and strategic infrastructure. “They will eventually build better countries because of this,” he said.

    Flatt added: “They’re going to build resiliency in all their systems. They’re going to build their own artificial intelligence (AI). They’re going to build their own pipelines to the coast. They’re going to do things they didn’t do before. They have to do it. They probably should have, but they’re going to now, and they’re going to be more resilient.”

    UAE meetings

    Flatt has also travelled to the region since the conflict began on 28 February, meeting senior UAE officials to discuss investment opportunities and deepen cooperation. In Abu Dhabi on 9 April, he met Sheikh Khaled Bin Mohamed Bin Zayed Al-Nahyan, Crown Prince of Abu Dhabi and Chairman of the Abu Dhabi Executive Council. The meeting explored ways to strengthen cooperation in investment and asset management between UAE-based institutions and Brookfield, in line with global economic trends and evolving market demands.

    Two days later in Dubai, Flatt met Sheikh Maktoum Bin Mohammed Bin Rashid Al-Maktoum, First Deputy Ruler of Dubai, Deputy Prime Minister, Minister of Finance and Chairman of the Dubai International Financial Centre (DIFC). During the meeting, both sides explored opportunities to expand cooperation, highlighting the UAE and Dubai’s value proposition for global investors, including an integrated financial system, a flexible and advanced regulatory environment and world-class digital infrastructure. Discussions also covered Dubai’s role as a bridge between East and West, and the emirate’s emphasis on long-term partnerships and a transparent, business-friendly environment.

    Qatar partnership

    Brookfield’s regional activities are not limited to the UAE. In late 2025, the firm and Qai – Qatar’s AI company and a subsidiary of Qatar Investment Authority – announced a strategic partnership to establish a $20bn joint venture focused on AI infrastructure in Qatar and select international markets. The venture is expected to support Qatar’s ambition to become a hub for AI services and infrastructure in the Middle East. It is slated to be backed through Brookfield’s Artificial Intelligence Infrastructure Fund, part of a broader AI infrastructure programme targeting up to $100bn in global investment.

    Brookfield Infrastructure maintains a vast and diversified global portfolio characterised by high-barrier-to-entry assets across five core sectors. The data infrastructure segment has become a primary growth engine, currently comprising 150 data centres with significant operating capacity and about 308,000 operational telecom sites. In the utility and energy midstream space, the firm manages over 1,900 miles of electric transmission lines and a network of 2,100 miles of gas pipelines. The transport sector is another cornerstone of the portfolio, anchored by 22,500 miles of rail operations.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16686052/main.gif
    Colin Foreman
  • Insurers will only cover a fraction of war damage to oil and gas facilities

    5 May 2026

     

    Insurers are expected to cover only a fraction of the damage to oil and gas facilities in the Middle East caused by the regional war, according to industry sources.

    Standard industrial property and business interruption policies typically exclude damage and disruption caused by acts of war. Companies therefore need specialist war-risk insurance or political violence and terrorism (PVT) insurance to be eligible for payouts.

    While most state-owned national oil companies (NOCs) are likely to have arranged this type of cover for major facilities, it is less common among smaller private or publicly traded companies.

    As a result, many assets – such as smaller fertiliser plants and chemical facilities – are expected to be uninsured for war-related damage.

    “War insurance was never a widely purchased product in the region,” said one source. “It’s one of these things that people never really believe is going to happen.

    “In a lot of companies, spending hundreds of thousands of dollars every year for this kind of product was seen as something they couldn’t really justify.”

    Even companies that purchased war-risk or PVT insurance before the US and Israel attacked Iran on 28 February are unlikely to be covered for the full extent of war damage.

    War-risk insurance for large assets such as oil refineries or LNG terminals typically carries limits of $200m to $500m.

    In many cases, repairs to the region’s large and complex oil and gas facilities are likely to cost billions of dollars.

    One source said: “If you had, for example, an oil refinery that’s worth $8bn, you couldn’t really buy a war insurance policy to cover the price of a complete rebuild.

    “There just isn’t enough insurance capacity in the market to buy that level of cover.

    “Very often NOCs were buying cover at the highest level they could find, but this was limited by what markets were prepared to insure.”

    Payout timing

    Full insurance settlements for war damage are expected to take significant time – potentially 18 months to two years for some policyholders.

    Payments typically begin with an initial payout of around 20%-30% of the total claim. This is followed by a second payment mid-project – usually once engineering is complete – and then a final payment.

    In most cases, projects to rebuild and repair damaged oil and gas facilities are not expected to be delayed while owners wait for insurance proceeds.

