COP28 controversy and the challenge of energy transition in the Gulf

With a COP28 deal to transition away from fossil fuels, speeding up the energy transition and economic diversification will help Gulf countries protect the needs of future generations and avoid costly consequences of delayed action.

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COP28 in Dubai marked the second time a COP has been hosted in the Gulf region since 2012. The selection of the United Arab Emirates (UAE) as host raised questions not only about its ability to deliver on the COP agenda but also drew attention to its socio-economic context and its equitable contribution to addressing climate change.

Serious questions were raised as to whether the UAE and its oil-producing neighbours were genuinely committed to meaningful action.

Concerns about the credibility of the UAE as COP28 host were due to its status as a major oil producer and the appointment of Dr Sultan al-Jaber, the head of the state-owned Abu Dhabi National Oil Company (ADNOC), as COP28 president-designate. Serious questions were raised as to whether the UAE and its oil-producing neighbours were genuinely committed to meaningful action, as opposed to engaging in lobbying and greenwashing during COP discussions.

The Gulf region is home to approximately 30 per cent of global petroleum reserves and 20 per cent of total natural gas reserves. While Gulf countries are adopting efforts to speed up economic diversification, oil and gas exports still dominate their export profiles and government revenues.

The Gulf region is also at the forefront of extreme climate challenges, and oil and gas resources have played a key role in helping these countries cope with such challenges. The UAE experienced a 50°C heat record in July 2023, a temperature that is becoming more common in a region that heats twice as fast as the rest of the world. The climate summit itself experienced warmer-than-normal December temperatures.

Climate models suggest, in a worst-case scenario, the region will experience a heating of 5°C by the end of the century, exacerbating existing challenges such as water scarcity, desertification, biodiversity loss and food security, as well as extreme weather events such as sand and dust storms.

Air conditioning makes up 70 per cent of Gulf Cooperation Council (GCC) peak electricity consumption, 97 per cent of which is met by power generated from oil and gas resources.

Air conditioning makes up 70 per cent of Gulf Cooperation Council (GCC) peak electricity consumption, 97 per cent of which is met by power generated from oil and gas resources. The region is also home to more than 45 per cent of global water desalination capacity and supplies more than 50 per cent of fresh water needs for countries like Bahrain, Kuwait and Qatar. This outlook is expected to continue, putting pressure on oil and gas supplies and financial resources needed to secure the expansion of thermal desalination plants. Oil sales have been also instrumental in securing the nearly 50-90 per cent of food that Gulf countries needs to import, given the region’s limited arable lands.

The role of fossil fuels in Gulf economies made the question of phasing out fossil fuels a particularly contentious issue at COP28. A second draft of the negotiating text had removed previously floated mentions of phasing out fossil fuels, causing anger and frustration among countries and campaigners calling for such wording to be included. However, a compromise was reached and the final text includes a commitment to ‘transitioning away from fossil fuels in energy systems’ in a ‘just, orderly and equitable manner’.

Despite the role of oil and gas in Gulf economies, these countries are shifting from a defensive position to strategic engagement with the global energy transition, but ensuring that energy transition aligns with their national economic transformation goals and does not jeopardize their ability to address challenging climate conditions.

All Gulf states, except Qatar, have committed to achieving net-zero emissions around 2050 and have increased investments in clean energy. Renewable energy installed capacity has increased from 67 megawatts in 2012 to 5,672 megawatts in 2022, and 85-fold increase in less than a decade. The region is also home to 14 hydrogen projects due to go online later this decade.

The Gulf position is that to keep 1.5°C within reach the focus should be on addressing emissions, rather than the origins of the emissions.

However, Gulf nations also plan to continue oil and gas production. Such plans will go ahead despite a COP28 decision that calls on countries to transition away from fossil fuels as the final text does not call for a phase-down or phase-out of fossil fuels in a specified timeline.

The Gulf position is that to keep 1.5°C within reach the focus should be on addressing emissions, rather than the origins of the emissions, arguing that greenhouse gases are emitted on the consumer end. They have therefore joined various global forums to cut greenhouse gas emissions.

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It was a focus at COP28 too, where five declarations aiming to cut greenhouse gas emissions were announced, including commitments by 50 oil and gas companies to reduce reducing methane emissions by 2030 and fully decarbonize by 2050, and commitments to tripling nuclear energy capacity by 2050 and renewable energy capacity by 2030.

Plans to expand oil and gas production in the Gulf, while advocating to scale up carbon capture and storage (CCS) and carbon dioxide removal (CDR), underscore Gulf countries’ attempts to align the energy transition with their economic aspirations. But financing these investments, as well as other clean energy options such as energy efficiency, renewable energy and hydrogen, currently remain heavily reliant on oil revenues.

However, as long as fossil fuels continue to dominate Gulf economies, they will remain vulnerable to oil price fluctuations. With a COP28 consensus to transition away from fossil fuels, there is also the looming challenge of oil and gas demand peak, which the International Energy Agency predicts will be by 2030. By speeding up the energy transition and diversifying from heavy dependence on a single commodity, Gulf countries will be able to protect the needs of future generations and avoid costly consequences of delayed action.

This transition will be challenging, but the region can harness its financial capacities and transferable skills to gradually transition to a post-oil, climate-compatible economy.