It was announced on the 18th of January 2015 that IRENA (International Renewable Energy Agency) along with the Abu Dhabi Fund for Development, at their 5th convention, the United Arab Emirates capital Abu Dhabi would be lending out $57 million in an attempt to bring electricity to five developing countries that are currently “off the grid.” This is part of a larger effort to loan out $350 million over seven years to finance renewable energy for developing countries.
These loans would go to countries like Argentina, Cuba, Iran, Mauritania and St. Vincent and the Grenadines and the grace period on these loans would be longer than typical loans, and they would have lower interest rates than standard market rates. Those providing the loans say that this is an attempt to provide less wealthy countries the opportunity to advance their productivity and quality of life with affordable loans. These loans are to be financed jointly by IRENA and ADFD who will provide 50% of the capital and the other 50% to be financed by banks/international financial institutions, and other development partners.
This is great news for developing countries looking to get to the economic level of their developed neighbors and at some point production of good from these companies may increase competition between countries to drive down the cost of goods. This move will also be very beneficial to Abu Dhabi. Abu Dhabi, the capitol of the UAE, is the wealthiest of the seven shiekhdoms and is also home to Abu Dhabi National Oil Company, ranked 11th in oil production in the world.
Some might wonder what a large oil producing entity is doing handing out loans for clean energy. Firstly, since these are loans with interest Abu Dhabi will be receiving money in the long term just for loaning money out. Secondly and possibly more surprisingly, many Middle Eastern countries are, by percentage of energy created from oil, the largest petroleum consumers in the world. In addition to promoting and funding renewable energy in developing countries, Abu Dhabi began operating the worlds largest solar power plant in March 2013. Because Middle Eastern countries have an abundance of oil, and sadly some of the greatest oil dependency, they can adopt clean energy practices and make available more of their product to be exported for greater profit. This is a very smart move to create revenue and also look good in the public eye. In fact this is one way in which the Middle East can begin to improve it’s world image. The transition from fossil fuel use to renewable sources is already proving to be a slow one, made faster by advancement in technology. To provide loans to countries trying to get a green start in energy and to participate in the transition themselves Middle Eastern states can begin to remedy the harmful impact of carbon emissions and encourage other countries to do the same. To become a role model for such nations as the United States and European nations would be to potentially reverse the perception that many people have of the Middle East as being backwards or uncivilized. This also may give other Gulf nations such as Yemen, Lebanon, Kuwait, and Saudi Arabia the direction they need to reduce their petroleum dependency. With more of their product available for export global prices could see drops. This would have both positive and negative effects on the world market. Positive effects would include lower average costs for consumers in America and perhaps an easier transition to green energy. Negative effects are more difficult to foretell but are not limited to weakening smaller regimes that are dependent on oil export like Russia and Iran, Americans that have invested in alternate carbon based fuels expecting oil prices to continue their upward trend, and less profoundly the large oil producing nations of the Middle East because they no longer see the same profit from oil production.
Because geopolitics is somewhat based on speculation there is not necessarily a sure set of outcomes generated by the actions of Abu Dhabi. But we can hope that these loans being offered may lead to positive regional and eventually global change for the betterment of the environment and quality of life for the average global citizen.