The Persian Gulf seems an unlikely place for a clean energy revolution. Yet in 2009, Abu Dhabi, an emirate notorious for profligate energy use, beat rivals Austria and Germany in a bid to host the headquarters of the International Renewable Energy Agency (IRENA). Though it has the world’s largest per capita carbon footprint, Abu Dhabi is at the centre of a Persian Gulf-wide initiative to lead the world’s clean energy sector. The emirate controls about 7 per cent of the world’s oil reserves. Abu Dhabi’s Sheik is behind the construction of Masdar City, the world’s first zero-carbon, zero-waste city scheduled for completion in 2015. The city relies on the Middle East’s largest solar farm, converts waste into energy and transports its residents using driverless electric cars. Abu Dhabi is attempting to partner this fearless innovation with a tonne of self-discipline by producing 7 per cent of its electricity from renewable sources by 2020. As Abu Dhabi anticipates future declines in oil revenue, it sees renewables as key to ensuring its continued economic and energy stability. With Abu Dhabi’s economy and the innovation of renewable energy at stake, environmentalists and investors eagerly anticipate a verdict on the initiative’s outcome.

 

Image courtesy of lamentables, © 2007, some rights reserved.

 

Abu Dhabi’s clean energy initiative is largely a reaction to hard fact and science: the United Arab Emirates likely reached its oil production peak in 2006.  With a full 25 per cent of Abu Dhabi’s GDP reliant on the extraction, refinement and exportation of petroleum products, life in the emirate truly does revolve around black gold. Abu Dhabi therefore urgently needs to diversify its economy in order to maintain growth when oil revenues begin to decline. Use of clean energy will also free up more of the Emirate’s oil and gas reserves for export.

Though primarily economic, the clean energy initiative is also about image and international legitimacy. The Persian Gulf is a vital geopolitical region due to its ready supply of oil. Global powers such as the US and China construct military and economic partnerships in the region in order to assure their energy supply. A bilateral security relationship between the U.S. and the UAE allows the Americans to base troops within Emirates’ borders, simultaneously fortifying the Emirates’ military while ensuring American energy interests. As an OPEC member, the UAE receives a measure of diplomatic deference from the global community, which fears the use of energy as a tool of foreign policy leverage. Abu Dhabi’s ruling elite would be loath to watch their global authority wane as petroleum revenues decline. A shift to renewables will allow Abu Dhabi to maintain its energy leadership while adding a ‘green’ and ‘eco-friendly’ sheen to its public perception.

New initiatives such as Masdar City in Abu Dhabi and others around the Gulf are worthwhile watching, as they could prove vital for the future of renewable energy worldwide. The West, which makes strenuous efforts to reduce global emissions through legal agreements and environmental conferences, does not have the financial means to take many risks when it comes to renewable energy. Even before the times of austerity, European governments would have been hard-pressed to allocate $22 billion, the estimated price of Masdar City’s construction, to experiment with green city building. Masdar City can serve as a laboratory for innovation that may bring down the cost of eco-friendly technologies. This may ultimately prove more effective than ill-respected international environmental legal agreements.

Abu Dhabi will nevertheless face societal obstacles as it initiates a renewable energy transition. The legitimacy of Abu Dhabi’s monarchy is derived from a rentier state social contract.[1] The ruling family is able to retain power and silence social criticism through the distribution of petroleum revenues. The society essentially operates on the revised principle of ‘no taxation, no representation’. Abu Dhabi citizens benefit from living in an industrialised emirate with one of the world’s highest GDPs per capita, but in exchange do not enjoy meaningful democratic representation.

The largest hindrance to the clean energy initiative’s success is its cost. Renewable energy can be up to twenty times more expensive than conventional sources, particularly in a country where energy prices are extremely low. Abu Dhabi’s monarchy would be reluctant to oblige its citizens to pay taxes in order to finance renewable energy policies, as such a shakeup of the status quo could unleash an appetite for other reforms. If citizens pay taxes, they may demand democratic representation. The emirate also fears a flight of international capital if its energy prices rise. The monarchy is therefore faced with a complex: while in the long-term, its future legitimacy as an international energy leader may depend upon its ability to innovate, in the short term, the monarchy may lose legitimacy when faced with an expensive transition necessitating a reform of its fragile social contract.

This clean energy experiment is mirrored in other Gulf petro-monarchies, where initiatives face similar challenges. Saudi Arabia established the Solar Village project, which provides solar electricity to three remote villages. Bahrain’s World Trade Center, completed in 2008, was the first skyscraper to integrate wind turbines into its design. Kuwait aims to produce 10 per cent of its electricity from renewable sources by 2020. Such innovations have the potential to raise the efficiency and lower the cost of renewables while providing solutions to the difficulties of storing electricity. But in societies in which governance and the economy rely so heavily on petroleum revenues, it is debatable whether clean energy will fully penetrate markets or continue to exist merely as individual experiments like Masdar City.

Due to the inevitability of an eventual decline in oil revenues, it is clear that Abu Dhabi’s energy transition is inevitable and rulers may need to hand over more democratic representation as their societies shift from the traditional petro-monarchy model to something new. Yet with this decline still years away, it is unclear on what time scale this will occur. Rumors already abound of haunting vacancies and staff cuts at Masdar City. The clean energy companies are increasingly questioning why they would move to a region where renewable energy use is outside the norm.  While environmentalists and clean energy advocates can allow themselves to rejoice that the clean energy craze has reached even the most oil-centric of states, investors in Abu Dhabi’s clean energy initiatives should err on the side of caution when deciding whether the time of the transition is indeed at hand for some states, like Abu Dhabi, or whether these initiatives are about more diplomatic flash than economic substance.


[1] A rentier state refers to those states whose national revenues are primarily derived from the extraction of natural indigenous resources.