Public transportation in the UAE is likely to see an overhaul following the cabinet's approval of a national system for vehicles running on the alternative fuel – a move that is expected to help the country achieve new clean energy targets.
On Sunday, the UAE cabinet approved a nationwide system for hydrogen vehicles, as the country ramps up production of blue and green variants of the fuel.
Blue hydrogen is manufactured from natural gas while green hydrogen refers to the fuel produced from clean energy sources.
In terms of impact on the local economy, "captive fleets of vehicles" from passenger cars to heavy duty trucks that have easy access to refuelling stations could benefit from the approval of a hydrogen vehicle system, said Antoine Trieux, managinbg director and an infrastructure and energy industry banker at Natixis.
"This includes taxi fleets, buses, vehicles in ports/airports, garbage trucks [and] delivery trucks," he added.
Globally, the hydrogen industry is expected to grow to $183 billion by 2023, from $129bn in 2017, according to Fitch Solutions. The research agency sees great traction for hydrogen uptake in transportation.
The UAE has made significant moves to scale up its hydrogen economy, including the formation of an alliance between the Abu Dhabi National Oil Company, Mubadala and ADQ, an industrial holding company.
On Monday, Mubadala and Italy's Snam signed an agreement to collaborate on "joint investment and development" of hydrogen.
The companies will undertake a series of technical and economic feasibility studies to develop "a hydrogen economy for the UAE", Musabbeh Al Kaabi, chief executive of UAE Investments at Mubadala Investment Company, said in a statement.
Ivano Iannelli, executive director at the Green Economy Foundation, said there were parallels between the speed with which the UAE is progressing its hydrogen agenda and the manner in which it developed solar energy.
"In terms of hydrogen, they're not looking at an isolated component of the value chain, but they are taking the entire marketplace at once ... so they're looking at manufacturing, production, distribution [and] utilisation," he said.
Sunday's cabinet meeting also gave the green light to a national energy and water demand management programme, which is targeting a 40 per cent increase in efficiency for the three most energy-intensive sectors of the economy – transportation, industry and construction.
"This move highlights the continuous efforts of the UAE government to achieve a balance between economic growth and the environment, and promote a culture of conservation," said Saeed Mohammed Al Tayer, managing director & chief executive at Dewa.
The UAE, which is Opec's third-largest producer, plans to green its power consumption and is targeting 50 per cent renewable energy use by 2050.
The country is a signatory of the Paris Agreement, which seeks to limit global warming to below pre-industrial levels of below 2 degrees Celsius.
Efforts to improve efficiency across energy-intensive sectors is part of the UAE's natural evolution in "updating targets in relation to the non-energy sectors", Mr Iannelli said.