The 29th session of the Conference of the Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCC) that was held in Baku in November 2024, described as the “Finance COP”, established a new collective quantified goal on climate finance (NCQG). This replaces the outdated target set in 2009 for developed countries to provide $100 billion annually by 2020 to supporting developing ones in reducing their emissions and building their resilience to climate change. Not only did developed countries fail to meet that target, but the global climate finance gap has widened significantly since 2009. Current estimates suggest a need of $500 billion to $1 trillion annually for climate mitigation and adaptation. Following extensive negotiations that stretched 33 hours past the deadline, COP29 reached a compromise: to mobilize at least $300 billion per year for developing countries by 2035, with developed ones taking the lead.
While this agreement marks progress after nearly nine years of stalled discussions, since states parties committed themselves under the 2015 Paris Agreement to establishing the NCQG, disappointment was evident among developing countries due to the persistent gap in meeting climate-finance needs. This gap is expected to widen further following the anticipated withdrawal of the United States from the Paris Agreement in January 2025, as promised by President Donald Trump.
A significant point of contention at COP29 was the possibility of requiring developing countries to contribute to the Green Climate Fund. The final declaration encourages them to do so voluntarily, but the criteria for mandatory contributions will be debated at COP30 in Brazil in November 2025. Among the potential contributors are countries classified as emerging economies based on their gross national income and per capita emissions. This includes Gulf countries such as Qatar, Saudi Arabia and the United Arab Emirates, alongside the likes of China, Israel, Singapore and South Korea.
The Gulf countries, classified as developing countries, or non-Annex II countries based on the UNFCCC categorization, are not obliged to contribute to the fund, but this is controversial given that they are some of the wealthiest countries in the world. While they may make voluntary contributions, they are unlikely to accept mandatory obligations. This stems from their competing domestic priorities, including economic diversification, decarbonization and the need to address severe climate vulnerabilities.
The Gulf countries are pursuing ambitious diversification strategies to create new streams of income while reducing their dependence on oil and gas revenues. These efforts – across the tourism, infrastructure, entertainment, transportation, logistics and digital sectors – require investments worth hundreds of billions of dollars. It is estimated that Qatar spent around $220 billion on hosting the 2022 football World Cup and the United Arab Emirates around $7 billion on Expo 2020 in Dubai. The latter aims to attract 40 million tourists by 2031.
In the case of Saudi Arabia, the estimated cost for Neom, a coastal mega-tourism flagship projects, is $500 billion. The country will host Expo 2030 and World Cup in 2034. In the tourism and entertainment sectors, infrastructure such as the Royal Diriyah Opera House and events such as MiddleBeast aim to draw 150 million tourists to the country by 2030.
Such efforts are largely spearheaded by state-funded mega projects and financed by hydrocarbon revenues. In Saudi Arabia, for example, the Public Investment Fund (PIF) plays a central role in economic transformation, overseeing investments in projects like Neom and The Line. However, its assets, which reached $925 billion by the end of 2023, are primarily derived from oil-related sources, such as the proceeds for the initial public offering for Aramco. Recent declines in oil prices have strained the PIF, necessitating additional asset sales to fund diversification efforts, a trend echoed across the Gulf countries.
The Gulf countries, whose economies remain largely tied to hydrocarbon revenues, are navigating a “climate conundrum”. The region is among the most climate-vulnerable in the world, leaving them facing extreme heat, water scarcity and food insecurity. Oil wealth has allowed these countries to adapt through technological imports and innovative solutions. For instance, it enables them to import nearly 50–90 per cent of their food while agriculture accounts for only 2 per cent or less of Gulf GDP. Oil and gas resources enable them to operate water-desalination plants that meet over 50 per cent of their water needs.
On the other hand, the global push to transition away from fossil fuels, emphasized in COP28’s final agreement, poses an existential challenge to the Gulf countries’ economies and their ability to build resilience against climate impacts. They are balancing their climate commitments with the need to optimize spending on economic diversification and domestic decarbonization initiatives, such as renewable energy, nuclear power, hydrogen and carbon-capture technologies.
At COP28, which it hosted in 2023, the United Arab Emirates contributed $100 million to the Loss and Damage Fund, which was operationalized under its COP presidency. The country’s contribution to the fund was largely driven by its ambition to leave a legacy as a COP host, and it was not universally welcomed by neighbours such as Saudi Arabia. This underscores that the Gulf countries may prefer to allocate their oil revenues toward their domestic economic and decarbonization priorities as well as climate impacts, rather than contribute to the Green Climate Fund.
Despite their reluctance to accept mandatory climate financial obligations, the Gulf countries are significant investors in climate-related initiatives regionally and globally. According to the International Renewable Energy Agency, they have made substantial renewable-energy investments. Between 2016 and 2020, the Middle East and North Africa received $1.4 billion from the Gulf countries, with key projects in Egypt, Jordan and Morocco. South Asia received $1.04 billion in investments and sub-Saharan Africa $388 million. Additionally, the Gulf countries allocated $823 million to renewable-energy development in East Asia, Europe, North America and the Pacific. These investments underscore their commitment to advancing renewable energy and supporting sustainable development globally.
Ultimately, for the Gulf countries, safeguarding their domestic economic transformation and maintaining their resilience in the face of climate change and the global energy transition will remain the utmost priority. Unless contributing to climate finance serves their national interest, they are unlikely to accept mandatory climate-finance obligations. This reluctance is rooted in their economic structure, as Gulf economies, despite ongoing diversification efforts, remain heavily reliant on oil and gas revenues, which are projected to diminish in the long term under aggressive energy transition scenarios. Even if Gulf countries agreed to contribute to global climate finance, should the global shift away from fossil fuels accelerate, they may struggle to sustain their climate finance commitments, if doing so could lead to fiscal instability and further consequences such as social unrest.
Gulf countries should design their climate finance strategies to align with their national economic visions and their climate adaptation needs. They need to embrace new economic opportunities associated with climate action, such as domestic investments in renewable industries or joint ventures in global clean energy markets, in a way that supports the long-term sustainability of their socio-economic development. This approach would enable them to contribute meaningfully to global climate action while safeguarding their long-term economic interests.