Abu Dhabi, UAETuesday 21 May 2019

Foreign relations will be a vital concern in the age of energy transition

The move from fossil fuels to renewable sources is filled with challenges that should be met hand in hand with our neighbours and friends

The shift to renewable energy sources will bring changes to existing international relations. Joshua Lott/Bloomberg News
The shift to renewable energy sources will bring changes to existing international relations. Joshua Lott/Bloomberg News

The world is moving towards renewable energy sources, which are distinct from fossil fuels in a number of ways. These differences have implications for international relations. The main contrast is that while the hydrocarbon era has been characterised by competition over scarce, geographically concentrated resources, renewable energy resources are abundant and, in many cases, involve co-operation. Regional electricity markets are a perfect example.

However, when it comes to examining how the Gulf region will be impacted by the global energy transition, researchers have so far mainly focused on the negative effects, namely relative losses in economic growth and geopolitical power. At the Emirates Diplomatic Academy, we wanted to understand better where the benefits and opportunities for this region lie, and what role diplomacy could play in this.

We gathered a group of independent energy experts to look at three areas in which foreign relations can help the UAE and its neighbouring countries to thrive in this new era. This research, which was recently published, focused on how energy diplomacy can be leveraged in bilateral relations, what is needed for a commercial electricity market in the region, and how international cooperation can support the goal of achieving energy access and clean energy for all.

In bilateral relations, the project identified the contours of an energy diplomacy approach that would build on existing partnerships, in particular in Asia, and pursue science and technology partnerships, including in the area of artificial intelligence. Engaging all national energy stakeholders in this effort will be crucial.

To reap the full potential of regional electricity trade, the project identified the benefits from further diversifying national energy mixes, harmonising national regulations, restructuring national power sectors and expanding grid capacity.

In the longer-term, expanding the grid beyond the GCC could also result in benefits to other areas, including through supporting energy access in Yemen, for example, and generating new investment opportunities in renewable energy in countries such as Egypt.

Building on its track record in supporting the poorest, the UAE could also expand its support to clean cooking fuels and rural electrification in sub-Saharan Africa, South Asia and South-east Asia – all regions where the UAE is working to strengthen its economic partnerships.

The research also identified three issues of the global energy transition that are of particular national interest for the UAE. The first one is maintaining the country’s status as a global energy supplier, which will involve the development of both hydrocarbon and renewable energy-related export industries and investments. At present, renewable energy is arguably still seen more as a “hedge” for the future, with the main focus on domestic supply security and some related green industries, rather than viewing it as a major export-oriented sector.

Another important goal is to ensure that domestic energy targets can be met, which will require securing supplies of critical materials and technologies. Finally, ensuring economic prosperity via a diversified economy is crucial. In this respect and others, joint projects with leading technology suppliers and investments in clean technologies will be essential.

For the UAE, a large share of the necessary measures are so-called “no-regrets actions”, which means that their adoption will increase economic resilience and their benefits will outweigh the costs over time.

But there are external factors that are beyond the control of individual countries. The timing of global peak oil and gas demand remains highly contested. For this region’s economies, when these peaks occur and the pace of the decline in demand thereafter are critical questions. But the large number of factors involved – such as socioeconomic and technological development, and climate-change policies in countries around the world – makes it impossible to predict these exactly.

Notwithstanding this, the policy prescriptions for the region remain the same. And the sooner they are implemented the better. Taking early action to diversify the economy and build lasting partnerships with strategic international players in the transition will help build resilience to future oil price shocks and rapid, unpredictable changes in demand. And foreign policy has an important role to play in this.

Dr Mari Luomi is a senior research fellow at the Emirates Diplomatic Academy

Updated: January 30, 2019 02:37 PM

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