The UN Framework Convention on Climate Change closed in Doha on Saturday after two weeks of talks aimed at reaching an international agreement to reduce greenhouse gas and carbon emissions. Throughout the conference, Gulf States received glowing press reviews of their investments in alternative energy sources. Indeed, the reported $109 billion that Saudi Arabia is expected to invest in alternative energy next year has the potential to revolutionize the industry, especially considering that total global spending on alternative energy in 2011 was $136 billion.
Altruism, however, is not the sole motivation behind these investments. In the past, Gulf States have not shown that they are particularly sensitive to climate and environmental issues. In addition to heavily subsidizing fuels, they have by and far the highest per-capita carbon emissions in the world – nearly double those of the United States – and have so far refused to pledge any reductions in these emissions.
So why invest in alternative energy sources? One answer might be found in the IEA World Energy Outlook 2012. The report indicates that two key trends have the potential to fundamentally alter the global energy market. The first trend is that demand for oil among OECD countries is set to decrease in the upcoming decade. The second is that as this demand falls, the otherwise rising global demand for oil will be met by increasingly diverse sources of petroleum. Iraqi production is set to at least double by 2015 and it will be joined by new production in the United States as well as the reintroduction of Libyan, and perhaps even Iranian, oil to the market.
Saudi Arabia currently burns about a quarter of its annual oil production to meet rising demand for electricity at home. If it hopes to maintain its key position in setting global oil prices then it will likely have to reserve a larger percentage of its reserves for the global market. So, while the fact that Saudi Arabia plans to get about 30% of its domestic energy from alternative sources is certainly admirable, it will likely do little to stem the global production of greenhouse gases.
These emissions could become a problem for the rest of the Arab world, which the World Bank predicts will suffer extreme economic hardship as a result of climate change. Global warming is also likely to increase water and food scarcity, which some argue could destabilize the entire region.
Of course, it is too soon to say with authority what the ultimate affects of the new Gulf investments in alternative energy will be. Still, it is clear that leaders will have to keep in mind the potential consequences of mismanaging these investments in order to make the most of the opportunity they provide.
Please note that the views expressed in this post do not represent the official policy or position of the National Defense University, Department of Defense, or United States Government.