In scale and importance, the climate agreement forged this week in Paris may be without precedent in the history of global economic and diplomatic relations. It is also about to become the most important policy intervention global energy systems have ever known. But far from being an entirely anti-economic move for the Gulf’s hydrocarbon exporters, there is a widely held view that the region has a window through which it can re-emerge in a new age of energy as a leader beyond oil and gas.
To do so we must view hydrocarbons as part of the solution. The truth is so much of the new hyper-connected, increasingly affluent world we live in can be attributed – directly and indirectly – to the impact of oil and gas. Together they power homes and businesses, have given rise to cities, fuel travel and advanced existence in so many other ways from manufacturing and industry to domestic life.
Despite this week’s decisions, fossil fuels will continue to play an important role in the global economy for some time. But what has become clear is that to avoid catastrophic temperature rises we must pursue a more balanced approach that prioritizes cleaner forms of power generation and makes hydrocarbon energy sources significantly cleaner. It’s a bold mission, and one that this region must be as committed to as anywhere else in the world. Consider a recent study by the Massachusetts Institute of Technology that warned of regional catastrophe and ‘heat waves beyond the limit of human survival’ in the GCC by 2070 should global warming continue unabated.
That said, clean energy’s impact on the climate has never been in question. The concern has been over the economic implications of an energy transition. But thanks to the world’s a growing appetite to invest in clean technologies renewable energy is more than just the answer to climate change – it presents an economic opportunity for the GCC to retain energy leadership and in the process incubate new industries that create and sustain thousands of new skilled jobs.
The factor that underpins the economics of future energy is the increasing cost competitiveness of solar technology. This new reality is turning the region’s enduring resource – sunlight – into a bankable commodity and a cost efficient source of new power generation, and potentially water desalination too. Solar PV is already the cheapest form of new power generation in UAE according to IRENA, and it will reach grid parity with fossil fuels in 80 per cent of countries within the next two years.
Hydrocarbons have been a blessing for the Gulf. They have transformed otherwise deserted landscapes into a heartland of energy that has given rise to cities of the future such as Dubai. But it has also been blessed with abundant sunlight. And through smart investment decisions and the adoption of attractive energy policies, Gulf nations have a unique opportunity to ensure that the impact of oil and gas is a lasting one, positively affecting the lives of generations well into the future.
So it’s now mission innovation for the energy community. In a region challenged more than most by energy security and water scarcity, the GCC has a lot to lose by not getting it right. And now that we are all clear there is no trade-off between decarbonisation and economic growth, the GCC’s more balanced future looks clean and bright.