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The cheque book COP: UAE’s $200bn bid for climate influence

Just days before negotiators from more than 60 countries descended on Abu Dhabi last month for the final round of climate talks ahead of the UN’s COP28 summit, Sultan al-Jaber, president-designate of the conference, travelled more than 1,000 miles north to Azerbaijan.

Jaber, who juggles at least eight different jobs including chief executive of the United Arab Emirates’ Abu Dhabi National Oil Company and chair of the state-owned renewable energy company Masdar, met Azerbaijani President Ilham Aliyev to mark the inauguration of a solar farm large enough to power 110,000 houses.

As Jaber unveiled the huge 230MW Garadagh Solar Park, Masdar also signed agreements for three more renewable energy projects with a combined capacity of 1GW in Azerbaijan. The value of the deals was not disclosed, but industry figures estimated the value of the projects at $1bn. 

The UAE positions the investment as evidence of its commitment to use some of its vast oil wealth to underwrite the transition to clean energy. The nation sits on assets worth $2.5tn across its sovereign wealth fund, pension funds and central bank, according to data provider Global SWF. 

The COP28 president’s trip north to strike a high-profile clean energy business deal also underscores the transactional approach of the UAE to this year’s summit, which kicks off in Dubai on Thursday.

Wind farms are not the only priority. Leaked briefing documents this week showed how the COP hosts had planned to offer to develop oil and gas projects with over a dozen countries during official talks.

But FT analysis has also concluded that UAE state companies and funds can be linked to almost $200bn in investments around the globe in the year leading up to the COP summit, mostly in green energy.

About a third of this is focused solely on developing economies, including joint ventures for clean energy in Egypt, Indonesia and Zambia, a memorandum of understanding for wind, solar and battery projects in Malaysia worth $8bn and agreements for an estimated $30bn of energy deals in Turkey. 

At the same time, its ministers and trade groups have toured countries from Kenya to Colombia, touting the UAE as a business partner.

This reflects the country’s desire for new influence, says Ben Cahill, a fellow at the Center for Strategic and International Studies. “[The UAE] wants to move beyond just being an oil and gas producer towards being a global country with partners all around the world. Climate is a big part of that.”

Yet critics argue that the UAE’s largesse also serves to greenwash its role as one of the world’s largest producers of hydrocarbons. The scale of its investments can be seen as an attempt to curry favour ahead of crucial negotiations at the UN’s leading forum for climate action, they say — and secure agreements that will allow it to continue pumping oil and gas in spite of the long-term effects on the planet.  

The UAE “is attempting to win the trust of developing nations still reliant on fossil fuels” while also bringing fossil fuel producers into the heart of the COP28 discussions, says Harjeet Singh, head of global political strategy at Climate Action Network International. 

“This strategy might pave the way for an agreement that, paradoxically, keeps the fossil fuel industry afloat while simultaneously positioning the UAE as a climate leader through support for renewable energy projects,” he says.

A spokesman for COP28 pushed back against the idea it was trying to win over countries through its investments, saying the “implication” that UAE’s “economic development and interests are directly related to COP is misleading and ignores decades of strong environmental stewardship and investment”.

The UAE has a “longstanding, more than 50-year history, of bringing the global north and global south together, and a clear track record of positive economic relationships with countries around the world”, he says. 

“These partnerships have a critical role to play in inspiring positive climate action around the world, and uniquely positions the UAE to host a transformative COP.”

‘An investor mindset’

The UAE always looked like an unlikely candidate to host a global climate summit.

A member of Opec, it is the world’s eighth-largest producer of oil, which alongside other fossil fuels is the biggest contributor to global warming. Its oil company, Adnoc, has set aside $150bn for expansion in the next five years.   

The UAE’s decision to appoint Jaber, who oversaw Adnoc’s plans to boost oil production capacity, as president-designate of COP28 sparked even more questions about the country’s fitness to preside over the critical global climate talks.

German Chancellor Olaf Scholz, right, glances at the Saudi energy minister Abdulaziz bin Salman, far left, as Denmark’s environment minister Dan Jorgensen, the UAE minister of industry and advanced technology and COP28 UAE president-designate Sultan al-Jaber and US climate envoy John Kerry look on during a group photo for the participants in the Petersberg Climate Dialogue meeting in Berlin in May © John MacDougall/AFP/Getty Images

The job of the president is to unite countries around a set of commitments to be negotiated at the climate summit. They are responsible for ensuring the meeting has the best possible outcome, even as late-night talks and conflicting views lead to terse exchanges between politicians and negotiators. The UN expects the host to act without bias or self-interest.    

