Are oil-rich countries renewing their economies or just distracting the rest of us?

Decarbonization language is currently not in use in the Gulf Cooperation Countries (GCC), but there is certainly room for strengthening the climate change-oil connection. Nations like the United Arab Emirates (UAE) and Saudi Arabia aim for the diversification of their economies and claim their attitude to climate change is changing. But in which direction?

The year is 2005. Saudi Arabia is looking post-oil in an attempt to diversify its economy. Oil sales accounted for 90 percent of the Saudi's government revenue at that time and such reliance on a volatile commodity was seen as a problem that the Saudi royal family was determined to overcome. Its neighbour, the UAE, made the same plans around 2007.

Fast forward. It is January 2016 and these nations are quite different a decade later. Saudi Arabia has not improved its economic complexity and is hit hard by the low oil prices.

The Emirates were able to experience GDP growth in 2015, partly as a result of walking the talk of diversification in economic terms throughout these years.

However, the production of hydrocarbons will not stop or slow down - the UAE aims to shift to “cleaner” hydrocarbons, like importing more natural gas - in addition to investing in nuclear energy. The government talks about a transition, not wanting to switch off and replace hydrocarbons overnight. Nonetheless, such a transition will occur quickly, as the UAE plan to jump from only 0.02 percent of renewables to 25 percent by 2025.

This shift represents an emerging signal to the future, perhaps as much as the economy diversification a decade ago. But exactly is it signaling?

The Emirates aim for a positive deviance role in the region, by bringing the clean energy investment signal to the Arab countries. IRENA (the International Renewable Energy Association) is headquartered in the UAE. A city based on renewables and advanced technologies is being built in Masdar City. New investments inrenewable technologies are booming in both Dubai and Abu Dhabi. Support for best initiatives is provided through the Sheik Zayed Prize for Future Energy.

Saudi Arabia is also investing in proof-of-concept carbon capture and storage projects and solar energy, like the Al-Oyeynah Research Station. Saudi energy officials have talked about becoming major solar players for years, but capacity is still insignificant. Their priority is still to advocate that the world “scale up technologies that capture carbon dioxide, instead of replacing the polluting fuels with renewable sources.”

The Saudi opposition to divestment of fossil fuels tries to counter the global call for diversification from assets with embedded carbon stranding risk. They certainly do not want to lose capital through new asset valuations, especially in times like these, when their economy has been already hit hard by 'market forces' operating at a low oil price.

I had the opportunity of meeting the UAE's Minister of Energy. I asked him if the Paris climate agreement was a signal for the decarbonization of the economy. His answer was a blunt "no.” Public opposition to a divestment narrative is still quite high. My second question to him was what was the solution to climate change. His answer was to work to cut inefficient fossil-fuel subsidies and stimulate demand-side measures, like metering energy consumption. This is not small talk in a nation where abundance is a cultural value.

For the time being, it is not possible to know if the 'post-oil' paradigm that is present in the Arab world will lead to a transition away from fossil fuel assets or if it will mean an even stronger counter-divestment strategy at a global level. The only certainty is that, as investors, Saudis and Emiratis have started to diversify into opportunities that can thrive in a low-carbon economy.

If Emirati and Saudi nationals become aware of how inefficient and unsustainable the current standards of living are, diversification of energy sources can become true decarbonization.

For now, their "post-oil" future is still a high-carbon, less resilient and warmer one. But the means to renew this option by choosing long-term price stability and energy security of renewables are forged.

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