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The Big Picture

UAE's Net-Zero Pledge Raises Stakes for Mideast

Copyright © 2021 Energy Intelligence Group
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  • After the United Arab Emirate's widely commended net-zero pledge, the focus is shifting to implementation.

  • Regionally, the target fuels competition, adding pressure on others to follow suit.

  • Longer term, the move might sharpen the regional divide between energy transition movers and laggards.

Setting ambitious goals is one thing, delivering on them another. With climate action set to top the agenda of world leaders in the coming weeks, many will be asking how the UAE plans to deliver on its pledge made late last week — the first by an Opec member and Mideast Gulf hydrocarbon producer — to achieve net-zero emissions by 2050. So far, details are sparse. A detailed road map has yet to be revealed.

But what's clear is that renewables, nuclear power and carbon capture, utilization and storage (CCUS) will play crucial roles, as will initiatives aimed at driving efficiencies in local industries and buildings with the help of advanced, fourth-industrial revolution (4IR) technologies. There will also be a push to increase domestic nature reserves and natural spaces that could work as carbon offsets, and to develop cleaner fuel alternatives such as blue and green hydrogen. Still, there is no doubt that reaching the target will be a tricky balancing act — and that the UAE will face intense scrutiny, particularly from climate advocates skeptical of offsets.

The country's net-zero declaration comes at a time when both oil and gas capacity expansions are under way in Abu Dhabi and other emirates such as Sharjah. Indeed, the country remains committed to boosting oil production capacity to 5 million barrels per day from 4 million b/d and achieving gas self-sufficiency, both by 2030, as it seeks to speed up the monetization of its reserves. It is betting that its lower-cost, lower-carbon resources give it a competitive advantage despite the expected, inevitable decline in fossil fuel demand in the future. To help it meet its net-zero target, it is expected to roll out CCUS technology, which has significant potential to reduce global emissions, on a greater scale.

Neighbors in Focus

The UAE's hydrocarbon-rich neighbors such as Saudi Arabia and Qatar, neither of which has made any net-zero commitments yet, will be watching closely. Whether they will be able to follow suit — and possibly even announce more ambitious climate commitments at the upcoming COP26 conference — is far from clear. Both have less diversified economies than the UAE's, which means they may want more time before making similar pledges. Arguing against adopting net-zero targets sooner rather than later could be more difficult in the wake of Abu Dhabi's move, however.

“The UAE is getting ahead of these issues and is taking a more regional lead. It is kind of a competition, with the UAE taking a step ahead. It does put pressure on regional competitors to respond in some way,” said Robin Mills, CEO of consultancy Qamar Energy.

Against this backdrop, there can be no doubt that the UAE's move will have repercussions, both for its peers in the Mideast Gulf and for the wider region. US Special Climate Envoy John Kerry said the UAE strategy was “an example for other energy-producing nations,” calling for “strong action in this critical decade.” Kerry has paid several visits to the Mideast Gulf since taking on his role in the Biden administration earlier this year, including to the UAE and Saudi Arabia.

“John Kerry's statements should be paid attention to. Kerry acts kind of like a second secretary ... he's doing a lot of back-channelling on a number of issues,” said one US-based observer of regional affairs.

The UAE's neighbors have yet to respond and outline any potential adjustments to their own climate strategies. These acknowledge the need to speed up energy transition responses, including by diversifying their economies away from hydrocarbons, but also assume that fossil fuels will continue to be essential in the global energy mix until at least 2050. That assumption is likely to have contributed to refraining from setting net-zero targets so far. But, says Mills, “a zero-carbon target doesn’t mean they will stop exporting oil and gas, and I expect they will still export oil and gas by 2050. So diversification is not as much an issue as how to decarbonize the local economy.”

Intensifying Competition, Including on Climate

The UAE's edge is rooted in a combination of factors. The country has a more diversified economy and is less reliant on hydrocarbon income than other Gulf producers. It has also made greater advances in the renewables space since it launched the Masdar clean energy initiative in Abu Dhabi in 2006, while plans in Abu Dhabi to boost CCUS capacity more than sixfold to 5 million tons per year are already under way. Its 5.6 gigawatt Barakah nuclear power plant, which will be fully operational later this decade, will allow the UAE to produce a large chunk of its electricity with a minimal carbon footprint in the future.

As such, the country's decision to move first in the region on making a net-zero pledge doesn't come entirely as a surprise.

It is not clear whether Saudi Arabia, the UAE's key regional ally, was aware of its neighbor's net-zero plans before they were announced on Oct. 14. Either way, the move will intensify competition between the Arab world's two largest economies as they position themselves for the energy transition and pursue their national interests more assertively, a trend that intensified over the past 18 months as both dealt with the fallout from Covid-19.

Abu Dhabi has adopted diverging positions on several issues, reflected in some of its decisions in Opec and its withdrawal of troops from the Yemen conflict. It also moved to normalize ties with Israel, a decision seen to support its ambitions to diversify the domestic economy further away from hydrocarbons.

Regional competition also intensified after Riyadh ramped up the pressure on international companies working with the government to relocate their headquarters to the kingdom — a direct challenge to Abu Dhabi. For decades international firms favored setting up their regional headquarters in the UAE and in particular the emirate of Dubai, which provides expatriates with preferable living and working conditions relative to other countries in the region.

Positioning itself favorably vis-a-vis the world by committing to net zero, could work in the UAE's favor as it seeks to attract foreign investment and technology, including in clean energies. This in turn could widen the gap between energy transition first movers and laggards.

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