A Clean Energy Superpower

This article aims to analyze certain directions in the UK’s and UAE’s climate policies and renewable energy investment trajectories. Additionally, it plans to assess whether the UAE is, as was described by Edward Hobbart, British ambassador to the UAE, becoming a “clean-energy superpower.”[1] It begins by mapping respective climate achievements and objectives and then attempts to sketch synergies in the bilateral relationship. A particular area of focus for this Strategic Insight will be cooperative structures for investment and technological exchange. Furthermore, this research aims to portray how the UAE is positioning itself as an innovator and pioneer in the energy economy of tomorrow through a focus on technological-driven sustainability solutions. More broadly, this paper aims to analyze whether the UAE’s environmental policymaking is becoming a strength. Ultimately, this Strategic Insight  seeks to demonstrate that a primary global contribution of the UAE to the fight against the climate crisis, using the UK as a case study, is an impressive mobilization of public and private capital and capacity-building cooperation for renewable energy projects. 

Should the world fail to act, the UAE could face temperatures “intolerable to humans”[2] and outside the “human climate niche.”[3] During the hottest month ever recorded, temperatures crossed 50°c for the first time.[4] The aggravated severity of heat waves, ocean warming, dust storms, biodiversity loss, water scarcity and air pollution, would be unfavorable. Concurrently, the world’s GDP, according to the G30, a grouping of economists, retired central bankers and finance ministers, could be up to 25% lower due to higher sea levels, food insecurity, more frequent heat days and natural disasters.[5] Therefore, economic models that embrace the renewable revolution are essential for economic growth and human flourishing. The UAE, despite a hydrocarbon legacy, is proving to be present in this endeavor. 

The UAE, according to Director of Clean Energy at Masdar, Bader Al-Lamki, recognizes that hydrocarbons will “diminish” and that diversifying its mix will be paramount for a continued notable presence on the “global stage.”[6] Accordingly, development strategies, namely “We Are the UAE 2031,” stipulate the government’s “vision” for the next decade, which includes the opportunities of sustainable technologies. Thematically, a “Forward Economy,” and “Forward Ecosystem,” are married to a “Forward Diplomacy.” As was reported by Emirates News Agency, “the plan attaches great importance to strengthening the UAE’s role as supportive for the global environmental agenda, thus contributing to achieving qualitative leaps in climate neutrality and consolidating the country’s position as an innovation hub in sustainability, science and technology.”[7] This may reflect a larger development strategy to become an “innovation hub and knowledge economy.”[8] The impetus of this energy, and economic, transition pathway may stem from “reduced demand for hydrocarbons” posing an “existential threat” to economies across the Gulf.[9] In 2021, 55% of the UAE’s exports were hydrocarbon exports, and 84% of government revenue came from hydrocarbons exports. Consequently, sustainable alternatives, energy-related and otherwise, are necessary for a post-hydrocarbon world.[10] 

Complimenting this “Forward” facing approach, the UAE has made an active effort to comply with and be a leader in international climate architecture. The UAE, along with many other Gulf countries, has a commitment to reach net zero. It was the first nation in the MENA region to make this pledge, and the deadline is commendably by 2050 as opposed to 2060.[11] Furthermore, the UAE was the first nation in the Middle East to sign the Paris Agreement.[12] 

Existing global governance architecture obliges only acceptance of scrutiny under the ‘pledge and review’ system,[13] whereby, as agreed in Paris 2015, “there would be transparency in the reporting of national commitments,” through Nationally Determined Contributions to reduce GHG emissions, “but no targets binding on any nations in any shape or form.”[14] 

On the front of sustainable technology, the International Renewable energy Agency (IRENA), the intergovernmental organization that supports countries in their sustainable energy transition, is headquartered in Masdar City. This represents the UAE’s newfound leadership role. Most relevantly, beginning this November, in the dubbed “Year of Sustainability,” the UAE will be the third member of OPEC to host the Conference of the Parties,[15] an annual meetings of countries under the United Nations Framework Convention on Climate Change.[16] Taken together, that a nation with the seventh-largest proven reserves of oil, and on the back of hydrocarbons became the second largest economy in the Middle East,[17] has integrated into the structures and effort to mitigate the climate catastrophe is seminal. 