    One source said: “A lot of the owners of these damaged facilities don’t see the current situation as the right time to start rebuilding, but that isn’t because they are waiting for insurance money.

    “The risk of new attacks and more damage is still high, and they are going to want to wait for signs of more stability before they start rebuilding.”

    Experts believe that once the security environment improves, facility owners will begin tendering repair and reconstruction contracts even if insurers have not settled claims.

    “A lot of the companies that operate oil, gas and chemical facilities in the region have access to funds that will allow them to rebuild without being reliant on insurers,” said one source.

    “Even if they have a policy that they expect to pay out, it is likely that they will go ahead with the project before receiving full payment if they think it is the right time to rebuild.”

    Once the security environment improves, the cost of rebuilding fully destroyed units is expected to be higher than when they were originally constructed, due to multiple rebuild projects progressing in parallel across the region.

    This is likely to drive a spike in demand for skilled labour and materials, pushing up costs.

    Market impact

    Insurers providing this type of cover in the region have generally experienced several years of low payout levels, so they are expected to meet claims with limited financial strain.

    However, the volume of claims stemming from the US and Israel’s war with Iran is expected to harden the war-risk and PVT insurance market, increasing premiums for owners of oil and gas facilities for some time.

    Ultimately, the limited scope of coverage means the financial burden of the war will fall more heavily on asset owners than on insurers.

    Even where cover is in place, policy limits mean insurers will only partially offset the cost of rebuilding large facilities, leaving companies and governments to bridge funding gaps.

    The experience is likely to prompt a reassessment of risk across the region’s energy sector, with lenders and investors placing greater emphasis on potential political violence-related damage when evaluating projects.

    READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16683871/main.jpg
    Wil Crisp
  • Oman seeks adviser for hydrogen-based IPP

    5 May 2026

    Oman’s Nama Power & Water Procurement Company (PWP) has issued a tender for technoeconomic consultancy services for power generation using green hydrogen.

    The offtaker said it intends to appoint a consultant to undertake an initial assessment for the development of a new independent power project (IPP).

    The plant is expected to be capable of operating on up to 100% hydrogen with an indicative generation capacity in the range of 800MW to 1,000MW.

    The bid submission deadline is 21 June.

    To date, hydrogen deployment has focused mainly on production and export projects, while power generation activity remains largely limited to pilot schemes rather than utility-scale, fully hydrogen-fired plants.

    According to a typical IPP development timeline spanning feasibility, procurement, financing and construction, the potential plant would be unlikely to enter operation before the early 2030s.

    Nama PWP also recently issued a separate consultancy tender seeking services to support ESG policy development.

    The deadline for firms to submit offers is 10 May.

    READ THE MAY 2026 MEED BUSINESS REVIEW – click here to view PDF

    Global energy sector forced to recalibrate; Conflict hits debt issuance and listings activity; UAE’s non-oil sector faces unclear recovery period amid disruption.

    Distributed to senior decision-makers in the region and around the world, the May 2026 edition of MEED Business Review includes:
    To see previous issues of MEED Business Review, please click here
    https://image.digitalinsightresearch.in/uploads/NewsArticle/16683857/main.jpg
    Mark Dowdall
  • NCP seeks firms for healthcare PPP project

    5 May 2026

    Saudi Arabia’s Ministry of Health, the Ministry of Defence and the National Centre for Privatisation & PPP (NCP) have issued an expression of interest and request for qualification (RFQ) notice for the Chronic Kidney Disease Care and National Dialysis Services project.

    The notice was issued on 4 May, with a submission deadline of 15 June.

    The project will be delivered as a public-private partnership (PPP) under a design, repurpose, finance and maintain (DRFM) model, with a six-year contract term.

    NCP said the initiative supports Saudi Vision 2030 by increasing private sector participation in the healthcare sector.

    The project is structured into four packages, each covering a minimum number of patients across multiple regions to ensure wide geographic reach and improved access.

    Selected operators will be required to provide the necessary facilities, equipment and information technology systems, as well as supply qualified personnel. They will also manage clinical services – including in-centre haemodialysis, home haemodialysis, peritoneal dialysis, vascular access and outpatient services – alongside non-clinical operations.

    In January, Saudi Arabia launched a National Privatisation Strategy, which aims to mobilise $64bn in private sector capital by 2030.

    The strategy builds on the privatisation programme first introduced in 2018. It will focus on unlocking state-owned assets for private investment and privatising selected government services.

    In a statement, NCP said the new strategy comprises 147 opportunities drawn from a broader pipeline of more than 500 projects across 18 sectors.

    https://image.digitalinsightresearch.in/uploads/NewsArticle/16683825/main.gif
    Yasir Iqbal