A fleeting look at the UAE’s recent sustainability record reveals a slew of obscenely large numbers: $40 billion invested in clean energy over the past 15 years, with a goal of reaching $160 billion by 2050; construction of some of the world’s largest solar projects, including one that met 15% of Dubai’s energy needs in 2022; and a $3.1 billion investment into carbon capture technology by the Abu Dhabi National Oil Corporation (ADNOC) seeking to capture five million tonnes of carbon dioxide by 2030. Compared to its Gulf counterparts, the UAE has demonstrated a strong attempt to diversify away from oil, with a quantifiably high transition readiness — in the top 10 across 12 energy transition indicators.

But environmentalists and general purists have been reticent to laud the nation’s climate efforts, pointing to the booming fossil fuel production that supplements the outward push toward a green economy. Perhaps justifiably, the chief executive officer of ADNOC heading a climate change conference felt inherently contradictory. What does Big Oil have to contribute to the clean energy agenda? It is much better for the oil lobby if the energy transition narrative is that fossil fuels should be reduced, but not phased out. ADNOC, while investing in carbon capture technology, also aims to increase its oil production capacity from 4 to 5 million barrels/day by 2027, receiving approval earlier this year from OPEC to amp up drilling. The UAE’s internal production is increasingly aided by investments in offshore fossil fuel infrastructure in developing economies like Uzbekistan and Azerbaijan. ADNOC’s growth project could lead to over 2.7 gigatons of carbon dioxide emissions, the second highest in the world. The World Economic Forum’s Energy Transition Index, benchmarking countries on their readiness for transition toward sustainable energy systems, ranks the UAE 63rd out of 120 countries globally.

While critics are irked by what they see as Big Oil’s veiled power play to extend its longevity, they are doubly skeptical of the emission reduction methods that are currently employed to limit global warming, carbon capture, and carbon offsetting. ADNOC’s carbon capture efforts aim to scale from 800,000 tons to five million tons by 2030, but studies show that existing carbon removal methods only account for 0.1% of the two billion tons of carbon dioxide removed from the atmosphere by other means, and that carbon removal must increase 30-fold by 2030 to meet the emissions reduction targets of the Paris Agreement. Carbon offsetting relies on excessive reforestation, which is already an uphill task for the arid Middle Eastern desert.

So the UAE finds itself accused of halting a fossil fuel phaseout while diverting away from clean energy. But hosting the world’s biggest renewables conference is not simply a PR move to hypnotize environmental lobbies; the UAE has legitimate interests in protecting itself from climate change.

Foremost on this list is the imminent threat of desertification and drought as a result of global warming. The World Bank estimates that climate-based water scarcity will cost the Middle East between 6 –14% of its GDP by 2050, and arid desert regions with high temperatures are the most vulnerable to drought. The UAE primarily secures its water through large scale desalination plants that are themselves significant carbon emitters and discharge one-fifth of the world’s brine into the Gulf. The UAE’s frequent heat waves and long summers also necessitate significant emissions from air conditioning, with temperatures between 35 – 45 degrees Celsius for 4 – 5 months in an average year. The UAE’s investment in clean energy by itself will not entirely solve the immense carbon footprint.

While the country lacks water, it otherwise has great features for renewables: The UAE’s desert receives over 350 days of sunlight per year as well as plentiful wind. The Mohammed bin Rashid Al Maktoum Solar Park in Dubai, the largest single-site solar plant in the world, will power 800,000 homes by 2030. The endless supply of solar energy presents great economic opportunity for the UAE, a country with some of the lowest power purchase agreement prices in the world, with the capacity to offer solar photovoltaic projects for just three cents per kWh. Investment in solar energy has been accompanied by a strong interest in green hydrogen technology, which, if done right, could generate close to $200 billion in annual revenue for Gulf countries by 2022, a third of the annual revenue generated by Saudi Arabia’s Aramco.

