The United Arab Emirates is the sixth largest oil producer in the world and one of the richest countries in the world. According to the World Bank, the gross domestic product per capita as of 2019 was over USD 43,000. According to its “Vision 2021”, its oil and gas dependent economy is committed to sustainable development in order to establish itself as the most diversified economy of the Gulf Cooperation Council or the Gulf Cooperation Council. This includes digitizing the economy, which has become a priority during the COVID-19 pandemic.
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A green economy for sustainable digitization
The first virtual summit of Abu Dhabi Sustainability Week 2021 was broadcast live worldwide in English and Arabic on YouTube and received over 100,000 views from attendees from over 175 countries during the event. It included over 500 influential global leaders from government, business and business technology who explored the social, economic and technological opportunities that support a sustainable green recovery from the pandemic.
At the summit, the heads of state and government of the Gulf Cooperation Council reaffirmed their commitment to decarbonization, “saving the equivalent of 354 million barrels of oil through the use of renewable energies”. That equates to a 23% reduction in oil consumption to cut carbon dioxide emissions from the energy sector by 22%, according to the latest figures from the International Renewable Energy Association.
In his opening address, Sultan Ahmed Al Jaber, Minister of Industry and Advanced Technology of the United Arab Emirates, Special Envoy on Climate Change and Chairman of the Clean Energy Company Masdar, indicated that society with the COVID-19 pandemic is now witnessing its implementation is artificial intelligence, machine learning and the digitization of various areas of life around the world. Accordingly, initiatives for electrification, decarbonization and digitization have become increasingly important in all industries.
Masdar’s solar energy initiatives
New digital technologies require high levels of electricity consumption, which in the UAE is currently mostly generated from fossil fuels, which have a negative impact on the environment. Given the UAE’s vast hydrocarbon resources, Masdar aims to become a major producer of blue hydrogen and contribute to the country’s efforts to reduce its polluting carbon emissions by nearly a quarter. Masdar recently reached an agreement with the Abu Dhabi Department of Energy and five other institutions to develop clean hydrogen fuel solutions.
However, the United Arab Emirates’ Paris Agreement commitment to zero emissions by 2050 depends heavily on solar energy to convert Abu Dhabi’s energy sector to renewable sources. Solar energy is viewed from many perspectives as the anchor for Masdar’s renewable energy strategies. The world’s largest solar power plant is being built in Abu Dhabi, as deserts are among the best places to harvest solar energy. They are never short of sunlight and are rich in silicon – the raw material for the semiconductors from which solar cells are made. Another benefit of installing solar panels in the desert, according to a 2018 study, is that it may create a more humid environment for vegetation to spread out to combat desertification.
Masdar City: The United Arab Emirates’ aerospace zone and green technology zone
Abu Dhabi’s city of Masdar was developed by Masdar and is one of the most sustainable urban communities in the world. It provides a strategic base on which companies can build their networks locally and globally and explore various investment opportunities and test innovative new technologies from inception to implementation to help the UAE diversify its economy.
The city is home to a free zone area and has more than 900 organizations, from international conglomerates to start-ups, developing innovative technologies in the fields of energy, water efficiency, mobility, space, blockchain technology and artificial intelligence to meet the world’s most important challenges in the field of sustainability to cope with more than 30 countries.
UAE Space Agency
The United Arab Emirates’ Masdar City-based space agency is helping to support a sustainable economy by developing satellites used for natural resource mapping, environmental monitoring, land use planning and security. She also launched a probe for Mars.
Digital economy
The UAE government has made digitizing its economy a priority in order to bring efficiency to government, creativity to industry and international leadership. To achieve this goal, in Masdar City, the UAE established the world’s first university-level research-based Artificial Intelligence University, the Mohamed bin Zayed Artificial Intelligence University, which welcomed its first students in January 2021.
