The COP28 Agenda is a Recipe for Economic Armageddon: An Open Letter to Sultan Al Jaber, UAE President of COP28

The COP28 Agenda is a Recipe for Economic Armageddon: An Open Letter to Sultan Al Jaber, UAE President of COP28

In my open letter to the UAE President of COP28, I provide an economic and technological reality-check on how his proposed policies expose us to gigantic financial and ecological risks.

  • Nafeez M Ahmed
16 min read
Nafeez M Ahmed
The world has a problem: Big Oil’s hijacking of the climate action narrative. The power of the legacy energy industry means that mountains of flawed and backwards thinking – much of which contributed to the climate crisis – is preventing major institutions from recognising the most transformative pathways forward. It’s also exposing them to gigantic financial risks which are about to unfold in the next few years. I decided to write directly to Sultan Al Jaber, the UAE President of the upcoming United Nations COP28 climate summit, to provide them with an economic and technological reality-check. Here’s my open letter:

This open letter is co-published with Byline Supplement.

To His Excellency Dr Sultan Al Jaber

I watched Your Excellency’s speech this February at the World Government Summit in Dubai about your vision for the upcoming United Nations climate summit with keen interest. I also noted your speech at a major oil conference in Houston this March, calling on the oil industry to do more to commit to net zero by 2050, and net zero methane emissions by 2030.

Your commitments to keeping the 1.5C goal alive, and to accelerating the clean energy transition, are absolutely welcome. Your vision of a UAE which in the near-future “will celebrate the last barrel of oil” was especially significant given that you are of course the CEO of your country’s national oil company.

I am conscious that this is not the first-time senior UAE leaders have openly admitted that we are facing the end of the Oil Age, given that last year your Energy Minister, Suhail Al-Mazrouei stated: “To assume oil is going to be there forever is wishful thinking… No matter how much we defend it, it’s in decline mode.”

But of course, as you are no doubt aware, your role in presiding over the planned expansion of UAE fossil fuel production has been questioned by critics who point out that this seems incommensurate with the very transformative climate ambitions you endorsed.

I’m writing to you with a different but more pertinent perspective. My suggestion is that the vision you outlined conveys a deep-level of confusion at the heart of how most policymakers and legacy industry experts think about climate action.

“We need to triple renewable energy capacity, double hydrogen production, expand nuclear power, improve battery storage and, if we are serious about capturing emissions, scale up carbon capture technologies”, you told the conference. “All while minimising the carbon intensity of the energy we use today”.

You went on to argue that the energy transition is only going to succeed with the support of the existing “energy industry”: “… it is in our common interest to have the energy industry working hand in hand, and alongside everyone on the solutions that the world needs. That is just logical and makes sense.” And in Houston, you urged the oil industry to look at electrifying its operations, and equipping facilities with carbon capture and storage.

As I explain below, this ‘all-of-the-above approach’ fails to understand what can really work, and what won’t, because it overlooks fundamental economic and technological dynamics that will massively impact the UAE, and other fossil fuel producers, this decade.

At face value the idea that we must throw ‘everything’ at the problem, and get the existing energy industry ‘onside’ seems to make sense. I’ve heard this so often from senior leaders in government, investment and industry that I’m absolutely convinced that you sincerely believe this.

That’s why what I’m about to tell you is extremely important. Your Excellency, the course of action you are proposing would not only be bad for the planet, but bad for the bottom-line, and a recipe for financial disaster.

The reason you may not see this is simple: most senior leaders in the most powerful institutions have an extremely poor understanding of how system transitions take place, and what this really means.

Life comes at you fast

Let’s tackle your first assumption: we need to partner with the incumbent energy industry, which means working “hand in hand” with big oil and gas producers.

Incumbent industries that have been around a long time tend to rest comfortable in the delusion that change is slow and linear. That’s because, of course, sometimes these industries can survive for hundreds if not thousands of years. But when change does come, it doesn’t happen slowly. It happens extremely fast, and it usually leads the old industries to completely collapse.

Take the disruption of horses by the car, for instance, an example we used a lot at the technology forecasting think-tank RethinkX where I was Director of Research Communications.

