• Home
  • The Race to Net Zero: Saudi Arabia and the UAE Compete over Climate Action

The Race to Net Zero: Saudi Arabia and the UAE Compete over Climate Action

As one of the hottest and most arid places in the world, the Arabian Peninsula faces a unique threat from climate change. If current trends continue, the World Bank has warned that many parts of the region could become uninhabitable in this century. A report in the Review of Geophysics published in June 2022 revealed that the Middle East is currently heating up twice as fast as the rest of the world.

In order to preempt an environmental catastrophe and the costs of reduced demand for fossil fuels, the Gulf Cooperation Council (GCC) states are accelerating their shift towards green energy. Saudi Arabia, Kuwait and Bahrain all aim to meet net-zero emissions goals by 2060, while the United Arab Emirates (UAE) and Oman have set a more ambitious target of 2050. Due to new hydrocarbon supply lines it is constructing to connect itself and the European Union, Qatar has not set a net-zero target, but indicates that it will instead cut emissions by 25% by 2030.

The race to transition to green energy has become another facet of ongoing intra-GCC competition. On the one hand, Saudi Arabia and the UAE share a deep partnership, but the second- and fifth-largest Middle Eastern economies have also escalated their economic rivalry in recent years. Riyadh and Abu Dhabi are jockeying to attract foreign investment to diversify their economies, while the fiscal consequences of Russia’s invasion of Ukraine and COVID-19 have increased concerns over their economic security. Meanwhile, the global pressure to shift toward clean energy sources has prompted the two GCC states to further revise their economic plans and battle for the best access to clean energy markets, particularly in the areas of solar power, green and blue hydrogen, and ammonia.

In spite of these high-minded commitments, the GCC states have taken advantage of an increased short-term demand for hydrocarbons to ramp up their production and revenues, indicating that rather than choosing “one or the other,” hydrocarbon exports will remain an important pillar of the Gulf’s economic power. Ultimately, Riyadh and Abu Dhabi want to build new clean energy partnerships and boost their own renewable energy production, but they also seek to use their own reliance on hydrocarbons to fund this transition.

Green Energy Competition

Green and blue hydrogen will certainly play an important role in the GCC’s shift toward clean energy. Green hydrogen is produced using renewable energy sources, such as wind or solar power; it is seen as better for the environment than blue hydrogen, which is a byproduct of natural gas. Given that the UAE and Saudi Arabia have long relied on natural gas, blue hydrogen—while still a “fossil fuel” in its origins—will help to curb domestic emissions.

The transition to renewable energy will require incremental steps. According to U.S. credit ratings agency Moodys, both green and blue hydrogen will prove necessary to alleviate the economic and financial consequences of lower oil demand as the race to net zero hastens. The agency wrote in October 2022, “however, only green hydrogen will also somewhat reduce GCC countries’ heavy reliance on hydrocarbons and as such their underlying credit exposure to longer-term carbon transition risks.”

For Saudi Arabia, concerns remain over how the Kingdom would adapt to market forces that will depress demand for hydrocarbons, given its extreme domestic dependency on oil. Riyadh has aimed to address this by becoming a leading exporter of hydrogen. The plan to produce and export hydrogen has been folded into Saudi Arabia’s ongoing “NEOM” megaproject. The futuristic city would host the world’s largest green hydrogen production plant, valued at $8 billion and aiming to produce 600 tons of green hydrogen per day. ACWA has also proposed to create two additional green hydrogen plants within the kingdom. Crucially for Riyadh’s net zero plans, it also aims to open the Middle East’s largest solar plant in Al Shuaibah in the Makkah governorate by 2025. The plant, funded by ACWA Power and the kingdom’s Public Investment Fund (PIF), hopes to supply 50% of the kingdom’s energy by 2030 through solar and wind energy. Additionally, Aramco hopes to produce two million tons of blue hydrogen by 2030.

The Saudis also aim to rival the UAE’s efforts by transforming its own companies into green energy initiatives. The UAE’s 2021 clean energy partnership between the Abu Dhabi National Oil Company (ADNOC) and EWEC (Emirates Water and Electricity Company) is a case in point. Both companies previously agreed to develop a giant solar power plant in Abu Dhabi called Al-Dhafra, which the Emirati government claimed would be the world’s largest.

Significantly, Abu Dhabi’s hosting of the COP28 summit in November 2023 bolsters the UAE’s attempt to position itself as a leader in the race for clean energy. Sultan Al Jaber, who will oversee the conference, said the UAE “has always made progress by getting ahead of the future.” Although Al Jaber’s own management of the Emirati state oil company has drawn criticism over a conflict of interest from environmental activists, it also reflects Abu Dhabi’s hopes to balance clean energy production without completely renouncing hydrocarbons.

Jockeying for International Partnerships and Investments

One interesting observation regarding the GCC’s green energy programs is that they have all been conducted at the national level, with little coordination between member states. There have been visions, however, to achieve wider cooperation within the bloc. One anchor for multilateral efforts is a series of EU-GCC cooperation deals, including the EU-GCC clean energy network. Meanwhile, all GCC states are participants in the Global Methane Pledge, which seeks to collectively reduce methane emissions by 30% by 2030 from 2020 levels.

The UAE has also undertaken efforts to diversify its energy relationships with East Asian states, securing a $1 billion investment from South Korea in another ongoing green hydrogen and ammonia plant in the KIZAD Industrial Area near Abu Dhabi. The UAE has also sought Japan’s cooperation, after both Abu Dhabi and Tokyo agreed in January 2023 to cooperate on green energy, mostly through partnerships on researching opportunities for green hydrogen, with the stated aim of supporting each other’s energy transitions.

