UAE proves doubters wrong about sustainability

The 28th United Nations Climate Change Conference (COP28) will be organized by United Arab Emirates (UAE) Throughout November and December 2023. The eyes of the world will be on the country, with unprecedented scrutiny of its performance as host of the world’s most important climate conference.

The world media will be quick to highlight the awkward symmetry in efforts by one of the world’s largest producers of hydrocarbons to reduce the environmental impact of global carbon emissions.

The UAE is well aware of this possible criticism and is making rigorous preparations to try to respond to it and ensure the success of COP28.

As part of these preparations, in November 2022, Abu Dhabi Added a day dedicated to sustainability Abu Dhabi Financial Week, an event that previously only focused on fintech. In January 2023, Abu Dhabi Sustainability Week will follow, aiming to be a bridge event to COP28.

These events aim to show the world that Abu Dhabi and the wider UAE intend not only to meet its climate action obligations, but to become a global leader in sustainable development.

Changing the UAE’s perception of sustainability

The Paris Agreement, the outcome of COP21 in 2015, established the Nationally Determined Contribution (NDC) system under which all signatories will declare their greenhouse gas emissions and reduction targets. While the system is non-binding, signatories are expected to update their NDCs every five years and step up climate action over time.

The UAE’s first NDC did not include any emission reduction targets and was only updated in December 2020. The second NDC pledged to cut emissions by 23.5% by 2030 compared to 2016 levels, although an independent research group still considers this “very inadequate” Climate Action Tracker.

In September 2022, the UAE released its third nationally determined contribution, raising the emission reduction target to 31% and including more details on delivery, suggesting that the UAE is putting more emphasis on reducing emissions. It will focus on five priority areas: electricity, transport, industry, waste management, and carbon capture, utilization and storage.

The UAE retained its goal of achieving net-zero emissions by 2050.While some would say these goals are still not ambitious enough, they still require a radical transformation A country built on the production and consumption of hydrocarbons.

Abu Dhabi Financial Week, organized by Abu Dhabi Global Market (ADGM), Abu Dhabi Financial Centre, promoted the country’s strategy to achieve this transformation. The UAE intends to become a hub for companies in the energy transition through increased inward investment and new forms of capital and deals to fund climate action.

Mercedes Vela Monserrate, Head of Sustainability at ADGM, said that “as a hydrocarbon producer, the UAE has an important role to play in the energy transition” and that its net zero strategy “is directly in line with the UAE’s vision of creating new knowledge, new industries over the next 50 years , new skills and new jobs”.

Regulatory coordination

Monserrat said the UAE “is a proven convener on climate and will continue to build on this tradition to drive bold climate action, including through COP28”.

She referred to ADGM’s 2019 Abu Dhabi Declaration on Sustainable Finance, which brought together financial institutions, multilateral organisations, institutional investors and academics to discuss sustainable development initiatives.

Recently, the ADGM published a consultation paper on a proposed comprehensive sustainable finance regulatory framework in line with international standards. This includes rules for sustainability-oriented investment funds, managed portfolios and bonds, and environmental disclosures for ADGM companies.

These types of frameworks have been rolled out in various jurisdictions around the world since the EU launched its own taxonomy in 2020, but Monserrat sees the potential for the UAE to play a leading role in establishing greater international standardization.

The proliferation of different sustainable finance frameworks across multiple jurisdictions carries the risk of “increased complexity, cost and confusion”, Monserrate said. “In a way, sustainable finance has surpassed financial legislation,” she added.

Attracting innovative sustainable companies to the UAE

Another focus of the UAE’s strategy is to be home to some of the world’s most innovative energy and sustainability companies.country, especially dubaiachieved remarkable results foreign direct investment Influx, even in the epicenter of the Covid-19 pandemic.

Over the past decade, the UAE has invested heavily in solar technology and has one of the lowest solar power costs in the world.The country is planning to have Install 5.6GW of solar power capacity by 2026 And set a goal of 50% of energy from clean energy by 2050.

Masdar City, a free zone in Abu Dhabi dedicated to sustainable development, began construction in 2008. Since 2015, it has been home to the intergovernmental organization International Renewable Energy Agency.

Toddington Harper is CEO of Gridserve, an electric vehicle (EV) company that specializes in “solar-to-wheels” services: generating and storing solar energy at scale, delivering it to EVs through a network of charging stations, while also Its customers lease electric vehicles.

Although the company is based in the UK, Harper grew up in Bahrain and saw great potential in the region.

“Do you want to be on the front foot and be a future leader? Or do you want to be a laggard, refusing to change?” Harper asked. “All the evidence I’ve seen, whether it’s initiatives over the past 15 years, Masdar’s work, etc., shows that the UAE understands this and wants to be on the right side of history.”

Harper insists his focus is on driving climate change, and providing services for it, such as the ones he needs to cover the world.

Not only does the UAE offer innovative technology companies a market with the potential to expand, but it also offers access to substantial capital.

Gridserve’s Harper said: “The cost of delivering this infrastructure is a multi-billion pound investment in every region, but this creates a significant opportunity for those interested in an investment of this scale.”

The future of the carbon market

The UAE’s sustainability strategy also appears to be anchored in becoming a major global market for carbon credits. The country has not set a goal of ending gas exploration, but appears to want to offset that by helping companies around the world reduce their carbon footprint.

In March 2022, ADGM announced a partnership with AirCarbon Exchange to create the world’s first fully regulated carbon trading exchange and carbon clearing house.

“ADGM’s regulatory framework allows global market participants to trade carbon credits on a spot basis, just like traditional financial assets, thereby increasing participation in and investment in global carbon reduction and offsetting schemes,” Monserrat said.

In November 2022, Abu Dhabi sovereign wealth fund Mubadala acquired a 30% stake in AirCarbon, further strengthening the partnership.

Nili Gilbert is Vice Chairman of Carbon Direct, which invests in climate technology companies and advises Fortune 500 companies on carbon management. She sees huge potential if carbon markets become efficient, and says companies’ demand for carbon-reduction strategies is growing.

“Societal awareness of ‘greenwashing’ is quite high right now, and it’s not just the reputational risk that most companies have to deal with – it’s the risk of not meeting decarbonization targets,” Gilbert said. “They want to get this right, but it’s hard. The carbon offset market offers a lot of promise, but it’s very complicated at the moment.”

Gilbert visited Abu Dhabi for Finance Week and sees great potential in the UAE and the wider region.

“The harder it is to reduce emissions, the more technical expertise is needed to manage them,” she said. “When we hear leaders in the region talk about building a knowledge economy with local and foreign partners, it really resonates with Carbon Direct because we see a gap between the need to expand the knowledge economy and the ability to meet climate goals Intense intersection”

Abu Dhabi’s potential as a hub for sustainable development

“For a net-zero industrial revolution or a green industrial revolution, we need to get to the scale of the first industrial revolution, which took about 80 years, and now we’re less than 30 years away,” Gilbert said. “So we really need Discuss the drivers of index changes.”

The UAE says it has the tools to effect such exponential change, even as it remains a major hydrocarbon producer. By becoming a hub for sustainable capital and energy transition companies, it believes it can be a global leader in the fight against climate change while managing its own transition in a way that allows its economy to continue to grow.

“The UAE has significant influence in the region as a major oil and gas producer and a world leader in renewable energy,” Monserrat said. “Because of this, the country’s Net Zero strategy initiative will resonate widely by encouraging neighboring countries to follow the same path and drawing attention to the UAE’s innovative approach to addressing the climate challenge.”

COP28 will ultimately test whether the UAE’s strategy has the support of the rest of the world.