A steady flow of finance to propel the energy transition is more important than ever to overcome arguably the worst energy crisis since the 1970s. Energy companies cannot support Net Zero goals without having far more financial support themselves, especially oil and gas. We are committed to helping energy stakeholders solve this increasingly complex equation.
Up to $12.1 trillion of investment in the oil industry is needed over the next 23 years to meet demand, says OPEC, while annual clean energy investment must triple by 2030 to at least $4 trillion to give the world a chance of meeting Net Zero emissions by 2050, said the International Energy Agency (IEA).
In the push for Net Zero, oil and gas are not the ‘bad guys’. Instead, they have been at the forefront of ensuring billions of people can turn their lights on, heat their homes, and fill their petrol tanks, not to mention the 6,000 everyday items that include petroleum. Equally, one might think the flow of capital towards greener markets is far stronger, but these markets also have a long way to go.
Crucially, this is not an ‘and/or’ conversation. All the boxes in both camps – sustaining energy security today by supporting cleaner fossil fuels while driving green innovations and markets – must be ticked simultaneously. We cannot sacrifice energy security today, for we will not reach the future, and we cannot sacrifice the climate agenda today because we will not have a secure future. Both tracks must evolve in parallel – that is the only chance of success.
The pace of policy and regulatory changes around energy security and Net Zero means the parameters of investing in oil and gas, and even renewable energy, could be entirely different in a couple of years, which means far more considerations must now be made for longer-term projects in oil and gas.
More Net Zero roadmaps are needed to give energy companies and financial institutions much-needed transparency, enabling the deployment of capital with far more confidence – and increasing the chance of repeated financings.
Part of boosting visibility is putting a price on carbon to give investors and all other stakeholders an obvious metric on how to value CO2 emissions, which improves the accuracy of financial forecasts. So far, 70 carbon pricing initiatives have been implemented worldwide. According to the World Bank, this represents 23.17 per cent of global GHG emissions, up from just two initiatives in 1991.
The Middle East has yet to make more progress in this space, but this is now quickly changing; the UAE for instance expects to soon start a carbon offset trading exchange in Abu Dhabi, for one. Overall, more collaborative, troubleshooting engagements between energy and financial stakeholders in terms of research and knowledge-sharing would be invaluable to bolstering confidence on both sides.
Leading the charge
The climate agenda heralds the most significant global overhaul in modern history, putting the world on an urgently needed track for a greener, cleaner, and more profitable future. There is no doubt that achieving Net Zero in the UAE and worldwide by 2050 is an enormous task that will change how we produce, consume, store, transport and market more types of energy than the world has ever managed. So much so, no one on the planet can yet fully understand the magnitude of what is required.
The UAE is already striding ahead, being the first nation in MENA to set such a Net Zero target, hosting COP28 in 10 months, and planning to invest $163 billion in clean and renewable energy sources over the next 30 years. OPEC’s third largest producer is also building the world’s largest solar plant with a total capacity of 2GW in Abu Dhabi, with the country being host to some of the world’s largest and most competitively priced projects worldwide – helping spur the 80 per cent reduction in the global price of solar since 2010.
The UAE also signed a $100 billion deal with the US, the world’s biggest economy, to develop 100GW of clean energy globally by 2035.