This year’s talks are viewed as especially crucial to limiting global warming, after the UN found countries were failing to take sufficient action.

Under the landmark Paris accord agreed eight years ago at COP21, countries pledged to limit temperature rises to well below 2C and ideally to 1.5C above pre-industrial levels. But the UN now predicts the world is on course for a rise of up to 2.9C, even if all government pledges are kept.  

A key focus for the UAE ahead of the summit has been on climate finance, with the intention of bridging the gap between the developed and developing world. Officials have spent the past few weeks leading up to the summit drumming up support for a financial framework to get more money into green investments, say people familiar with discussions. 

This is an area where progress is desperately needed. UN research in 2021 found that $125tn of climate investment will be needed by 2050 if the world is to slash its emissions and meet its Paris agreement goals. 

But despite several initiatives and schemes — including a new focus on climate at the World Bank and an innovative carbon credit scheme launched by the US — money is not being invested in the developing world at the pace and scale needed.

Investors looking to back renewable energy projects in emerging economies typically face higher borrowing costs due to political instability and volatile currency exchange rates. 

Finance is “the obstacle we always trip over” when it comes to addressing climate change, says Rachel Kyte, visiting professor at the Blavatnik School at Oxford university and a former UN climate adviser. The UAE understands this, she adds. “The COP presidency thinks: ‘We understand investment, renewables — we can do this’. They have very much an investor mindset.”

Earlier this year, the UAE pledged $4.5bn to help African countries finance clean energy projects, with money coming from Masdar, Abu Dhabi Fund for Development, Etihad Credit Insurance, the nation’s export credit agency, and AMEA Power, a renewable-energy company.

Masdar said it would use its $2bn in equity to mobilise $10bn in financing to target the delivery of an additional 10GW of clean energy capacity in Africa by 2030 under a partnership with Africa50, an initiative aimed at scaling up renewable energy across the continent.

The investment in Africa is only a tiny fraction of the UAE’s investments abroad. Over the past five years, the kingdom has been one of the world’s most active overseas investors, doing deals in 122 countries and 35 sectors, according to Ahmed Jasim Al Zaabi, chairman of the Abu Dhabi Department of Economic Development. 

Oil still makes up the overwhelming majority of capex in the UAE, but renewable energy has become a growing concern. Last year, the US and UAE agreed a $100bn deal to develop 100GW of clean energy by 2035. Masdar has invested in renewable energy in about 40 countries, valued at more than $30bn. The country plans to invest $160bn into green energy globally in the next three decades.

Delegates will gather at Expo City in Dubai for the 28th UN Climate Change Conference later this month © Kamran Jebrelli/AP

Developing countries are a particular target. In just the past few months alone, various UAE chambers of commerce, ministers and companies have visited countries from Rwanda and Kosovo to Kenya and Colombia. Climate change or clean energy came up frequently in meetings. 

The foreign trade minister was in Turkey, arriving just months after the UAE and Turkey agreed deals worth an estimated $50bn. This included about $30bn for energy projects. The country is planning deals worth another $50bn in India, according to reports. 

Mohammed Hassan al-Suwaidi, the new investment minister, was also among those on tour, meeting with Egypt’s prime minister Mostafa Madbouly to discuss the UAE pumping more money into the north African country in sectors from clean energy to food and infrastructure. 

It came after the two countries signed an agreement to build a mega $10bn 10GW wind farm — enough to offset almost 10 per cent of the African country’s carbon dioxide emissions.

Elsewhere, Masdar and Indonesia’s state-owned utility PLN agreed to triple the capacity of the Cirata floating solar plant in Indonesia, the largest in south-east Asia. It also pledged to make an $8bn investment in Malaysia’s clean energy economy last month, while there have also been deals in Zambia, Saudi Arabia, Germany and Austria among other countries.

Several people familiar with discussions say the UAE is expected to announce more deals at COP28. There are also plans for a multibillion-dollar “pot” or fund focused on climate finance, initially backed by the UAE but with others also encouraged to contribute, according to people briefed on draft plans. 

The COP28 presidency is seen by some as having conflicts of interest, such as a major oil producer overseeing climate negotiations © Giuseppe Cacace/AFP/Getty Images

The expectation is the fund would provide equity finance and play a big role in helping poorer countries gain access to the cash needed to green economies. The fund would also look to leverage more investment from the private sector than similar efforts by the World Bank and IMF.

