Transforming petrodollars: how oil-rich countries are developing clean energy
As the world accelerates its shift toward green energy, many countries are adopting unique approaches to better integrate sustainable practices and reduce dependence on fossil fuels. Oil- and gas-rich nations, such as Norway, the United Arab Emirates (UAE), Brazil, Azerbaijan, and Kazakhstan, are developing strategies shaped by geographic, economic, and political factors. A Kazinform News Agency correspondent explores how these countries are investing oil revenues in the green economy and what ideas they propose for a sustainable energy future.
Oil and gas countries & economic diversification
Norway, the world’s third-largest natural gas exporter, is redirecting financial resources to invest in building a new domestic industrial base focused on green energy technologies. The UAE, although trailing in this area, initiated a shift by hosting COP28 UN climate change conference, demonstrating how fossil fuel wealth can support a green transition. Azerbaijan, set to host COP29 in November, positions itself as a regional leader in the shift to green energy, potentially opening clean energy export avenues to neighboring countries. Brazil, the next COP30 host, emphasizes the role of renewable energy in developing economies. With significant renewable energy potential, Kazakhstan is financing climate initiatives to support a sustainable energy transition in Central Asia.
These countries showcase various paths to a green economy, each shaped by different economic realities and environmental imperatives. Their experiences indicate that a successful green economy depends not only on embracing renewable energy sources but also on balancing environmental, economic, and political factors. As more nations undertake this transformation, these models will serve as key examples for navigating the complex journey toward a sustainable future.
Norway’s renewable energy revolution
As global energy demand grows, Norwegian oil companies are using oil revenues to spearhead a green energy revolution. With a sovereign wealth fund of $1.4 trillion, mostly generated from oil profits, Norway is channeling substantial resources into renewable energy. Norwegian oil companies are at the forefront of green innovation, repurposing oil wealth to advance renewable energy. With billions invested in offshore wind farms, hydrogen production, and carbon capture and storage (CCS) technologies, Norway’s green ambitions have set a benchmark in the energy transition. While challenges remain, Norwegian oil companies demonstrate that a sustainable future can be built using the resources of the past.
In recent years, oil companies like Equinor, Aker BP, and Norsk Hydro have increasingly allocated oil funds to green energy. Norway’s Ministry of Petroleum and Energy reports that Equinor alone has committed approximately $10 billion to renewable energy projects by 2030. Much of this funding goes toward offshore wind farms, CCS technologies, and hydrogen production — a portfolio that reflects Norway’s aspiration to lead the world in renewable energy innovation.
Aker BP and Norsk Hydro are also making substantial investments. Aker BP, in partnership with Aker Group, launched Aker Horizons, a subsidiary focused on renewable energy projects, with over $2 billion in initial funding. Norsk Hydro, historically an aluminum giant, has shifted part of its capital to renewables, particularly hydropower and green hydrogen, with an annual clean energy investment budget of around $300 million.
Norway’s focus on offshore wind energy is evident in projects like Equinor’s Dogger Bank Wind Farm. Located in the North Sea, this project is expected to become the world’s largest offshore wind farm upon completion in 2026, with a projected production capacity of 3.6 GW.
Norway is also investing in hydrogen, a low-emission energy source intended to replace fossil fuels in various sectors. Equinor is constructing a blue hydrogen plant that integrates CCS to make the process carbon-neutral. The Hydrogen Valley project, based in Rogaland, will receive over $1 billion in funding by 2025 and is expected to produce 150,000 tons of blue hydrogen annually, targeting heavy industry and transport.
Experts often regard Norway’s green transition as a model for resource-rich countries.
“Norway is setting a precedent by reinvesting oil money into renewable energy. While oil has provided our prosperity, green energy will sustain it,” says Andreas Foss, an analyst at the Norwegian School of Economics.
However, he cautions that maintaining economic stability as oil demand declines will be a challenge.
Environmental advocates like Karin Olson of the Norwegian Climate Fund welcome these initiatives but warn against “greenwashing”. Olson argues that while Norway is undergoing a transition, it should also encourage other countries to adopt similar policies.
“Norway cannot green the planet alone. Global cooperation is essential, particularly in CCS and hydrogen, where cross-border projects can reduce costs and accelerate adoption,” she asserts.
Green ambitions and oil wealth of the UAE
The UAE, one of the world’s largest oil producers, has taken ambitious steps to become a key player in the global green energy sector, highlighted by its hosting of COP28. Acknowledging the volatility of oil markets and the growing pressure to reduce carbon emissions, the UAE’s strategy combines its traditional energy sector with substantial investments in renewable projects, aiming to reduce its carbon footprint and diversify its economic base. The “UAE energy strategy 2050” targets achieving 50% clean energy in its overall energy mix by 2050, thereby reducing the carbon footprint of electricity production by 70%.
Noteworthy projects like the Mohammed bin Rashid Al Maktoum Solar Park, set to become one of the world’s largest single-site solar parks, and the Barakah nuclear power plant underscore the country’s commitment to renewable energy. Additionally, Masdar City, a pioneering sustainable urban development, embodies the UAE’s focus on technological and environmental innovation.
