The United Arab Emirates (UAE), in particular the cities of Dubai and Abu Dhabi, face major environmental challenges exacerbated by climate change. Rising temperatures, water stress, desertification and rising sea levels jeopardize not only their economic model, which is heavily dependent on fossil fuels, but also public health, the population's pace of life and the resilience of infrastructure. Against this backdrop, the UAE has adopted various strategies to mitigate climate risks and develop new investment opportunities in climate technologies. This article examines the climate challenges specific to the UAE, the strategies put in place to manage these risks, and the investment opportunities and financial risks associated with the energy transition.
The United Arab Emirates is located in one of the world's driest regions, with annual rainfall of less than 100 mm. This chronic drought is exacerbated by extreme temperatures that accelerate evaporation of surface water, accentuating desertification and soil impoverishment. In addition, the Abu Dhabi Environment Agency points out that overexploitation of groundwater, mainly to meet agricultural and urban needs, is leading to an alarming drop in aquifer levels. This phenomenon exacerbates water stress and compromises the sustainability of groundwater resources. Faced with this shortage of fresh water, the United Arab Emirates rely heavily on seawater desalination, which accounts for over 70% of their drinking water supply. Although this technology can compensate for the lack of rainfall, it poses significant environmental and economic challenges. Desalination is an energy-intensive process, requiring large quantities of electricity, often produced from fossil fuels, which contributes to greenhouse gas emissions. In addition, brine discharges into the Persian Gulf increase the salinity of coastal waters, threatening local marine ecosystems. Managing water stress in the Emirates is therefore a major challenge, requiring innovative, sustainable solutions to reconcile economic development with the preservation of natural resources.
Summer temperatures in the UAE regularly exceed 50°C, with an average increase of 1.5°C observed over the past thirty years. This trend is worrying because of its effects on public health, the economy and infrastructure. Demand for air conditioning has exploded, increasing energy consumption and exacerbating the country's carbon footprint. Extreme heat also reduces the productivity of outdoor workers and endangers local biodiversity.
Rising sea levels represent a major threat to coastal infrastructure in the Emirates, particularly in Dubai and Abu Dhabi. According to the World Bank, a rise of just 1 metre could submerge up to 6% of the UAE's territory, threatening iconic projects such as Palm Jumeirah and The World Islands. Coastal erosion and saltwater intrusion into underground aquifers also compromise access to drinking water.
The UAE regularly experiences sandstorms that reduce visibility and aggravate respiratory illnesses. At the same time, air pollution, mainly from industrial emissions and transport, results in high public health costs. According to the World Health Organization (WHO), outdoor air pollution causes around 1,872 premature deaths per year in the UAE.
Faced with the scarcity of fresh water, the UAE has invested in energy-efficient desalination technologies. In addition, projects to recharge aquifers and reuse wastewater have been implemented. The "Water Security Strategy 2036" initiative aims to diversify sources of supply and improve the efficiency of water infrastructures.
The UAE is investing heavily in solar and wind power to reduce its dependence on hydrocarbons. The Mohammed bin Rashid Al Maktoum Solar Park, with a target capacity of 5,000 MW by 2030, is one of the world's largest solar projects. In parallel, the Noor Abu Dhabi project provides clean energy to 90,000 homes.
To limit the effect of urban heat islands, initiatives such as Masdar City in Abu Dhabi have been launched. This ecological city is designed to reduce energy consumption and encourage sustainable mobility through innovative solutions such as autonomous transport and low-energy buildings.
Oil company ADNOC has set up a carbon capture and storage project aimed at reducing industrial emissions. The "Al Reyadah" initiative captures up to 800,000 tonnes of CO₂ per year, contributing to the UAE's emission reduction targets.
The UAE aims to become a leader in the global green hydrogen market. Projects such as Masdar aim to produce and export clean hydrogen, with an estimated growth potential of $400 billion by 2050. Green hydrogen is a key alternative for decarbonizing the industrial and transport sectors.
With increasing climate regulations, demand for carbon capture solutions is on the rise. Investing in this technology offers high potential returns, thanks in particular to government incentives and emerging carbon markets.
Companies specializing in AI applied to climate forecasting and sustainable infrastructure management are benefiting from an expanding market. The partnership between Emirati company G42 and Nvidia illustrates the growing interest in these innovations.
With the global energy transition, oil and gas assets are subject to increased volatility. The UAE's economic dependence on hydrocarbons poses a major financial risk, prompting institutions to diversify their portfolios towards clean energy.
New international regulations aimed at taxing carbon emissions could affect the profitability of fossil fuel industries in the UAE. Institutional investors need to anticipate these developments to minimize their exposure to carbon-intensive assets.
The concept of "stranded assets" refers to energy assets likely to lose value as a result of the energy transition. Sovereign wealth funds and private investors are looking to redirect their capital into more sustainable sectors, such as renewable energies and green infrastructure.
The United Arab Emirates faces complex climate challenges, but has put in place ambitious strategies to mitigate their effects. The boom in renewable energies, carbon capture and green hydrogen represents a major opportunity for investors. However, the energy transition also entails financial risks that institutions need to anticipate. The future of the UAE will depend on its ability to balance economic growth with environmental sustainability.