As the existential threat of climate change continues to intensify, the future of fossil fuels has been thrust into the international spotlight. Reducing hydrocarbon production and consumption, known as fossil fuel phase down, has gained traction in international climate talks during the last two years amid warnings that the window to avoid catastrophic warming is closing quickly.
The consensus has long been that carbon should be attributed where it is emitted, and the emissions of fossil fuels, as tradable goods, should only be accounted for where they are burned. This absolved fossil fuel exporters of all emissions but those associated with its extraction and production processes. The landmark 2015 Paris Agreement lacked any language around phasing down oil, natural gas, and coal supplies and focused solely on reducing emissions from burning hydrocarbons through adopting energy efficiency measures and switching to renewable energy sources.
The 2021 United Nations Climate Change Conference (26th Conference of the Parties, COP26) in Glasgow saw the first ever COP decision where parties committed to accelerate “efforts towards the phasedown of unabated coal power and phase-out of inefficient fossil fuel subsidies”. At the same summit, over 40 countries also signed on to the Beyond Oil and Gas Alliance, pledging to phase down fossil fuel production.
The following year, at COP27, in Sharm el-Sheikh, Egypt, a coalition of over 80 countries demanded that this commitment be expanded to include all fossil fuels. While unsuccessful, it was a further signal of increasing pressure to consider the role of fossil fuels supplies, and the beginning of a shift toward placing more responsibility on fossil fuel producers rather than just its consumers.
A growing movement led by activists and civil society organizations argues that supply-side action is needed to restrict extraction and production of oil, gas, and coal, as well as the associated lobbying of governments by fossil fuel companies. Pressure is also rising against the continued provision of subsidies to fossil fuel consumption, which only serve to support carbon-intensive industries. According to a recent estimate by the International Monetary Fund, total global fossil fuel subsidies amounted to $7 trillion in 2022, equivalent to nearly 7.1% of global GDP, and more than five times all investment in energy transition technologies, including energy efficiency, during the same year.
The shift could not have come at a more difficult time: It coincided with the Russo-Ukrainian war, a tight energy market, and heightened concerns about the economic impact of high energy prices. This concern was evident in 2022, when the United States government heavily criticized the OPEC+ cartel for cutting back petroleum production.
The Gulf’s unique transition
Producing a fifth of global oil supply and holding 56% and 40% of the world’s proven conventional oil and gas reserves, respectively, the Gulf countries find themselves on the receiving end of some of this pressure, while facing a unique economic conundrum.
They have long relied on revenues from fossil fuel exports to drive their national economies. And in recent years, they have relied on those exports further to diversify and decarbonize those economies. With the exception of Qatar, all countries of the Gulf Cooperation Council (GCC) have plans to reach net zero carbon by 2050 or 2060, despite their limited historical responsibility for man-made climate change. They all have economic diversification plans at various degrees of development. The United Arab Emirates aims to derive half of its GDP from non-oil sources by the end of the decade.
The irony here is that Gulf countries are using revenues from oil and gas to fund diversification and decarbonization efforts in preparation for a future when the world no longer needs these fossil fuels. In this race against time, Saudi Arabia has utilized its petroleum income to invest heavily in sectors like tourism and renewable energy. Similarly, the UAE has tapped into its fossil fuel wealth to develop its technology, logistics, and tourism sectors.
The inherent contradiction of using oil and gas revenues to fund decarbonization has stirred up controversy, considering how these exports enable other countries’ emissions. It has even led to calls for producers to leave unexploited hydrocarbons in the ground. However, abruptly halting oil and gas exports could have severe economic consequences for the Gulf countries, not to mention international markets more generally. Without rents from hydrocarbon exports, the Gulf economies would likely falter before their diversification efforts could bear fruit. The result could be economic crises, high unemployment, and political instability in the Gulf, harming local citizens and undermining regional security, while simultaneously roiling economies, financial markets, and transportation, industry, and food-production sectors across the world.
