Sustainability in the UAE

With the discovery of oil in 1958 and its independence in 1971, the UAE rapidly grew to become one of the world’s wealthiest nations by the production and shipping of oil. Today, oil exports account for 30% of the UAE’s GDP, and approximately 97% of its energy consumption comes from oil and gas. In our current political climate, where fossil fuel producers are often subject to criticism, oil-dependent economies tend tobe unpopular with commentators, but two crucial questions present themselves: How do the UAE’s ESG plans compare to other oil economies? More importantly, how does the UAE’s plan compare to the world’s most sustainable economy? Norway might give us the answers to both.

A historically wealthy country, Norway’s economy has always relied on raw materials and was recently named the most sustainable country on the planet. However, since the 1970s Norway has built its economy on oil and gas, deindustrialising its economy and letting its traditional fish and timber exports take a back seat. Nowadays, oil and gas account for nearly 20% of Norway’s GDP equating to 62% of its total exports and 31% of the EU’s gas imports. How, then, have Norway and the UAE, two nations heavily reliant on oil, mapped out their futures?

The Norwegian government has stated its desire to become a ‘low-emission economy’ by 2050, and in signing the 2008 Climate Change Act bound itself to cut emissions by 80-95% of 1990 levels by 2050. Furthermore, in early 2020 the government submitted its enhanced Paris Agreement target stating that the nation would reduce its emissions by at least 50% by 2030 (improved from its original 40%), which would result in a decrease of approximately 19 megatons of CO2 (MtCO2) from today’s levels. One of Norway’s key focus areas is its shipping industry, which it aims to clean by halving domestic fishing and shipping vessel emissions and achieving emission-free ‘green ports’ by 2030.

Norway has also promised investment in both research and deployment of green technology. In 2018 it proposed a research budget equivalent to $50 million for environmentally friendly research, more recently, in May 2020 it proposed a green transition package equivalent to $400 million. Alongside this announcement, Norway also put forth a hydrogen strategy that leans towards hydrogen production through natural gas reformation with carbon capture and storage (CCS) and began to champion ammonia as the fuel of choice to decarbonise its high-emissions transport sector. Whilst Norway’s long-term goal should be to generate ‘green hydrogen’ via electrolysis (an inherently more efficient process), it is widely accepted that ‘blue hydrogen’ will be the primary driver of the Hydrogen Economy in the coming years. Furthermore, with Norway’s large landmass and access to spent oil fields, it has the perfect environment for underground CO2 storage. Therefore, if managed correctly, Norway has the opportunity to continue exploiting its gas reserves whilst minimising emissions.

A continent away, the UAE has promised to cut emissions by 30% by 2030, equating to approximately 60 MtCO2, three times Norway’s commitment. Furthermore, the nation has been investing heavily in renewable projects. The emirate of Dubai is particularly strong in ESG, announcing that as part of its Dubai Clean Energy Strategy 2020 a $27.4 billion Dubai Green Energy Fund, aimed at facilitating clean energy loans to help reach its target of 75% clean energy by 2050. Considering the UAE’s near-total dependency on fossil fuels, this is one of the most ambitious energy targets in the world. Furthermore, without the vast water resources that have enabled Norway to run 40% of its economy on hydroelectricity, the UAE has long been confined to less flexible renewables such as solar and wind, whose intermittent output limits its scalability without the development of good battery technology.

Nevertheless, the emirates have been investing heavily in what is available to them. Abu Dhabi, which possesses the vast majority of the UAE’s oil resources, is expecting to complete the Al Dhafra project in 2022, which will be the world’s largest single-site solar farm and will also generate the cheapest solar energy in the world. In 2020 the UAE also began operating the first of four reactors at its Barakah nuclear power plant, a $32 billion project which will produce 25% of the nation’s energy when it is fully operational.

Another of the UAE’s significant undertakings is the construction of Masdar City. Expected to be completed in 2030, Masdar was built with the sole purpose of being a sustainable city. Designed to be highly energy-efficient, the city is also home to the Masdar Institute of Science and Technology (now part of Khalifa University), which offers free tuition to students focused on clean energy research. However, Masdar has been subject to controversy owing to delays in completion, curtailing of energy targets, and a lack of inhabitants, however, given the ambition and scope of the project it could be argued that some failings were inevitable.  These shortfalls notwithstanding, Masdar is a strong example of the UAE’s commitment to a sustainable future.

Norway’s sustainability has been the centre of praise in recent times, and its government has certainly implemented ambitious policy and put forth impressive packages for the transition to a greener economy. The UAE could learn from Norway’s method of integrating green technology into its current system. Norway’s hydrogen strategy enables it to preserve its enormous gas industry whilst cutting emissions, and with some of the largest gas reserves on Earth, such a strategy would be perfectly suited to the UAE. Adopting this strategy with integrated CCS would also enable enhanced oil recovery by pumping CO2 deep into wells, pushing out more oil and trapping the greenhouse gas below.  

In absolute terms, the UAE has made much more significant promises than Norway. From its clean energy transition to its commitment to carbon cuts three times the size of Norway’s, the UAE has undoubtedly set itself lofty goals and seems to have taken the lead in its green ambitions. It would be a mistake, however, to neglect the fact that the UAE is a much greater polluter than Norway, and as such should be expected to do more to decarbonise. Likewise, it would be a mistake to overlook the UAE’s relative lack in flexible natural resources, and it must be acknowledged that decarbonising is a more arduous process for the small, arid nation than for Norway. The next steps for the UAE should be to integrate low-carbon solutions to leverage its natural resources in a sustainable way. It has already begun the process with solar energy, and could revolutionise its critically-important fossil fuel industry under a Norway-style hydrogen strategy.

Analytics by Jacob Armstrong