Catalyzing Green Growth in the UAE: Growth Opportunities in a Decarbonizing World

The world is rapidly shifting towards a lower-carbon economy, drawing a new map of comparative advantage in the process. As the global economy decarbonizes, it will bring about profound changes in the landscape of production, giving rise to new industries, markets, and pathways for economic development. This transformation will manifest through changes in global demand and prices for existing products but also through the emergence of novel technologies and industries, many of which will replace older, carbon-intensive practices and production methods. These trends will have a significant impact on the fundamental competitiveness of every economy. Therefore, it is crucial for national economic policies, including in the United Arab Emirates, to include a well-designed green growth strategy to harness the global drive towards a decarbonized world economy. This report aims to identify green growth opportunities for the UAE through a structured approach and suggest concrete policy ideas to seize them. We analyze green growth opportunities along the following four pillars: (1) make the enablers of decarbonization; (2) make green versions of energy-intensive products; (3) capitalize on carbon capture, utilization, and storage (CCUS); and (4) export decarbonization-related know-how. One of the most promising opportunities identified lies in the development of green industrial parks. The UAE should consider establishing such green industrial parks to attract energy-intensive industries aiming to switch to low-carbon production processes. These parks provide the necessary inputs to low-carbon industrial production in a concentrated geographical area. These include dedicated low-cost renewable energy, but also clean, high-temperature heat, low-carbon hydrogen, as well as carbon capture technology and other services necessary to certify the green nature of the production. A net-zero world will need to make things like steel, cement, chemicals, aluminum, and glass without emitting carbon. It will also need to develop fuels for ships, planes, and heavy-duty transport that have near-zero life cycle emissions, a large proportion of which are expected to come from renewable energy that is used to make hydrogen and liquid fuels. Low solar energy costs make the UAE one of the best places to develop low-carbon energy-intensive industries. Additionally, the UAE has a low cost of capital, which is an important comparative advantage since many of these industrial activities are highly capital-intensive. As the world transitions towards a decarbonized global economy, green industrial parks will drive high-value green economic activities to locate in the UAE, resulting in stronger exports, more value-added, and a future-proof economic model for the country. As developing green industrial parks is complex, this is an opportunity to accumulate valuable know-how that, in turn, can be monetized. For instance, nobody yet knows how to build, manage, and operate a multi-gigawatt green hydrogen production facility. In the process of building green industrial parks in the UAE, the UAE will have to learn how to optimize a very complex renewable energy system, balance electricity, heat, and hydrogen across multiple energy users with different load profiles, and deploy multiple new technologies together that are still in the pilot phase. The UAE should consider monetizing its domestic experience by developing and exporting green industrial parks in other countries and developing a business model around these activities. Such a strategy could involve (1) owning the Engineering, Procurement, and Construction Management (EPCM) contractors and other related businesses that develop and operate parks; (2) where possible, having as much of the high-income knowledge workers who provide these services live and work in the UAE; and (3) helping UAE industrial companies that wish to expand abroad (such as Emirates Global Aluminium, or Emirates Steel Arkan) make profitable foreign investments in green industrial parks in other countries. There may be another opportunity in critical minerals processing. A mining boom is required to provide the world with enough critical minerals to build a clean energy system. Currently, China is dominating the critical minerals processing market, but many countries are looking to diversify their critical minerals supply chain. Given its low cost of capital, strategic location, and good trading infrastructure, the UAE is well-positioned to take advantage of this opportunity. The country already has nascent strengths in mineral refining to build off, in the aluminum and, soon, in the lithium value chains. Other promising policy ideas are centered on accelerating the creation of green growth knowledge in the UAE and encouraging high-potential business applications. Given their potentially large implications for low-carbon industrial processes in the UAE, we recommend that the government consider establishing applied research hubs in the areas of electrochemistry and thermal energy management & storage. Our research has already identified leading actors in this area that may be attractive partners for collaboration. Additionally, to ensure the close monitoring of the innovation and technology developed abroad, we recommend discussing the establishment of a green technologies working group within the Emirates Scientist Council. This working group would continuously monitor advances in green technologies and their impact on the UAE, reporting findings to the higher levels of government to inform strategic decisions.