Horses were the dominant mode of transport for millennia. Then in the late 1800s, multiple innovations converged to culminate in the car and the auto assembly line. Costs dropped exponentially, and vehicle technology improved exponentially. These economic factors drove an exponential adoption rate along an S-curve. Tony Seba illustrates the speed and scale of this disruption with two simple images:

Source: Tony Seba, RethinkX

In 1900, horses dominated New York City streets. It’s hard to spot the car.

Source: Tony Seba, RethinkX

In just thirteen years, horses disappeared almost entirely from those same streets. It’s extremely hard to spot the horse.

This disruption was brutal and swift. There was no ‘partnership’ between the horse and the car industries. The latter simply outcompeted the former because they offered a superior and cheaper technology.

Incumbent technologies and industries which have been around for a while often don’t understand these dynamics of disruption. They are like the horse industry, blithely presuming that change is slow, they will exist for a long time because they’ve been around for so long already, and failing to understand that the new technology is going to make them extinct far more rapidly than they anticipate.

In the current case, Your Excellency, what you and your advisors have overlooked is that the very same system dynamics which drove the disruption of horses by cars – which also drove the disruption of landlines by smartphones, of film cameras by digital cameras, the disruption of video rentals by streaming, and dozens of other disruptions which took place in as little as 10-15 years– are currently pushing forward the clean energy transformation.

Today, fossil fuels are the horse, and renewables are the car.

The economic extinction of Big Oil

When horses were disrupted by cars, there was a period of time when eating horse meat became a ‘thing’. The horses that people loved so much and would never give up ended up in people’s stomachs. The oil industry is going to be economically disrupted in a similar fashion, to the point that we will be wondering what to do with all that defunct leftover infrastructure from this industry – oil rigs, pipelines, shipping and beyond.

A series of studies published in Nature Climate Change and Nature Energy found that over the next decade, oil and gas investors will experience gigantic losses worth up to $11 trillion due to the rapid impact of major technology disruptions, especially solar power and electric vehicles. That’s an astonishing figure, because it’s more than double the total annual revenues of the global oil and gas industry.

The economists, earth system scientists and technology experts behind this new research led by Cambridge University conclude that “the transformation of energy systems is well under way”, and will create a whole new “emerging energy geography… irrespective of new climate policies”.

Solar power, for instance, will become “the lowest-cost energy generation technology” within two years, an outcome which will have tremendous “economic implications”, because at this point they will rapidly outcompete the incumbents purely due to economic factors.

The message of this research is astounding: no matter what governments and fossil fuel industry giants do, they cannot stop the ongoing transformation of the global energy system over the coming decade. Trying to pretend that this transformation isn’t happening, and won’t happen at shocking speed, is the biggest mistake you can make.

In other words, Big Oil is heading for financial extinction, and it will begin within the next decade. Converging technology disruptions in energy, transport, food and information are set to dramatically slash demand for oil. Just one of these – electric vehicles – will take such a huge chunk out of the global oil market that profits will drop so far and so hard, most oil industry players will not be able to survive. The main challenge is that despite happening far faster than conventional analysts expect, this energy transformation is still not happening fast enough to avoid the risk of dangerous climate change. So we need to accelerate it, and eliminate delays.

You and your colleagues are absolutely right that we should have a ‘just’ transition. But what does that mean? Does it mean clinging onto doomed industries whose assets will become stranded this decade? Or does it mean rapidly shifting to more viable energy industries while retraining and reskilling oil workers far more quickly than you’ve recognised is necessary?

Internal implosion

There’s another dimension to this. Fossil fuels are facing problems on their own terms.

Despite the record profits they are currently experiencing thanks to Russia’s war in Ukraine, they are still experiencing escalating costs and diminishing returns due to declining resource quality as measured by EROI (Energy Return On Investment).

The EROI of oil, gas and coal has plummeted by more than half over the last few decades. It’s only going to get worse. The global oil industry currently consumes more than a tenth of its own energy just to keep pumping oil. As early as 2024 (next year), the global oil industry will be consuming a quarter of its own energy. By 2050, the global oil industry will consume half the energy it produces just trying to produce more oil. This situation, unfolding over the next quarter century, represents a total economic disaster and the collapse of the oil industry. This means it doesn’t matter if oil demand rises out to 2050 (it really won’t); because the oil industry would not be able to meet that demand anyway.

