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THE ‘POWER’ GAME: Phasing out fossil fuels and developing renewable energies in the GCC

The term energy transition originally referred to prospective solutions against the 1970s energy crisis. The 1973 Yom Kippur War and the 1979 Iranian Revolution led to several consecutive interruptions in exports from the Middle East to the Western world, causing oil shortages and soaring prices.

In this report BSA have joined forces with the Legal 500 to investigate the Gulf renewable energy industry and its regulatory environment. 

The United Arab Emirates (UAE) and the Middle East as a whole are undergoing a remarkable transformation in their energy sector, reflecting the sustainable energy goals of the global energy industry. This report investigates the Gulf's renewable energy industry and its regulatory environment through the eyes of various experts in the field.

In a region historically dominated by fossil fuels, the UAE, and other Gulf Cooperation Council (GCC) countries have embarked on an ambitious course towards a sustainable and environmentally responsible energy future.

As the first country in the region to ratify the Paris Agreement, the first to commit to an economy-wide reduction in emissions and the first to announce a Net Zero by 2050 strategic initiative, the UAE is committed to raising ambition in this critical decade for climate action.

This report investigates the dynamic landscape of the UAE's energy sector, analysing the evolving regulatory framework, the integration of ESG principles in both the public and private sectors, the emergence of clean energy regulations in the GCC, and the exploration of cutting-edge clean energy technologies.

The report also provides insight from industry experts on the potential improvements in GCC regulations, as well as discusses the importance of ESG requirements in both public and private sectors and the critical role of clean energy initiatives in the diversification of GCC economies.

The publication of this report is particularly timely given the UAE hosted COP28 in Dubai, in November 2023. COP28, short for the Conference of the Parties, represents a critical moment in global transformative climate action, and saw energy experts and leaders come together in Dubai to continue the momentum on climate action build upon the progress made in Paris.

Member countries convene every year to determine the ambition and responsibilities and identify and assess climate measures. At COP21 in 2015, the world agreed to limit global warming to 1.5°C compared to pre-industrial levels by 2050. Science tells us emissions must be halved by 2030 to remain on target. We only have another seven years to meet that goal.

At the Glasgow COP26, for the first time in the history of COP events, finance was one of the major topics discussed at a COP. Participants agreed that both the public and the private sectors have available or transferable funds to allocate to the global energy transition and achieve net-zero emissions.

The most recent initiative and the most talked about by legal professionals is the recent announcement by the Saudi government that green bonds would be issued in compliance with ESG goals. The National Debt Management Center (NDMC) declared that green bonds will likely become their main funding avenue to back renewable energy projects.
The Abu Dhabi Sustainable Finance Declaration initiative in the UAE has been open to private and public companies since 2019. Its purpose was to design guidelines for organizations to reduce their carbon footprint with the support of banks, and it proved to be an important milestone in the country's push towards renewable power.

However, the foundations for green finance are still being built. Legal professionals and investors are looking forward to expanding this area, which should promote trade in the industry.

Outcomes from COP28
COP28 saw the largest attendee numbers to date, with over 100,000 delegates, 700 CEO’s, 156 heads of state, and philanthropic leaders, showcasing a commitment across a multitude of sectors, including oil & gas, to decarbonization.

The event was a milestone moment where the world took stock of its progress on the Paris Agreement. It was a prime opportunity to rethink, reboot and refocus the climate agenda, bringing the world together at a critical moment for global transformative climate action. As COP28 concluded there was increased optimism that progress towards complete decarbonization has been made since Paris.

The COP Program reflected the sectors and topics raised by stakeholders during consultations, including new action areas like health, trade, relief, recovery, and peace. The thematic days programming incorporated four cross-cutting themes that underpin effective, interconnected delivery: Technology & Innovation, Inclusion, Frontline Communities, and Finance.

COP28 was the first to put global health on the climate agenda, as 123 countries signed the UAE Climate and Health Declaration to “place health at the heart of climate action” and support the development of climate-resilient, sustainable, and equitable health systems.

In tech, COP28 acted as a catalyst, mobilizing the ecosystem of governments, corporates, multilateral, academia, investors, and startups to drive step-change in the development and deployment of climate solutions to bring the world back to a 1.5C trajectory and reduce suffering for the most impacted populations and ecosystems. This included discussions surrounding the challenges faced in accelerating deployment of, already available, climate technologies such as wind and solar power.

Overall, there was a consensus that accelerated action is needed now, with discussions focused on moving away from long-term pledges and towards immediate change. One such commitment saw leaders agree on the pressing need to lower carbon emissions by tripling renewables by 2030 and doubling energy-efficiency improvement rates. Nuclear energy was also on the agenda, with the countries currently accounting for two-thirds of global nuclear energy production, including the United States, committing to tripling nuclear capacity in the next twenty-five years.

COP28 concluded with the “UAE Consensus”, which at its core contains the first Global Stocktake (GST), setting out an ambitious plan to achieve 1.5°C, with fossil fuels being collectively mentioned for the first time in a COP agreement, stating that “transition away from fossil fuels in energy systems, in a just, orderly, and equitable manner, accelerating action in this critical decade, to achieve net zero by 2050, in keeping with the science.”

As the UAE and its GCC counterparts navigate the complex landscape of the energy transition, this report offers a comprehensive analysis of the current state of affairs, shedding light on the path forward and the pivotal role these countries play in shaping a sustainable energy future for the entire world.

We hope this report will inspire you to join us in achieving our sustainable energy goals.

The full report can be downloaded here: The Power Game (PDF). 
It can also be read on the Legal 500 website: The Power Game (WEB). 

BSA is a regional Law Firm in the Middle East with offices in the UAE, Oman and Saudi Arabia. As a full-service law firm our practice areas include litigation, arbitration and corporate services, including M&A, banking & finance, Intellectual Property, TMT, Fintech, employment and insurance.

Published on 1 February, 2024.

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