The UAE’s pledges, likewise, demonstrate a recognition of the need to reduce emissions. In the UAE’s third update to its second Nationally Determined Contribution, the revised and strengthened 2030 targets “that responded to Glasgow Climate Pact,[18] the UAE has pledged to cut emissions by 40%.[19] 

In renewable energy development, the UAE is making prodigious strides. As will be elaborated upon, Masdar, the Abu Dhabi Future Energy Company, operates in 40 countries across six continents with investments in projects worth over $30bn.[20] For instance, in the month before COP28, Masdar has partnered with Africa50, an investment platform for clean energy projects across the continent, and pledged $4.5bn with the aim of speeding up developments that hope to supply 100 million people with clean electricity across the continent by 2035.[21] Moreover, domestically, the National Energy Strategy 2050 supplies a blueprinted reality to a net zero vision. An update to the plan, made this year, commits the tripling of investment in renewables over the next seven years, and that 30% of the overall mix to be renewably provided by 2030.[22] This includes a sizable amount of 150bn to 200bn dirhams. Therefore, the UAE’s detailed programs and capital can move mountains in GHG reduction efforts. Additionally, the National Energy Strategy 2050 outlines as a priority to become a “leading” hydrogen producer by 2031 and an aspiration to occupy a quarter of the world’s total low-carbon hydrogen production.[23] Furthermore, the  National Hydrogen Strategy 2031 also indicates the UAE’s inclination toward partnerships and international investment opportunities in a hydrogen economy. This demonstrates an acceptance of the opportunities in a post-oil, ‘post-hydrocarbon’, economy and a willingness to lead the region in a net zero transition. Saliently, the UAE led the Gulf region in economic liberalization and is thus no stranger to dynamic development.[24] Hence, the UAE is adopting an innovative posture on renewable energy and its growth opportunities. Going forward, it will be essential to understand that the UAE’s approach to net-zero will be a “pro-climate, pro-growth strategy”, and this promises scope for bilateral investment.[25] 

The coming global stocktake will, according to Dr. Sultan Al Jaber, President-designate of COP28, demonstrate the global community is “way off track”, in that global emissions are not on track to fall 43% by 2030, and thus there may be an expectation of dramatic change and remedy from the conference.[26] However, there is little precedent for such change at former COPs. Former UK prime-minister Gordon Brown has described Copenhagen 2009 (COP15) as “a tragic comic event with elements of farce.”[27] He describes how the Chinese delegation questioned the right of the Danish Prime Minister to chair the conference.[28] Moreover, the commitment of $100bn per year, agreed at COP15, in climate finance from rich countries to coastal and poorer nations has not even nearly been met, and is again a topic at COP28.[29] The second pillar enumerated by Dr. Al Jaber of his four-pillar strategy, “fixing climate finance”, would therefore likely encounter challenges.[30] The global community, during the COVID-19 pandemic, was tested with regards to the propensity of rich nations to provide capital and resources to poor nations during a crisis, and the results were unsatisfactory.[31] Moreover, COP26 ended with its president, Alok Sharma, weeping as he apologized for a late amendment that changed the wording in the draft text to “phase down” from “phase out” regarding coal.[32] Tellingly, the debate on this terminological dispute has already begun in the runup to COP28, although Dr. Al Jaber has stated that the “phasedown of fossil fuels is inevitable.”[33] Unfortunately, aside from the Montreal Protocol 1987,[34] international summits rarely exact binding and enforceable agreements related to the climate crisis. It is a “super-wicked-problem”[35] and concerns to do with free-riding and domestic disadvantage mean that, until an international system of burden-sharing is established, climate finance will remain ‘passing around the begging-bowl’. 