The UAE finds itself in a precarious position here. Your country’s oil production peaked in 2016 and since then has declined fairly consistently. Given such self-cannibalising EROI dynamics, the prospect of expanding oil production is going to entail a huge escalation in energy costs and diminishing energy returns that simply cannot be economically sustained, and will result in economic obsolescence as early as the 2030s. There is very little that high oil prices in a state of permanent warfare can do to ameliorate this reality. The plan is not going to work for fundamental economic reasons.

Unfortunately, Your Excellency, the strategy that you outlined will be unable to stave off this economic disaster. Instead, it will accelerate it. Here’s why.

Carbon capture – the holy grail that can’t work with Big Oil

You mentioned three technologies in particular: carbon capture, hydrogen and nuclear.

The biggest problem with carbon capture and storage is that it is not yet a commercially viable technology, will not become viable within the time-frame that is meaningful to stay within the 1.5C ‘safe limit’, and can never become one while attached to fossil fuels.

I’m by no means belittling your welcome recognition that we need to solve this carbon problem: because the amount of carbon in the atmosphere is already at dangerous levels, we urgently need to reduce existing emissions, as well as drawdown huge quantities of carbon that are already in the atmosphere.

The problem is that most experts, like Cambridge University engineer Professor Julian Allwood who has been a lead author for the UN Intergovernmental Panel on Climate Change (IPCC), agree that carbon capture technologies will not mature or scale-up until the 2050s. That, of course, is far too late because as you are no doubt aware, we could be on track to breach the 1.5C climate danger zone well before that.

Your Excellency, I suggest that you pay attention to a study led by scientists based at the UAE’s own Masdar Institute for Science and Technology. Their paper published in Nature Energy in 2019 found that carbon capture and storage (CCS) technologies applied to fossil fuel production has both lower energy return on investment (EROI) and lower carbon reduction capabilities than renewable energy with storage. This means that investing in fossil fuels and CCS is a losing bet both economically and environmentally.

By appending CCS onto fossil fuel industries which are on track to become economically obsolete within the next decade, this approach increases costs to society while diminishing returns to investors.

We also need a much more holistic and systemic approach to thinking about the implications of such a strategy – the global economic consequences would be disastrous.

The huge fossil fuel price hikes triggered by Russia’s war in Ukraine and its impact on gas markets are already destabilising societies, driving dangerous inflation and inducing global recession. Doubling down on CCS and fossil fuels will amplify those trends by making energy an order of magnitude more expensive. In other words, the CCS ‘sustainability’ pipe-dream is a trojan horse for acute economic collapse. This is not a competitive technology that can survive the current age of exponential technology disruptions. It is a dinosaur.

CCS and carbon withdrawal technologies can only work in a completely new clean energy system when such technologies are powered by abundant clean electricity, generated at zero marginal costs once the system has been built.

That means not simply “tripling” renewables, but recognising the inevitable reality that as renewables are already on track to 100% disrupt the incumbent legacy energy industries, instead of futilely trying to delaying the inevitable, we should attempt to benefit as much as possible from it. The faster we move to 100% renewables, the quicker we can adopt carbon withdrawal cheaply.

The hydrogen fantasy

Your Excellency also spoke of “doubling” hydrogen production. Hydrogen has been seen as a major way to deal with the fact that so much of modern industrial society requires energy forms that can be easily stored, transported and burned, especially in relation to residential and commercial heating.

While there may well be some applications for hydrogen, many conventional analysts assume incorrectly that hydrogen is a clean energy game-changer. This ignores not only basic environmental data, but simple economic facts.

As you know, blue hydrogen produced by burning fossil fuels. Understandably, this is the form of hydrogen most favoured by fossil fuel companies, who argue that we should expand fossil oil and gas output while expanding CCS.

But there’s a big problem. The EROI of blue hydrogen is ridiculously low(one study puts it at around 1.6:1) – unsurprisingly given that the EROI of oil is already in the single digits and getting lower. So hydrogen is not cheap. Instead it entails higher energy costs overall. Blue hydrogen cannot economically compete with disruptive renewable technologies, and therefore is also at risk of becoming a stranded asset.

Your Excellency, I humbly urge you and your advisors to think through the implications of the current strategy.

I appreciate the hope: the idea is that we can keep the fossil fuel bonanza growing, using CCS to drawdown carbon, and using fossil fuels to produce ‘clean hydrogen’ which can then be used by industries without any major transformation of existing societal infrastructure.

