Dubai: The UAE will require Dh2.5 trillion ($680 billion) to transition to net-zero, according to a Standard Chartered report released on Tuesday.
The study found that if the finance is provided by developed markets, UAE household spending could increase by around Dh2 trillion, compared to self-financing. It also added that if emerging markets were to fund their own transition, household consumption in these markets could fall by 5 per cent on average each year.
“The UAE is well positioned to capitalise on the major economic opportunities offered by the path to net zero,” said Rola Abu Manneh, CEO, Standard Chartered UAE, in a statement. “Reaching this objective would require a strong focus on ensuring economic prosperity throughout the transition process in addition to a great deal of investment.”
“The public and financial sectors need to come together to help facilitate the flow of investment into net zero - failure to deliver transition finance could mean climate goals are missed, therefore triggering an environmental catastrophe,” she added.
The bank said that emerging markets as a whole need to invest an additional Dh350 trillion – a sum higher than the annual global GDP – to transition to net-zero in time to meet long-term global warming targets. This is on top of the capital already allocated by governments under their current climate policies.
Private investors can contribute over Dh300 trillion of the Dh350 trillion that is required – “underscoring the urgent need for financial institutions to fulfil green and transition finance pledges”, said the report.
The report looks at two pathways to closing the emerging market transition finance gap, self-financing by emerging markets and developed market financing, where capital is provided through grants and loans.
Exclusive emerging market self-financing would lead to higher taxes and an increase in government borrowing, meaning that families in emerging markets, including UAE, will have less to spend on their everyday needs.
However, developed market financing could see emerging market household spending increase by around Dh6.25 trillion on average each year (compared to self-financing) and would also stimulate global growth – GDP could be around Dh400 trillion higher cumulatively between now and 2060 if developed markets finance the transition.