Seeing green to feeling blue: Declining investment in UK renewables 

The logic of “economics is geopolitical, and geopolitics is economic”[36] is not uniquely practised in the Gulf. The challenges for action on the climate-crisis can be attendant to political and ideological objectives that accompany changes in local and international landscapes. A recent reminder of this came during the energy crisis of 2022.[37] Albeit, firstly, it must be stated the UK has taken considerable action on greening its grid. In 2008, the UK Climate Change Act established the world’s first long-term legally binding framework to reduce GHG emissions.[38] Several of its officials have, thus, claimed the status of ‘global leader’. In 2019, this was updated to a reduction of 78% by 2035.[39] Furthermore, renewable electricity generation has reached 47.8%[40] of total generation. The pace of this transition, however, like many other parts of the UK economy, has become sclerotic. Growth in the UK’s low carbon generating capacity is modeled to be the slowest amongst the world’s eight largest economies from now until 2030.[41] In the past three years, global recorded growth in renewable capacity has more than doubled that of the UK. According to Energy UK, the group that commissioned the research, this reflects “low levels of expected investment in the UK”. For instance, the UK’s investment in the energy transition from 2021 to 2022 fell by 10% to $28bn while Germany’s rose by 17% to $55bn.[42] The Liberal Democrat energy and climate spokesperson expressed that this meant the government’s “claims of being world leaders in the energy transition are in tatters.”[43] This also is consequential for the future of the UK economy. After a failed government auction for offshore wind farms in September of 2023, Trade Union Congress general secretary, Paul Nowak, articulated that “the race to net zero is also a race for industrial revival” and that the current government is stuck in “first gear.”[44] 

Additionally, the recent decision to “max out” development by instructing the North Sea Transition Authority to grant up to 100 new licenses for oil and gas exploration, four months before COP28, could be seen, if nothing else, as insensitive.[45] This fits into a larger thematic shift in UK foreign policy. In the 2023 Integrated Review refresh, the “first priority area” for “addressing the UK’s vulnerability is energy security” in big bold characters.[46] Although it is reiterated that this will not come at the cost of decarbonization, the implication is certainly that decarbonization must be coterminous with energy security. 

The Labour Party, should it come to power in the next election, could reverse some of these trends. However, the recent decision to renege on a £28bn a year investment plan in green energy on account of “economic and fiscal responsibility” is uninspiring.[47] The decision taken in June, announced by shadow chancellor Rachael Reeves on BBC Radio 4’s Today Programme, was reportedly part of an effort to enforce spending discipline. Reeves was, more inspiringly, keen to suggest that Labour would build up to the annual £28bn plan by halfway through a first parliament.[48] 

This shows that Britain is committed to net zero, but, in the pursuit of ‘pragmatism’, has other ends and markers of prosperity. Moreover, it suggests that continuing Britain’s net zero transition will require significant, inward, investment that supports projects supplying domestically produced energy contributing toward a high growth economy. Powering Up Britain 2023 is keen to remind a reader, should there be any, “Investment is key” for a “rapid rollout of existing technologies” and for “transformative new ones.”[49] The UAE, with its abundant capital and know-how, and desire for green credibility and leadership, could be a very beneficial post-Brexit partner for a Global Britain. The Integrated Review Refresh does identify the Gulf States as partners for collaboration on renewable energy projects.[50] 

Greener together: An appraisal of existing cooperation, and investment, on renewable energy 

Zooming in on the bilateral relationship, as of 2022, the UAE is the UK’s largest trading partner in the Gulf,[51] and the UK the largest European trading partner of the UAE.[52] This portrays a pre-existing robust economic relationship. This is relevant because COP28 is “drawing attention to” further opportunities decarbonization could bring to boost trade and investment.[53] Even going back to 2008, when Masdar took a 20% in the London Array wind farm, UK leadership has hailed green investment from the UAE as “an excellent example of the partnership we need between oil-producing and oil-consuming countries to develop new energy sources and technologies.”[54] 

The greatest facet of this remunerative relationship has been the Strategic Investment Partnership. Signed in March 2021 as part of the “Partnership for the Future” framework, SIP is the central bilateral investment platform between the two countries. It channels funding into three key areas: the energy transition, infrastructure, and technology. It commits £10bn, over the five years following 2021, in inward investment for the UK.[55] This slush fund will be overseen by the British office for Investments and Abu Dhabi’s Mubadala Investment Company. Therefore, investment from UAE Sovereign Wealth Funds (SFWs), and Government Related Enterprises (GRE’s),[56] are significantly helping renewable projects in the UK. 

