Bracing for the Sandstorm: The Gulf Energy Transition Imperative

Before the 2008-2009 financial crisis, the Gulf Cooperation Council (GCC) states—Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE)—were riding high on a wave of prosperity, fueled by soaring oil prices that approached $200 per barrel in mid-2008. Some GCC governments and businesses based their plans and budgets on the assumption that this golden age would continue. But like a mirage in the desert, this illusion evaporated as quickly as it had appeared. In 2014, a perfect storm of global events, from the rise of US shale oil production to the refusal of the Organization of Petroleum Exporting Countries (OPEC) to cut production in order to maintain market share, sent oil prices tumbling to under $50 per barrel. Following the onset of the COVID-19 pandemic in 2020, oil exporters had to contend with historically low oil prices and revenues. The once-mighty Gulf economies found themselves scrambling to adapt to these cyclical changes, their vulnerability to the whims of the global energy market laid bare. This experience starkly reminded the region that failing to prepare, diversify, and build resilience in a world of shifting sands may leave them behind.

As the world transitions to cleaner energy sources, the Gulf region finds itself at a crossroads. Despite varying efforts to diversify their economies, Gulf countries remain heavily dependent on hydrocarbon exports, leaving them vulnerable to the volatility of global energy markets. The region also is grappling with the effects of climate change, from rising sea levels to scorching temperatures.

To secure its future, the Gulf states must embrace a transition to diversified, decarbonized, and climate-resilient economies. This requires a fundamental shift in mindset and investment in new industries, technologies, and infrastructure. By taking bold action to reduce their carbon footprint and build resilience, Gulf countries can safeguard their economic futures and contribute to the global fight against climate change. The alternative—clinging to the status quo—is a path fraught with risk and uncertainty.

The Risks of Inaction

The Gulf region faces significant risks if it fails to take decisive action to address the challenges posed by the global energy transition and the impacts of climate change. Perhaps the most pressing risk is the potential for stranded assets and economic losses as the world shifts away from fossil fuels. Not only would oil and gas reserves remain untapped, but the region’s vast oil and gas infrastructure, including pipelines, refineries, and export terminals, could become increasingly obsolete in a world that prioritizes clean energy. This could lead to a significant drop in the value of these assets, leaving Gulf countries with a diminished revenue stream and a hasty and potentially costly investment in alternative industries.

Moreover, the GCC states are particularly vulnerable to the physical impacts of climate change. The region is expected to warm up twice as fast as the global average; such an increase in maximum temperatures could strain public health, water resources, and energy systems and undermine the region’s tourism sector. A combination of rising summer temperatures and high relative humidity along the Gulf states coastline could render outdoor summer conditions fatal under the worst case climate change scenario. Greenhouse gas emissions produced in the coming few decades will lock in sea level rise this century and beyond, posing a direct threat to coastal cities and infrastructure, undermining economic development, and potentially leading to the displacement of communities.

The GCC states are particularly vulnerable to the physical impacts of climate change.

The Gulf region also risks losing its competitive edge in attracting and retaining human capital if it fails to create a more sustainable and livable environment. As global awareness of climate change grows, specialized individuals and businesses may increasingly factor future environmental considerations into their decision-making, opting to locate in regions that are less at risk and that offer a higher quality of life. This could lead to a brain drain from the Gulf, undermining efforts to diversify economies and build knowledge-based industries.

Furthermore, failing to adapt to the global energy transition could have far-reaching geopolitical consequences for the Gulf region. As the world moves toward cleaner energy sources, countries that are slow to adapt may be left behind in the global economy, with diminished influence and bargaining power. This could lead to a realignment of global power dynamics, with countries that embrace the energy transition taking on a greater regional leadership role.

The Opportunities in Decarbonization and Climate Adaptation

The transition to a decarbonized and climate-resilient economy presents significant opportunities for the Gulf region. By investing in clean energy and green technologies, Gulf countries can tap into a rapidly growing global market. In 2016, the International Finance Corporation estimated that opportunities for climate-smart investments in emerging economies amount to nearly $23 trillion from 2016 to 2030. This includes opportunities in renewable energy as well as in energy efficiency, green buildings, and low-emission transportation. Investing in such sectors can drive economic diversification, develop new value chains (i.e., the full range of activities required to create a product or service), and create new sources of revenue for Gulf countries, reducing their reliance on fossil fuel exports.

Moreover, the transition to clean energy could create a substantial number of jobs in the region. A recent study estimated that investing in decarbonization and green industrial growth energy could create 10 million jobs in the Middle East and North Africa region by 2050.

Investing in clean energy and green technologies can also help Gulf countries attract foreign investment and build new economic partnerships. Many global companies and investors are increasingly prioritizing sustainability and looking for opportunities to invest in low-carbon projects. By creating a favorable environment for green investment, Gulf countries can position themselves as attractive destinations for these firms.

The transition to a low-carbon economy also presents opportunities for Gulf countries to assume a leadership role in the global fight against climate change, a role that could enhance the GCC states’ geopolitical influence and soft power.

