• Monday, June 24, 2024
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UAE unveils $30 billion climate fund to accelerate global action

COP 28: Here are all major climate finance pledges

The United Arab Emirates has set up a $30 billion fund to invest in clean energy and other climate projects worldwide — with a particular emphasis on financing infrastructure in the Global South — as the Middle Eastern nation tries to quell doubts that it is committed to moving the planet away from fossil fuels.

The plan, announced Friday at the opening proceedings of the annual U.N. Climate Change Conference, which the UAE is hosting this year in Dubai, comes as the petrostate tries to burnish its credentials as a leader in the clean energy transition, even as it continues the oil investments that have brought Emiratis tremendous wealth. The money to fund the projects will come largely from oil revenue.

The newly established fund was “specifically designed to bridge the climate finance gap” and hopes to stimulate further investment of $250 billion by 2030, UAE President Mohammed bin Zayed Al Nahyan told leaders gathered at the talks known as COP28.

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“The lack of readily available and affordable climate finance has long been one of the biggest obstacles in advancing climate action globally,” Al Nahyan said, speaking through an interpreter.

Some $5 billion of the investment is earmarked for developing nations that lack the capital to cut electricity emissions and update their energy systems.

While the overall dollar amount is considerable, experts caution its ultimate impact on curbing warming and bringing new energy resources to the Global South will hinge on how the UAE structures the spending.

Investors have passed on a number of projects in developing countries because they are considered too financially risky. It is unclear if the UAE is willing to use this spending to absorb some of that risk, which could act as a catalyst to attract many billions of dollars more in private and government climate investment to regions in need.

“Given the source of these funds, it is essential that these investments help accelerate the transition to renewable power, especially in low-income countries,” said Rajiv Shah, president of the Rockefeller Foundation and USAID administrator under President Barack Obama.

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The initiative puts a spotlight on the UAE’s evolving role in the fight against climate change. The country is at once one of the world’s biggest contributors to warming, pumping massive amounts of oil into the global economy, while also using its fossil fuel wealth to put itself on the vanguard of energy innovation, bankrolling some of the most ambitious clean tech projects.

The Emirati presiding over the climate conference, Sultan Al Jaber, who is also the head of the Abu Dhabi National Oil Company, will chair the new fund. He is accused of using the conference to broker fossil fuel deals for his country — a charge he denies — while at the same time Al Jaber has won recognition for making big bets on the energy transition and prodding other petrostates to follow suit.

On the first day of COP28, he also got the summit off to a quick start with nations approving the mechanics of a fund that seeks to help vulnerable nations hit by climate emergencies.

“This country is trying to figure out its role in a changing planet,” said David Victor, co-director of the Deep Decarbonization Initiative at the University of San Diego. “It doesn’t yet know what its future looks like in a low emissions world. The country is still experimenting, and I don’t think it knows which of these experiments will work.”

Regardless of the path the UAE ultimately charts in the long term, Victor said, it is critical for the country’s ambitions that the conference in Dubai be seen as a success. The $30 billion pledge, while still representing only a fraction of the finance needed to bring countries in line with emissions reduction goals forged through the Paris agreement on climate change, could help move the needle on fighting climate change, advancing projects that otherwise are not viable.

“This lines up with things the Emirates was already doing and it reduces the risk that the conference will be perceived as a failure,” Victor said.

The shortfall of funding for renewables is largest in poorer nations struggling to expand power supply without relying on fossil fuels. Developing countries in 2022 received under a third of the $1.7 trillion in investment needed every year to transition to clean energy sources, according to the U.N.

Bridging that gap is going to depend on finding ways to make investors comfortable backing projects in the countries that need the funding the most.

That is why the portion dedicated to the Global South may be more significant than that rest of the funding, because it will focused on securing loans at favorable rates for those countries, said Rishikesh Ram Bhandary, an expert on climate finance at Boston University’s Global Development Policy Center.

“It’s great that they are trying to mobilize institutional investors, but in terms of affordability and access, that’s really going to have to come through the $5 billion,” he said.