The UAE told the Financial Times it would announce a “robust set of climate finance initiatives at COP28 that exemplify the presidency’s call to bring forth available, affordable and accessible climate finance”.

The prospect of the UAE offering up some of its cash to help spur the energy transition and encourage more private investment in the space has been applauded by investors. 

“I would welcome anyone who is bringing more money into the system,” says Curtis Ravenel, the vice-chair of the Glasgow Financial Alliance for Net Zero, a coalition of financial institutions. “Will it be effectively deployed? . . . I think it’s hard to say because we don’t know the details.”

The UAE’s willingness to invest in the developing world is in stark contrast to the “unfulfilled promises of many wealthier nations” when it comes to climate finance, says Singh of Climate Action Network International. Western nations have repeatedly failed to deliver on money promised to help poorer countries deal with climate change. 

What the money buys

Yet while climate financing is undoubtedly a key part of discussions at COP28, an equally pressing issue is the future of fossil fuel production.

The EU and countries such Kenya, Ethiopia and Samoa are pushing for a global commitment at the summit to phase out oil and gas use, as proposed by the UN’s “global stocktake” of progress towards Paris agreement goals, published in September. The International Energy Agency says there can be no new oil and gas projects if the world is to meet the 1.5C goal. Russia, among others, opposes the idea.

But the discussion of the future of fossil fuels at the summit will be shaped by the holder of the presidency, which has a massive, vested interest in the continued production of hydrocarbons.

Jaber has said several times that the phase-down of oil and gas is “inevitable” and “essential”, and has been working with fossil fuel producers on an initiative to cut emissions that will be unveiled at COP28. At the same time, he has emphasised the need for investment in carbon capture and storage technology that could allow production to continue for longer, and has shied away from a concrete deadline for any phase-down.

As talks begin, the UAE’s financial firepower gives it a strong hand to influence these discussions, suggests James Lynch, a former UK diplomat and now co-director at FairSquare, a research and advocacy group with a focus on the Gulf region.

“Many developed countries will be very keen to have strong positive relations with the UAE, given its financial clout and the potential for investment.”  

A satellite view of the Mohammed bin Rashid al-Maktoum Solar Park being built on the outskirts of Dubai © Planet Labs PBC/AP
An aerial photo of the Barakah nuclear power plant in the far western deserts of Abu Dhabi © Planet Labs PBC/AP

The COP28 presidency is “extremely conscious” of being seen to have conflicts of interest, Lynch adds, such as being a major oil producer overseeing climate negotiations. “There is a sophisticated plan to manage these conflicts and the investment strategy forms part of that.”  

The flurry of dealmaking also ostensibly shields the UAE from the consequences of failure, says Nigel Purvis, chief executive of the climate consultancy Climate Advisers and a former US State Department official.

“Those issues are difficult and there’s a chance of a blow up, with nations not reaching agreement,” he says. “The UAE seems likely to hedge that risk by making big financial commitments to invest its sovereign wealth in climate technologies and innovation.”

One developing country negotiator says he does not believe the spate of investments is an attempt to influence negotiations at COP28. Although multi-country alliances have successfully pushed to certain outcomes, any country, no matter how big or small, can veto a COP agreement.

Some say this activity illustrates a preference for deals over climate diplomacy that does not augur well for a successful COP.  

One senior official from a developing country says that during various climate talks leading up to COP28 this year, it was clear that Jaber and his team were keen to focus on what business or bilateral deals could be done, especially with the private sector.

They “would rather talk to Kristalina [Georgieva] or Mark Carney or Larry Fink”, referring to the head of the IMF, former Bank of England governor and BlackRock chief executive, respectively, than wrangle “messy” climate talks, says the official. But he noted: “COP has no remit to tell the private sector what to do.”

At the preliminary summit agenda discussions in Abu Dhabi last month, some developing and developed countries complained Jaber was too busy with business calls to preside over the negotiations. 

The UAE says Jaber had “engaged in an unprecedented level of outreach with climate stakeholders, including ministers, business leaders, and representatives of civil society”.

But the risk of hosting a COP that leads to a failure to reach agreement between sparring countries could hamstring the UAE’s ambitions to be seen as a diplomatic powerbroker. 

No business deal or investment can make up for that, Kyte says. “The announcement of new funds and new mechanisms in and of themselves will not get you the diplomatic agreements that you need.”

Data visualisation by Steven Bernard

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