Investing in climate adaptation measures, such as building resilient infrastructure, developing early warning systems for natural disasters, and improving water management will reduce potential losses and damages. It will also create new economic opportunities and protect communities from the impacts of climate change. The Global Commission on Adaptation estimates that investing $1.8 trillion in climate adaptation measures globally could generate $7.1 trillion in net benefits between 2020 and 2030.

Strategies for a Successful Transition

To successfully navigate the transition to a decarbonized and climate-resilient future, the Gulf region must adopt a comprehensive and multi-faceted approach. This involves targeting key areas for decarbonization, investing in climate-resilient infrastructure, fostering collaboration between the public and private sectors, and learning from successful initiatives in the region.


One of the most critical areas for decarbonization in the GCC region is the energy sector. To reduce energy emissions, Gulf countries must accelerate the deployment of renewable energy technologies, particularly solar and wind power. The region has already made significant strides in this regard, with the UAE and Saudi Arabia setting The cost of solar and wind power also has become commercially competitive. But more needs to happen to scale up these efforts and phase out fossil fuel subsidies.

The transportation sector is another key area for decarbonization. According to the World Bank, as of 2024 transportation accounted for 12 to 26 percent of the region’s total carbon emissions. To reduce this, Gulf countries must invest in low-carbon transportation infrastructure such as public transportation networks and walkable and bikeable roads, and encourage a transition to electric vehicles by developing needed charging networks.

One of the most critical areas for decarbonization in the GCC region is the energy sector.

The construction sector is a third significant contributor to the Gulf region’s carbon footprint. In Saudi Arabia, the construction and industrial sectors accounted for around 24 percent of total emissions in 2014. To decarbonize this sector, Gulf countries must adopt energy-efficient building standards and promote the use of materials with low-embodied carbon, which have less climate impact.

Investing in climate-resilient infrastructure is another critical strategy for the Gulf region. This includes upgrading water management systems to cope with increasing water scarcity. The region has already experienced significant climate-related damages. A 2017 study of 12 economic sectors in the UAE warned that a number of those sectors could be adversely affected by 2050 due to climate change. Investing in resilient infrastructure can help mitigate these risks and create new economic opportunities.

Gulf governments seem to have taken the first step in the last two years by setting decarbonization targets. As of 2022, all GCC countries, except Qatar, have set a net zero target by 2050 or 2060. Setting such targets, however, is not enough. Also required is implementing supportive policies and creating an enabling environment for private sector investment.

The national visions of GCC countries (Saudi Arabia’s Vision 2030, Oman Vision 2040, Qatar National Vision 2030, UAE Vision 2021 and its Energy Strategy 2050, Bahrain Economic Vision 2030, and Kuwait Vision 2035) incorporate some of the strategies described here. The majority of these visions promote the adoption of renewable energy sources (five countries), encourage energy efficiency practices and technologies (four countries). Three countries’ strategies aim to reduce greenhouse gas emissions and two encourage reducing dependence on oil and diversifying the economy.

Some GCC countries’ visions boast other notable features. For example, Saudi Arabia has set up a voluntary carbon market and plans to increase the share of power generated by renewable energy sources to 50 percent by 2030 and to plant 10 billion trees in the coming decades. The UAE has a Long-Term Strategy that demonstrates its commitment to Net Zero by 2050 and sets out a roadmap for how it plans to decarbonize each economic sector.

The Time for Action Is Now

The Gulf region stands at a critical juncture in its history. As the world transitions to a low-carbon future, the region faces significant risks if it fails to adapt, including obsolete assets and economic losses. These risks are compounded by the effects of climate change on GCC countries’ infrastructure, economies, and ways of life.

But the transition also presents tremendous opportunities for the region to diversify its economies, create new jobs, attract investment, and assume a leadership role in the global fight against climate change.

To seize these opportunities, Gulf countries must take bold and decisive action. The vision for a sustainable and prosperous future in the Gulf region is within reach. By embracing the transition to a low-carbon economy, Gulf countries can build a more diversified and resilient economic model that benefits all segments of society. They can create new industries and jobs, attract top talent and investment, and enhance their global competitiveness and influence.

However, realizing this vision will require strong leadership, political will, and a sense of urgency. The time for action is now, before the world transitions away from fossil fuels and leaves the region behind. Rather than attempting to delay global climate action, Gulf countries must seize the moment when trade surpluses are still available and take decisive steps toward diversification, decarbonization, and climate adaptation. They should take these steps even if they will be financed with fossil fuel revenues in the short to medium term. They must invest in the technologies and infrastructure of the future, forge new partnerships and alliances, and mobilize the necessary resources and expertise.

The alternative—clinging to the status quo and hoping for the best—is simply not an option. The risks are too high to ignore, and the opportunities too great to miss. By embracing the transition to a low-carbon future, Gulf countries can not only safeguard their own economic and social well-being but also make a vital contribution to the global fight against climate change. Today, the question is whether the GCC countries will rise to the challenge and lead the way forward.

The views expressed in this publication are the author’s own and do not necessarily reflect the position of Arab Center Washington DC, its staff, or its Board of Directors. 

Featured image: Shutterstock/Dominic Dudley