But we’ve already seen that fossil fuels are on track to become energetically and economically obsolete by the 2030s.

What then happens in this scenario, when the EROI of oil continues to haemorrhage over the next 25 years, becoming increasingly self-cannibalising and requiring greater and greater subsidies and investment sustained by taxpayers? And then what happens when on top of that dire EROI situation, we reduce EROI even further by adding the astronomical costs of CCS into the mix, a technology which has still failed to actually meaningfully drawdown more carbon than it generates? And then what happens when all that expanding costly oil and gas is used to build-out a new gigantic hydrogen infrastructure, which requires further massive costs? And how can these energy technologies possibly compete with disruptive, exponentially scaling renewable energy technologies that are an order of magnitude cheaper?

I can understand why this is an attractive vision for legacy energy giants, and I can understand why they want to believe it.

But when we examine it through the lens of fundamental energy economics, it becomes clear that it is not a future that can ever actually happen. The more that needs to be drained from society to keep the energy system afloat, the less there is to invest in society itself. The strategy you outlined, Your Excellency, entails a state of permanent and intensifying economic contraction, growing societal impoverishment and resulting deindustrialisation driving widespread societal instability.

Hydrogen can be viable: but it only becomes viable in the context of electrolysis that is powered by renewable electricity. This has a much lower carbon footprint and a much higher EROI than blue hydrogen (estimated at around 6:1 by this study). That’s roughly where the EROI for oil and gas is right now (which is, incidentally, already lower than EROI for solar, wind and batteries).

Once again, in the context of 100% abundant clean electricity, hydrogen can be seen as one potential application where zero-marginal cost energy can be used to generate new types of alternative clean e-fuels far more cheaply than ever thought possible.

So we need a strategy that is attentive to the strengths and weakness of different technologies. That means prioritising building a new foundational clean energy infrastructure based on solar, wind and batteries, while investing in mass electrification of heating and industry wherever possible.

The nuclear delusion

Similar concerns apply to nuclear. Once again, the issue is primarily about economics. Like fossil fuels, nuclear is not an emerging or disruptive technology. In fact, it is an old and declining technology, just like oil, gas and coal. Although there are different perspectives on the EROI of nuclear – some see it as really high, others as really low – the most robust analyses suggest that the most accurate EROI figures are on the lower side (as low as around 5:1according to one meta-analysis). Another recent studywarns that the future EROI of nuclear is likely to decline in the near-term.

The biggest challenges can be seen with regards to the large costs of building new nuclear power plants, and the long-lead times. That means that nuclear power is vastly more expensive than renewables, and too long and difficult to build-out, and continuously expensive to maintain.

Professor Derek Abbott, an electrical engineer at the University Adelaide in Australia, found a decade ago that major engineering and economic factors would fundamentally constrain shifting significantly to nuclear power. We would need to build 15,000 commercial nuclear reactors to supply 15TW of power (currently 440 exist), which is slightly less than what we consume today. It takes up to 12 years to build just one nuclear power plant – and 20 years to decommission one (and they need decommissioning and replacement after 50 years or so). The economics doesn’t add up.

Even just trying to double the number of nuclear reactors that currently exist, by Abbott’s calculations, would be astronomically expensive and resource intensive. When we compare the economics of nuclear with the economics of renewables, once again nuclear is not competitive.

Battery realities

Your Excellency also spoke about the need to improve battery storage. While continued battery storage improvements are welcome and to be expected, the assumption appears to be that existing battery technologies aren’t good enough. This is implicit in the notion that we need things like hydrogen and nuclear to have a stable supply of clean energy that can match fossil fuel baseload.

Yet this is simply wrong.

Numerous research teams have now showed beyond doubt that using existing battery technologies, we can supply 100% of global energy needs without intermittency at prices that are far cheaper than fossil fuels.

Several other research teams have further shown that conventional assessments tend to overestimate the quantity of batteries we need. Supersizing solar and wind generating capacity to around 3-5 times demand means we can reduce the amount of batteries we deploy from months to just days of storage. As batteries are the most expensive, metal and mineral intensive component of clean energy systems, this means that actual material requirements will be much less than conventionally assumed – and that system costs will also be vastly cheaper than conventional designs. The most detailed report claiming that the clean energy transformation is impossible due to insufficient metals, rare earths, and beyond by Simon Michaux is riddled with egregious errors. In reality, numerous peer-reviewed studies show that, with the right circular economy approaches, we can avoid mineral or resource bottlenecks.