Faced with global pressure to address climate change while dependent on fossil fuel income and incentivized by continued strong international demand for their energy exports, Gulf states have developed climate strategies centered on carbon capture and storage, offsets, and emissions trading. They argue that when demand for oil peaks, they should be the last producer standing given their low carbon footprint per unit of energy produced. At the same time, these countries are increasingly investing in renewable energy due to its cost competitiveness and potential to free up more oil and gas for export.
This dual approach is exemplified by Saudi Arabia through its Circular Carbon Economy framework. Rather than reducing oil and gas production, the kingdom aims to neutralize emissions by expanding renewable energy sources to half of its electricity capacity by 2030. It also has ambitious plans to plant billions of trees, develop carbon-capture technology, and establish a carbon market.
Under the spotlight
The choice of the UAE to host COP28 and the appointment of Dr. Sultan Ahmed al-Jaber to preside over the upcoming climate summit shone a glaring spotlight on the Gulf amid this emerging battle over the future of fossil fuels. It sparked backlash from climate advocates who feared an oil executive presiding over the negotiations would represent a conflict of interest, regardless of his record as a climate pioneer. They also worried it might influence the pivotal tug of war between fossil fuel producing countries and those seeking a phase down of oil and gas.
In an unprecedented move, more than 130 lawmakers from the U.S. and European Union wrote an open letter calling for Sultan al-Jaber’s removal. Former U.S. Vice President Al Gore called his appointment “outrageous” and said it sent a message that “the oil and gas industry is still in charge,” while former U.N. climate chief Christiana Figueres called his approach “dangerous.”
In response, the COP28 presidency adopted a more progressive approach toward the energy transition, echoing the International Renewable Energy Agency’s (IRENA) call to triple renewable energy investment by 2030 and referring to the phase down of fossil fuels as “inevitable” and “essential.”
Showdown in Dubai
But this campaign against fossil fuel production was never just about the Gulf producers, and it continues to gain momentum. The latest U.N. synthesis report highlighted that Paris goals are unlikely to be achievable without phasing out all unabated fossil fuels. It also called for a cessation of all new oil, gas, and coal exploration and for phasing out fossil fuel production before 2050. The International Energy Agency’s (IEA) Net Zero Roadmap likewise warned against new infrastructure and forecasted a peak in coal, oil, and gas demand by 2030. During the U.N. Climate Ambition Summit, on Sept. 20, 2023, Secretary-General António Guterres implored leaders to phase out all hydrocarbons and denounced “naked greed” holding back the energy transition.
With the world off-track on Paris goals, and mounting extreme weather focusing minds, a reckoning over fossil fuels looms in Dubai. The Gulf will face heavy scrutiny, as its climate approach and carbon mitigation technologies draw increased attention. In June, the U.N. chief called plans to expand oil and gas using carbon-capture technologies “proposals to become more efficient planet wreckers.” In late September, former British Prime Minister Gordon Brown called for a levy on oil and gas exports to make up for the shortfall in climate finance that the developed economies have failed to provide. His proposal singled out Gulf producers in Saudi Arabia, the UAE, and Qatar, along with Norway, but did not include bigger producers such as the United States, which is on track to represent over one-third of all planned fossil fuel expansion through 2050.
Entrenched positions and no compromise in sight mean a challenging COP awaits. Just seven years remain to meet global pledges to halve emissions, so the stakes are immense. The lack of a negotiation track on phasing out fossil fuels complicates progress. Unless an unlikely consensus emerges, this pivotal tug-of-war will continue until the Dubai climate summit concludes, and it could spill out into the open during the drafting of the final statement.
COP28 represents a now-or-never chance for humanity to collectively rise to the existential climate challenge. But an innovative compromise is desperately needed to avoid another setback. We must all row in unison, lest we drown in divided squabbles.
Karim Elgendy is an urban sustainability and climate consultant based in London, and a Non-Resident Scholar at the Middle East Institute.
Photo by YU FANGPING/ Feature China/Future Publishing via Getty Images
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