The UAE’s China-Nixon Moment Has Arrived

Given the range of grim climate projections in the recent Intergovernmental Panel on Climate Change (IPCC) report, it’s easy to be downbeat about our planet’s future. U.N. Secretary-General António Guterres spoke for many when he warned that “we seem hellbent on destruction” in his speech to mark Earth Day.

Yet the future is not set in stone, and it is possible that despite the geopolitical tension rising between great powers, conflicts proliferating, and climate impacts undercutting already sluggish growth, 2023 may be the year when leaders galvanize into climate action. This may sound unduly optimistic. But there are several compelling reasons why this could be the case—and the fact that the United Arab Emirates (UAE) is hosting the next COP climate change summit is at the center of them.

The controversial decision to hold this critical round of climate talks in the Gulf, which has built its wealth on its fossil fuel endowment, provides the UAE with an opportunity to meet the political moment and detail what a post-fossil fuel world could look like. Countries have struggled in previous rounds of talks to acknowledge fossil fuels’ role in emissions and agree to phase them out. But the UAE can pull off a modern-day energy diplomacy “Nixon goes to China” moment. Its oil producer credentials position it to unite the world around this fundamental statement of the obvious.

Oil and gas companies, national and private, may have finally understood that they need to significantly rebalance their investment toward renewables, but they are still a long way from doing so. Even leading oil and gas majors tend to have total portfolios with less than 25 percent clean energy, and that needs to change significantly. The good news is that a recent analysis by McKinsey shows that when portfolios are more than 40 percent clean, and firms are closer to alignment with the Paris Agreement, they will start to see the upside in valuation from investors.

Who better than the UAE to demonstrate it is part of the solution? The UAE cannot afford to play it safe. 2023 is the year when the U.N.’s “Global Stocktake” on progress toward the Paris Agreement will be published, and it will make tough reading, requiring a clear political response at COP28. As guardian of the U.N. climate process, the UAE must be guided by the latest science and driven to protect the most vulnerable, not vested interests. It’s a high risk-high reward COP: At this stage of the climate crisis, the outcome is high ambition or abject failure.

Because the UAE hosts COP, any potential Dubai deal must signal to global markets that the fossil fuel era is drawing to a close or sap the COP process of its last semblances of credibility. The International Energy Agency’s latest recommendations to governments offer a practical pathway forward, calling for renewable energy installations to triple by 2030. And COP28 can endorse them. The UAE is in a promising position because Sultan Al Jaber is both COP president and the head of the state-owned oil company. The UAE can thus bring national oil companies, which comprise 80 percent of production, into the energy transition in a way they have not up to now.

The UAE must also recognize that the world needs a finance deal for the climate in 2023. The growing gap between policy needs and financial flows means there is again an opportunity to achieve breakthroughs. Jaber has said he wants to bring business approaches to climate solutions. The Gulf is home to significant underleveraged sovereign and development funds. One idea under consideration is using some of that financial depth to jolt the current system into effectiveness through guarantees and risk sharing. But the Gulf is highly vulnerable to climate-induced water shortages and extreme weather. It can also act in solidarity with the most vulnerable, who need grants and subsidized support to build their resilience. A bold move here would allow the UAE to develop partnerships with friends across Africa, Asia, Latin America, and the Pacific.

A broader discussion around financial system reform gained momentum at the International Monetary Fund and World Bank spring meetings in April. It will continue to the annual meetings in Marrakech just weeks before COP28. As Barbados Prime Minister Mia Mottley and World Trade Organization boss Ngozi Okonjo-Iweala argued recently: “Access to finance on prolonged and low-cost terms is an indispensable part of building a more sustainable, more inclusive global economy.” Saddling low- and middle-income countries with greater debt is a one-way ticket to global economic ruin.

The pieces are in play for 2023 to deliver. It has been a quiet start to the COP presidency by the UAE—lots of traveling the world, a listening tour, and hundreds of consultants and others clamoring to be close to the process. The world is waiting to see how it will shape the agenda and drive the world toward an agreement—playing the role of rotating president and not that of the UAE. We can look to soccer, where the UAE has made a significant impression in the last decade and is a sport close to Jaber’s heart. It is, as they say, a game of two halves as we approach halftime with no goals on the score sheet; the UAE must offer bold strategic initiatives, because the planet needs a win, not a draw or a loss.