What are the challenges and opportunities for factoring climate action into the UAE’s and Oman’s economic diversification strategies?

Climate change brings both challenges and opportunities for economic growth in oil producing countries, which are highly reliant on oil-export revenues. On one hand, if not managed properly, climate change affects both non-oil and oil-based economic sectors. Non-oil economic sectors such as agriculture, food security, water, fisheries, tourism, and infrastructure are already negatively affected by the physical impacts of climate change, including rising temperatures, falling annual rainfall,  sea level rise, and increased exposure to  extreme events like intense rainfall. Climate change also imposes risks to the economic sustainability of oil-based economic sectors, especially due to international policies to reduce fossil fuel consumption, which would impose direct economic losses on the Gulf Arab states. On the other hand, factoring climate risks into economic development could unlock many economic, social and environmental opportunities. In the Gulf Arab states in particular, factoring climate risks in the development of oil and non-oil economic sectors will not only minimize the harm caused by climate change but will also support their long-standing economic diversification ambitions.

In our new paper in Climate Policy, we analyze the extent to which climate change has factored in economic planning and development in the UAE and Oman, and assess the challenges and opportunities for its integration into economic planning and development. Our analysis draws on semi-structured interviews with key stakeholders in the UAE and in Oman, as well as relevant policy documents.

The paper reveals that both the UAE and Oman have nascent climate policy regimes and have developed modest governance capacities in factoring climate change in their economic development. Yet, we find evidence that the ‘super-rentier’ status of the UAE, with greater national income and sovereign wealth, allowed greater, albeit modest, progress in integrating climate policy into economic development plans, than in Oman.

The UAE’s relative progress in delivering modest growth in the governance of climate policy integration, as supported by the ruling elite, can be explained by its strategic commitments to green growth and finance, although the climate policy regime has not tempered continuing hydrocarbon production. Oman’s very limited progress in institutionalizing climate policy integration can be explained by the persistence of a centralized political–economic regime in which the ruling elite has so far treated climate change largely as a symbolic vehicle directed at the international climate policy audience, with Omani climate mitigation commitments conditional on international finance, capacity building and technology transfer.

In both countries, climate policy integration has been largely concentrated in the energy sector with growing integration of renewable energy investments, in order to reduce dependence on fossil fuels. However, this integration has been significantly constrained by the systemic imperative in the UAE and Oman aiming to protect rents from oil exports, and that in neither country is there mainstreaming of climate change mitigation (or adaptation) in the core rentier state institutions (ministries of energy, national oil companies and financial institutions).

Read the full paper.

Aisha Al-Sarihi is a Research Associate at King Abdullah Petroleum Studies and Research Center, where she focuses on the environment, energy policy and climate economics and policies.

Michael Mason is Director of the Middle East Centre and Associate Professor in Environmental Geography at the London School of Economics and Political Science.   

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