The UAE has also adopted the Emirates Blockchain Strategy 2021 and the Dubai Blockchain Strategy, which have carried out several blockchain projects. SustVest is a blockchain-based crowd investing platform that enables people to invest in solar projects and generate returns from consumers who use their funds to install solar panels. The company is based in the Dubai Silicon Oasis Authority and has built its solution on the Nem blockchain. Its founder, Hardik Bhatia, stated:
“The global rooftop solar segment is booming with opportunity and is valued at over $ 66 billion. Emerging economies are seeking a transition to solar as it is an environmentally friendly and cost effective alternative to traditional energy sources. SustVest is enabling this transition in emerging economies through crowdfunding on the roof solar projects in emerging economies on their platform. We granularly tag solar projects to the level of individual solar cells, and investors who buy these tokens can earn dividends generated by the sale of electricity from these individual solar cells. We are opening the gates for retail investment in solar space, and we do so by symbolizing the barrier-to-entry projects and creating a secondary market for providing liquidity to investors. “
The central bank of the United Arab Emirates is developing the state-supported bilateral digital central bank currency “but” together with the Saudi central bank. But first, it aims to help the United Arab Emirates and Saudi Arabia conduct more cost-effective bank-to-bank, cross-border payments and financial settlements using blockchain technology on trial. According to official information, it will only be available to a limited number of banks. Ultimately, Aber will be deployed worldwide in China’s Blockchain-based Service Network (BSN), which will support future CBDCs from various countries such as the United Arab Emirates.
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Crypto Asset Regulations in the UAE
The UAE is prioritizing blockchain and distributed ledger technology and has launched various related projects, particularly since the COVID-19 pandemic. Still, regulation of cryptocurrency remains limited in the nation.
Towards the end of 2020, the United Arab Emirates’ Securities and Commodities Authority (SCA) released Decision No. (21 / RM) of the Chairman of the Board of Directors of the Authority of 2020 on the Regulation of Crypto Assets. The SCA’s decision sets out the licensing system for anyone wanting to offer crypto assets in the UAE, including exchanges, crowdfunding platforms, initial coin offerings, custodians and other services that use crypto assets.
The Abu Dhabi Global Market Financial Services Regulatory Authority (FSRA) regards crypto assets as characteristics like stocks, meaning they are to be treated as securities and subject to disclosure requirements for information related to risks and transactions. On the other hand, utility tokens and non-fiat cryptocurrencies are considered commodities and are not subject to market regulations. Anti-Money Laundering Act No. 20 of 2018 defines laundered funds as assets in any form, including digital currencies. Article 3 of Law No. 8 of 2017 on Value Added Tax imposes a tax of 5% on imported and exported goods. This tax can apply to utility tokens and non-fiat cryptocurrencies as the FSRA considers them to be commodities.
The UAE does not have a signed tax treaty with the United States. However, under the Conduct of Business Rulebook, crypto asset companies are required to declare international income for tax purposes in accordance with the requirements of the Interstate Agreement on Tax Compliance for Foreign Accounts between the UAE and the United States.
Conclusion
A green recovery is an essential prerequisite for a sustainable social and economic future in the post-pandemic world, as Alok Sharma, President of the 26th Climate Conference of the Parties to the United Nations – better known as COP26 – highlighted and praised Masdar’s company in developing greener Energy technologies.
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According to Khaldoon Khalifa Al Mubarak, General Manager and Group CEO of Mubadala Investment Corporation, finding funding for this green transition probably won’t be too difficult. As a tectonic paradigm shift has occurred since the COVID-19 pandemic and markets are pricing climate risk into the value of securities, there is a fundamental redistribution of capital towards sustainable investing to ensure a green recovery in a post-COVID-19 world. Laurence Fink, Chairman and CEO of BlackRock – the world’s largest wealth manager – said:
“I believe the pandemic presented such an existential crisis – such a powerful reminder of our fragility – that it has led us to be more responsive to the global threat of climate change and to reflect on how, like the pandemic, our lives are will change. It reminded us how the greatest medical or environmental crises require a global and ambitious response. “
The views, thoughts, and opinions expressed here are the sole rights of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
Selva special, Esq., CPA, is an international tax attorney and accountant who writes frequently on tax, legal, and accounting issues for Tax Notes, Bloomberg BNA, other publications, and the OECD.