This also means that the cheapest way to build out a solar, wind and battery (SWB) system also generates far more energy – 3-5 times demand. RethinkX call this extraordinary feature ‘superpower’ because it means that the system will potentially generate more energy than the current fossil fuel system at zero-marginal costs: virtually for free once built.

This optimal design can also be achieved in different ways. For instance, energy efficiency measures to reduce energy consumption would make this build-out easier to achieve. Even more interesting is that the clean energy transformation would in itself help reduce energy demand, because the fossil fuel system is so energy intensive: 40% of global shipping, for example, is dedicated to transporting fossil fuels, which would therefore evaporate. Some 60-67% of energy is wasted as heat from burning fossil fuels for energy to meet existing demand. Shifting to clean electricity would eliminate nearly 70% of the energy input needed to meet current demand, contributing greatly to the overall reduction of energy consumption.

SWB superpower will create previously unthinkable opportunities to electrify services and industries from wastewater treatment, desalination, to mining, to carbon withdrawal and sequestration. It will enable vast new arenas for innovation, including for instance the production of new e-fuels. So, the real challenge is not about improvement: it’s about deploying the battery storage technologies that already exist in the most optimal way in the context of solar and wind systems.

What all this means

Your Excellency, my genuine concern is that the vision you have proposed for COP28 reflects the mistaken assumptions of incumbent ideology. Even when UAE environment minister Mariam bint Mohammed Almheiri called for the “phase out” of oil and gas “in a just way”, she argued that this should follow an initial phase of decarbonising the fossil fuel industries. Yet what I hope I’ve made clear is that these industries cannot actually be decarbonised due to debilitating and insurmountable economic realities.

This is going to be a devastating moment of truth for all fossil fuel producers. The UAE’s current COP28 message is a recipe for economic Armageddon: not just for the world, but for your country.

It doesn’t have to be this way. Your Excellency, the UAE is in a prime position to adopt a different and more viable approach that can transition your industries, and transform your economy, creating a new era of clean energy abundance. The risk is that if this is not done, your country will sleepwalk into an unprecedented economic crisis.

What should the new approach involve? Here are some ideas:

1.     The biggest priority is to commit to rapidly scaling up clean energy ‘superpower’ capacity by deploying an optimal design for solar, wind and batteries. That requires aiming to build-out solar and wind generating capacity at least three times larger than existing demand, which will dramatically reduce battery storage requirements; while also dramatically reducing primary energy consumption by as much as 70%.

2.     Simultaneously, oil and gas production needs to be phased out far more rapidly to avoid catastrophic financial risks as well as further dire environmental consequences, because CCS and hydrogen are simply not economically feasible. To facilitate this shift requires ending non-emergency subsidies for oil and gas companies.

3.     It also requires retraining and redeploying oil and gas workers into the new clean industries of the future. Incumbent oil and gas companies should be transitioned so that they can either invest in and be transformed by new clean energy acquisitions, or should be wound-down on a science-based timeline channelling their resources and expertise into more viable industries.

4.     Exorbitant new subsidies for clean energy and transport will not be required. Instead, we need to create the right market environment. We need to design free and open energy markets that facilitate the investments which are required, and that allow solar, wind and batteries to compete on a level-playing field with incumbent industries.

5.     One way to accelerate this is to unleash entrepreneurial spirit by giving new rights to citizens to own, store and trade electricity, while creating new avenues for the input of new investments.

6.     Where government investment will be crucial is in investing in electrification. The areas for priority include residential heating, cooling and cooking; as well as commercial heating, cooling and cooking.

These are some of the broad policy shifts that could make all the difference. I humbly urge you and your colleagues to rethink your current approach. The future of your country, and of all humanity, depend on it.

Yours sincerely,

Dr Nafeez Ahmed MA DPhil FRSA FSI

Principal, System Shift Lab

Commissioner, Club of Rome Transformational Economics Commission

Advisor, Biophysical Economics Institute

Distinguished Fellow, Schumacher Institute for Sustainable Systems

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