Driving Decarbonization: Inside the UAE’s New Climate Change Legislation

Touching on some of the key provisions of the law gives us an indication of the direction of travel for the country:

• Article 5 (National Pathway to Climate Neutrality): Provides that the cabinet shall set annual emission reduction targets for all sectors by following international best practices and in accordance with the national pathway to climate neutrality. This would be the first step on the country’s journey towards net zero, which it is aiming to achieve by 2050, according to its latest NDC announcement².
• Article 6 (Measurement, Reporting, and Verification): The Ministry of Climate Change and Environment will determine the emitters that will be required to measure and report on their greenhouse gas emissions, and take measures to reduce such emissions in accordance with resolutions issued by the Ministry. This would mark a first step in introducing a carbon reduction mandate, enshrining incentives in applicable regulation.
• Article 10 (Incentives and Carbon Offsetting Mechanisms): The Ministry shall incentivise emitters to reduce their emissions through various policies and mechanisms, including facilitating carbon offsetting activities and emissions trading, while maintaining a national carbon credit registry.

The detail in the law at this stage is scarce, however the direction of travel is clear. From the above, it appears that the UAE is taking bold measures to achieve its climate change goals. By introducing emissions reduction obligations and facilitating emissions trading, it appears that the country is looking to introduce its own emissions trading scheme, which could function like the EU ETS, requiring emitters to purchase emissions allowances by auction, the quantity of which will diminish over time, thereby driving the price up and further incentivising reduction in carbon emissions.

It is notable that the law does not come into force until the middle of 2025, allowing the country a period within which to raise awareness amongst the industry, and allowing stakeholders to begin making preparations. Businesses should stay alert for further announcements providing more detail on these measures, as the costs of compliance with the new legislation will need to be factored into ongoing operations, especially in emissions-intensive sectors.

Authored by Andrew Shaw and Firas Albani, with contributions from Judith Elemele.