Europe is also a key and willing partner for the GCC states, given the EU’s goals to implement its European Green Deal. The Emirati renewable energy company Masdar struck an initial agreement in January with four Dutch companies to investigate the creation of a green hydrogen supply network connecting Abu Dhabi and Amsterdam. The UAE has also penned clean energy agreements with Germany, a series of agreements with other European nations like the UK, and a green hydrogen partnership with Italy in June 2022.

Importantly, both Riyadh and Abu Dhabi have sought to balance their energy relations with the United States and China, which fits their broader pattern of seeking neutrality in the brewing geopolitical conflict between the two sides. In November 2022, Abu Dhabi and Washington agreed to forward the Partnership for Accelerating Clean Energy (PACE), advancing $100 billion worth in bilateral investment for bolstering access to clean energy and developing clean energy projects. Saudi Arabia has also secured its own clean energy partnership with the U.S. China has also emerged as an attractive partner, given its growing global economic footprint and its dominance of solar energy supply chains. Of all the GCC states, Beijing has remained particularly close to Abu Dhabi in this regard; in February 2022, it agreed to invest $1 billion in the UAE’s Al-Dhafra solar power project.

Ultimately, of all the GCC states, Riyadh and Abu Dhabi have planted themselves at the forefront of the global energy transition, and their ambitious plans for alternative energy will see further geopolitical shifts. Clearly, GCC states’ desire to reform their oil-dependent economies have accelerated a race to capture the largest share of the green energy market.

Such competitiveness aims to attract greater green investments, while prompting the UAE and Saudi Arabia to secure effective partnerships for boosting their own clean energy access and production. However, further intra-GCC harmony over adopting green energy would also prove beneficial and might consolidate coordination with blocs like the EU and other international powers. Indeed, although the GCC states are understandably trying to secure their economic security as the world shifts towards carbon free energy, cooperation within the GCC would also be helpful for the region’s long-term stability.

The views and opinions expressed in this article are those of the authors and do not necessarily reflect the views of Gulf International Forum.

Issue: Energy & Environment
Country: KSA, UAE

Risky Business: Saudi Arabia’s Oil Price Hike and Market Reaction

June 12, 2024

As the world’s leading energy exporter, Saudi Arabia’s decision to raise the price of oil for its Asian customers, namely China and India, is a…

Untangling the Motives Behind Iran’s New Energy Agreements

April 23, 2024

Though the country faces a raft of international sanctions and several major geopolitical hurdles, Iran’s oil and gas sector has seen a significant expansion in…

Bridging Dreams and Reality: Masdar, NEOM, and the Future of Sustainable Living in the Gulf

April 3, 2024

In the vast expanse of the Arabian Peninsula, an ambitious vision is gradually coming to life that promises to transform the stark desert landscape into…

KSA

Risky Business: Saudi Arabia’s Oil Price Hike and Market Reaction

Commentary

As the world’s leading energy exporter, Saudi Arabia’s decision to raise the price of oil...

KSA

Securing the Seas: Examining Changing Saudi & Emirati Naval Capabilities

Reports

Over the past decade, the Gulf Cooperation Council (GCC) countries have significantly expanded their navies...

KSA

How A Football Spat Nearly Derailed Saudi-Turkey Rapprochement

Commentary

On December 29, 2023, Turkey’s most storied football teams, Galatasaray and Fenerbahçe, planned to play...

GCC

The Gulf in 2024: Expert Outlook

Commentary

GCC Unity in 2024 in the Face of Regional Threats Dr. Kristian Coates Ulrichsen Fellow...

Iran

Pragmatic Investment: Possibilities for Saudi-Iranian Cooperation Amid the Gaza War

Commentary

In the months since Iran and Saudi Arabia agreed to their Chinese-mediated normalization deal, the...

Iran

The Gulf in BRICS: Reshaping Geopolitical Landscapes

Commentary

The nature of the BRICS alliance, and the Gulf states’ interactions with it, has long...

Jonathan Fenton-Harvey is a researcher and journalist focusing on geopolitics and humanitarian issues in the Middle East and North Africa, particularly related to the Gulf. He has worked with Al Sharq Forum, The New Arab, Middle East Eye, Al Monitor, Carnegie Endowment’s Sada journal, and many other outlets.


KSA

Risky Business: Saudi Arabia’s Oil Price Hike and Market Reaction

Commentary

As the world’s leading energy exporter, Saudi Arabia’s decision to raise the price of oil...

KSA

Securing the Seas: Examining Changing Saudi & Emirati Naval Capabilities

Reports

Over the past decade, the Gulf Cooperation Council (GCC) countries have significantly expanded their navies...

KSA

How A Football Spat Nearly Derailed Saudi-Turkey Rapprochement

Commentary

On December 29, 2023, Turkey’s most storied football teams, Galatasaray and Fenerbahçe, planned to play...

GCC

The Gulf in 2024: Expert Outlook

Commentary

GCC Unity in 2024 in the Face of Regional Threats Dr. Kristian Coates Ulrichsen Fellow...

Iran

Pragmatic Investment: Possibilities for Saudi-Iranian Cooperation Amid the Gaza War

Commentary

In the months since Iran and Saudi Arabia agreed to their Chinese-mediated normalization deal, the...

Iran

The Gulf in BRICS: Reshaping Geopolitical Landscapes

Commentary

The nature of the BRICS alliance, and the Gulf states’ interactions with it, has long...

Subscribe to Receive Latest Updates from GIF.