PART I: UAE Net Zero 2050

At EPIC we produce an Environmental Country Rating Score, a subset of our overall ESG country scores. The environmental score is derived from scores for 18 factors where we take the data for 167 countries and rank them from best to worst and assign a star rating (7 star is best and 1 star is worst) and a country’s overall score is based on the average score of these factors. These factors include metrics such as greenhouse gases, biodiversity, sustainable agriculture, and forest coverage. 

Interestingly, the UAE scores well on a number of the metrics and scores 6 stars on the Environmental Country Rating although unsurprisingly, given its hydrocarbon exposure, the UAE has poor scores for greenhouse gases. However, on an encouraging note, the UAE recently announced a ‘Net-Zero by 2050 Strategic Initiative’ aiming to achieve net-zero emissions by 2050. This aligns the UAE with the Paris Agreement which calls upon nations to put strategies in place to reduce greenhouse gas (GHG) emissions to limit the rise in global temperatures to 1.5 degrees Celsius above pre-industrial levels.

Given the UAE is an oil producer with ~30% of UAE GDP coming from hydrocarbons, and key producer Abu Dhabi National Oil Company (ADNOC) is looking to increase production, this is an ambitious target. Although we note under the UN carbon accounting rules carbon emissions from fossil fuels are counted in the place where they are burned rather than where they are produced. Nevertheless, producing oil still emits greenhouse gases so there is scope to enhance the production process and reduce emissions by repairing leaks, using renewables for power generation, and using carbon capture and storage. Clean energy solutions will be a key pillar of the UAE’s policy to reduce GHG emissions and it has already invested over USD40bn in this sector over the past 15 years and is aiming to invest around USD165bn in clean energy by 2050. The UAE is targeting to produce 14 GW of clean energy by 2030 up from ~100MW in 2015.

In response to this strategic objective a number of initiatives have been announced in its support. More on this tomorrow.

Fixed Income Team