A greener future costs – a lot. This could be a daunting reality against today’s backdrop of global financial instability.
However, the natural ebb and flow of global economics can’t steer us off the course of the UAE’s Net Zero by 2050 strategic initiative.
We must leverage the unique platform of Cop28 – to be held in Dubai in November – to grab this challenge with both hands and proactively turn the dialogue around climate financing into quantifiable action.
Time is not on our side.
There is a 66 per cent chance that between 2023 and 2027 we’ll see the global average temperature breach 1.5°C above pre-industrial levels for the first time, the World Meteorological Organisation has said. It is a huge red flag.
Transforming the energy sector into a greener, cleaner machine is a cornerstone of making net zero possible. Progress is being made, but it isn’t a linear journey when it comes to speed and scale.
Conflicting forces
While global investments in energy transition technologies reached a record $1.3 trillion last year, annual investments must rise to about $5 trillion to ensure we don’t exceed 1.5°C (again) by 2050, according to the Abu Dhabi-based International Renewable Energy Agency.
Overall, the world needs $35 trillion worth of investments by 2030 to have a successful energy transition, the agency said in March.
The major call to action comes at the same time as the International Monetary Fund saying advanced economies will likely see a pronounced slowdown in growth, from 2.7 per cent in 2022 to 1.3 per cent in 2023.
In the Middle East and Central Asia, growth rates of 5.3 per cent in 2022 are expected to nearly halve to 2.9 per cent this year.
The continuing effects of Russia’s invasion of Ukraine, three years of Covid-19 pandemic and concerns over inflation, rising interest and currency rates are all part of the worrisome mix.
Eyes on the prize
All are valid concerns, many of which we have seen before in previous squeezed economic situations. Thus, there are some tried-and-tested solutions and fiscal measures to calm the turbulence over the next year or so.
The Great Recession of 2007-2009 impacted us all, but we learnt key lessons and moved on. Comparatively, the vastness of the world-altering consequences of failing to stay on track for net zero are almost impossible to fathom – and must be avoided at all cost.
We also need to remember that tackling the energy transition under the umbrella of net zero is not just doom and gloom. There are many financial bright spots too.
A study by Oxford University found that a decarbonised energy system by 2050 could save the world at least $12 trillion, in accordance with our current levels of fossil fuel use. Therein lies a triple win: for energy security, helping economic stability and protecting the environment.
We can do this
Achieving this transformation is extraordinarily difficult, but possible. How can we be so sure?
Firstly, necessity.
Our species and planet face great danger. The Middle East and North Africa region is set to warm nearly twice as fast as the global average, according to Greenpeace Research Laboratories.
Secondly, our confidence is underpinned by the fact that we have already dramatically moved the needle.
The renewable energy sector now generates seven times more of a return on investment than fossil fuels, according to the International Energy Agency. Few thought this paradigm shift was possible in our lifetime.
Renewables also contributed to an unprecedented 83 per cent of global power additions in 2022, according to Irena.
And this is the kind of real change we must keep striving for.
Badar Chaudhry is head of energy sector at Mashreq Bank