UAE SFWs like Mubadala, with an asset base in 2022 of a respectable $276bn, are flushed with capital.[57] Looking through a regional prism, over the past two years, GCC SFWs have grown by 20% on average to reach the better side of $4 trillion. Five of the world’s ten largest investments on behalf of state-owned investors during 2022 were from GCC sovereign investors, and the UAE accounted for 62% of total capital deployed from this pool.[58] However, keen to demonstrate lessons learned from 2008, certain SFW representatives, such as Khaldoon Mubarak, chief executive of Mubadala, have delineated that future ambitions will be tailored to “strategic ambitions”, and investments in sustainable technologies, like SIP, fall under that umbrella. Reportedly, the tumultuous leadership of the UK in recent years did cause some angst on the part of Gulf SWFs.[59] There were, also, issues with the sclerotic bureaucracy of the UK according to Mohammad Al Ramahi,[60] managing director of Masdar. This concern does not, ostensibly, threaten future investment as the January 2023 Clean Energy MoU reaffirms SIP, and celebrates other successes of the bilateral relationship, including those on hydrogen.[61] Continued UAE interest in British renewable energy projects appears certain. 

Masdar has set a target to support at least 100GW in renewable energy capacity by 2030. It has linked this ambition to investments in offshore wind projects such as Hywind Scotland, in which the company has a 25% stake.[62] Moreover, Masdar has purchased UK battery developer Arlington Energy in 2022 and plans to invest £1bn in battery storage technology in Britain.[63] Masdar is also a major investor in the UK Government’s Charging Infrastructure Fund. This substantiates Masdar’s Chief Executive Officer Mohammed Al Ramahi claim, after a deal with the UK’s Octopus Energy, that Masdar’s commitment to the UK will “never change,”[64] or at least, appears to be long-term. Portraying the scale of this relationship, Al Ramahi has articulated that the UK represents the largest share of Masdar’s investment portfolio outside the UAE, totaling £4bn. These projects, according to Masdar, can provide power for approximately one million homes and reduce nearly 2 million tonnes of Co2 emissions a year.[65] 

Masdar is also helping the UK to reach its 10 GW of hydrogen by 2030 target.[66] Incidentally, there are some criticisms of hydrogen, especially blue hydrogen, as a renewable energy source, and whether it perpetuates the use of oil and gas infrastructure that would otherwise be “stranded assets.”[67] However, a report on UAE-UK Clean Hydrogen Collaboration by 2050 outlines that hydrogen could deliver $8.7bn annually to the UAE’s economy and £13bn GVA for the UK. Auspiciously, the report identities that “the UAE and UK have complementary, rather than duplicative, capabilities and goals.” The UK excels at “early-stage innovation” whilst the UAE excels “at later-stage scale-up.” Already, the report notes that the UK and the UAE have the strongest links amongst all studied bilateral relationships.[68] The Memorandum of Cooperation on Industrial and Advanced Technologies, prominently, has cemented collaboration between Britain and the UAE to “become leaders in the hydrogen market.” The primary example of this partnership is ADNOC’s 25% stake in BP’s blue hydrogen project H2Teeisde, the first of its kind investment from ADNOC in the UK.[69] 

Furthermore, Masdar has signed a memorandum of understanding to acquire a stake in BP’s proposed green hydrogen project HyGreen Teeside. Together, these two projects could deliver 15% of the UK’s 2030 hydrogen production target.[70] Additionally, the 2021 strategic framework agreement between ADNOC, Masdar and BP is more evidence of the two countries cooperation on hydrogen.[71] Therein, collaboration for the development of clean hydrogen hubs of at least 1 GW in each nation are planned. The agreement also underscores the partner’s leadership in “technology driven solutions.”[72] 

In conclusion, the UAE is helping the UK to reduce its emissions, improve its energy security and stimulate its economy. Investments like SIP, and incidentally PACE,[73] complemented by the successes of Masdar, are, likewise, helping the UAE to diversify and evolve its economy and “future-proof”[74] its market portfolios. It is further providing the UAE with international credentials as a “responsible stakeholder” in a global-green-new-deal.