That is no small number in light of a global economy moving away from fossil fuels, and the UAE has already been working to strengthen international ties. Masdar, the renewable energy wing of ADNOC, has been contracted to build wind farms and solar power plants in the United Kingdom, Spain, and the Pacific Islands. Energy interests have even taken precedence to diplomatic relations, with a recent diplomatic thaw with Israel, partly to strengthen bilateral commercial solar energy ties. Masdar has attractedsignificant foreign private investment from over 500 global energy providers. Furthermore, Masdar has itself invested in ventures for green hydrogen technology in India, the United States, and Egypt. Clearly, the UAE wants to be the first-mover in a future market for clean energy. Integrating Masdar within ADNOC doubly ensures that ADNOC can serve as one of the “last men standing” when global oil producers eventually start to close up shop.

But apart from concerns of desertification and opportunities for cost-effective first-mover advantage, there is a significant fiscal interest in the UAE presenting itself as a crucial market for green finance. It is important for the government to expand revenue from non-hydrocarbon sources and to promote private investments in renewables in order to reduce fiscal hydrocarbon dependence. Public investment has been the main policy of the UAE Green Strategy thus far, but it remains to be seen if a private green finance market will develop organically in a country like the UAE, where a high percentage of jobs depend on the hydrocarbon ecosystem. Hosting COP28 and ushering in more foreign investment for sustainability projects allows the government to offset its spending on renewable investment by allowing them to organically expand the private market. The private market can only expand if the rest of the world acknowledges the UAE as a major player.

We see that the UAE’s hosting of COP28 is driven by its own personal incentives to profit from sustainable investment and trade, manage government spending, and protect its people from climate change. There is nothing perverse about this; governments do not need to be motivated by deep cosmopolitanism or an unselfish altruism in order to work toward climate change as long as their actions contribute to furthering a renewable energy transition. If anything, proof that the UAE has personal stakes in the energy transition gives its commitment a far greater integrity.

The looming variable that remains is still the region’s large-scale fossil fuel production which is not slowing down any time soon. But this is more a question of immediate survival and practical policy considerations than any long-term masterplan. Direct hydrocarbon revenues still comprise over 60 percent of the UAE’s total fiscal revenue, but the percentage was significantly larger a decade ago. Al-Jaber holds the view that the collapse in global oil demand during the Covid-19 pandemic was in part caused by significant investment cuts in fossil fuels.

While oil market shocks are viewed as an omen for a shift toward renewable energy, they also signal how reliant the global economy is on fossil fuels. The accelerated decarbonization of the UAE’s economy would pose significant economic risk, straining fiscal revenues, increasing debt and decreasing the qualit of hydrocarbon assets like those invested in by the UAE’s prime sovereign wealth fund. Decarbonization must occur at a calculated pace to preserve the UAE’s economic health and build new streams of resource revenues in time.

However, the UAE is adapting to the challenge. The renewables transition in global sovereign wealth funds, which have previously turned a blind eye to alternative energy, is telling. As recently as 2019, sovereign wealth funds had the lowest proportion of financial institutions that included ESG metrics or climate risk in their investment approach. But in 2021, ADIA acquired a 10% interest in Sempra Infrastructure, one of the largest energy networks in North America. The same year, Mubadala, another UAE sovereign wealth fund, invested in Culligan International, a leader in North American sustainable water solutions. Globally, renewable energy is now the second most popular sector for sovereign wealth funds in the area of development. For the UAE, returns from these funds are expected to substitute hydrocarbon revenues in the long run, when fossil fuels are exhausted. Given enough time, returns from alternative energy sources will eventually comprise a significant majority of the UAE’s annual revenues.

In the months leading up to COP28, al-Jaber is formulating a Global Decarbonisation Alliance and has stopped all routine gas flaring and significant methane emissions at ADNOC plants. More ambitiously, ADNOC has pledged to remove all operational net carbon emissions by 2045. Giving Big Oil a seat at the climate conversation does not imply that they control the conversation; if anything, it makes them listen to what the developing world has to say. Neither al-Jaber, nor the UAE, nor any oil company, has final say on the conference’s outcome. Al-Jaber and the UAE have attempted to pave a path toward renewable energy while still thriving economically, and can guide the Middle East’s remaining oil powers to do the same.

A cognitive dissonance surely arises when an environmentalist sees ADNOC helming COP28. Much of this is linked to political narratives of fossil fuel divestation that have become ideologically pervasive today. But while demanding divestiture from fossil fuels is a legitimate cause, physically divesting fossil fuel producers from conversing with global governments may not achieve the same effect. Villainizing the people who hold the world’s fate in their hands is cathartic, but impractical.