From an economic perspective, the UAE’s approach is unique as it uses oil revenues to fund green projects, lessening the fiscal burden of the transition. This approach offers lessons in leveraging finite fossil fuel resources to build renewable capacity and diversify the economy.
However, critics argue that the UAE’s ongoing reliance on fossil fuel exports may contradict its green ambitions. Balancing these factors and maintaining economic growth amid fluctuating oil prices remains a central challenge. Nonetheless, the UAE’s strategy demonstrates that even oil-dependent economies can transition to green energy with the right investments and long-term vision.
Brazil’s biofuel and hydropower
Brazil, a major oil-producing, agricultural powerhouse, and host of COP30, also positions itself as a global leader in renewables, with a focus on biofuels, hydropower, and increasingly, wind and solar energy.
Brazil generates about 80% of its electricity from renewables, primarily hydropower, but also capitalizes on its extensive agricultural sector to produce biofuels, especially ethanol from sugarcane. This reliance on biofuels has allowed Brazil to reduce its dependence on oil, though environmental concerns persist, particularly related to land use and deforestation.
For Brazil, the green transition has direct implications for its economy and labor market. Investments in renewable sectors like wind and solar energy create jobs in rural and urban areas, promoting local economic development.
The energy transition also positions Brazil as a key player in tackling global climate issues, though the country faces significant social and political challenges. The Amazon rainforest, critical for global carbon absorption, remains under threat due to deforestation driven by agriculture and livestock farming. Balancing environmental conservation with economic demands is crucial, as Brazil’s green reputation depends on its ability to protect these critical ecosystems.
Impact of COP29 on Azerbaijan’s energy policy
Azerbaijan, long known for its vast oil and gas reserves, has recently accelerated its transition to green energy. The country is using oil export revenues to develop a sustainable energy infrastructure in line with global decarbonization goals.
Since gaining independence, Azerbaijan has accumulated considerable wealth through oil exports, particularly via the State Oil Fund of Azerbaijan (SOFAZ). As of 2023, SOFAZ held over $53 billion, primarily from oil and gas revenues. Initially used for infrastructure and social programs, a portion of these funds is now allocated to green energy projects, helping to diversify the national energy mix.
Azerbaijan is dedicating an increasing share of its oil wealth to renewable energy. Official figures report that between $1.5 and $2 billion has already been invested in renewable energy projects, including wind, solar, and hydropower. The goal is to increase the share of renewables in the national energy balance to 30% by 2030, supported by these oil-financed investments.
Significant investments have been made in large-scale renewable energy projects, such as the 240 MW Khizi-Absheron wind farm and the 230 MW Garadagh solar power plant, both expected to play key roles in reducing Azerbaijan’s reliance on fossil fuels.
In green energy development, Azerbaijan collaborates with companies like Masdar (UAE) and ACWA Power (Saudi Arabia) to leverage their expertise in renewable energy projects. The country plans to build major solar and wind power plants with a combined capacity of 7 GW, including 2.5 GW from ACWA Power’s wind projects.
Azerbaijan is also developing plans to export green energy across the Caspian Sea to Europe through the “Green Energy Corridor.” By 2027, it aims to complete $2.8 billion in energy projects, including constructing eight solar and wind power plants.
Moreover, Azerbaijan has reached agreements with Kazakhstan and Uzbekistan to establish a joint venture for this corridor. The Black Sea cable project for transmitting “green” energy between Azerbaijan, Georgia, and Europe is currently at the feasibility study stage, and the main results are expected to be presented at COP29 in Baku.
COP29, the upcoming UN climate conference in Baku, represents a significant opportunity for Azerbaijan. By showcasing its green energy projects and commitment to renewable energy, Azerbaijan hopes to attract new international investments and strengthen collaboration with global financial institutions. Energy experts believe that Azerbaijan’s strategic investments in green energy could yield both economic and environmental benefits.
“Oil money is being reinvested to secure Azerbaijan’s long-term energy future. Investments in renewables aim not only to diversify the economy but also to preserve our oil wealth for future generations,” says Shahmar Movsumov, former head of SOFAZ.
Former SOCAR president Sabit Bagirov notes that Azerbaijan’s geographical position and natural resources offer tremendous potential for wind and solar energy.
“With the right infrastructure, Azerbaijan can become a major exporter of green energy, especially to energy-intensive markets like Europe,” says Bagirov.
Kazakhstan’s steady progress toward carbon neutrality
According to Francesco La Camera, Director-General of the International Renewable Energy Agency (IRENA), Kazakhstan has the potential to become a regional leader in green energy production, thanks to its abundant renewable resources and strategic location.
“Kazakhstan has vast potential for expanding renewable energy. By harnessing its wind and solar resources and investing in new technologies like green hydrogen, Kazakhstan can diversify its energy mix, enhance energy security, and lead sustainable energy in Central Asia,” said La Camera.
Kazakhstan, committed to sustainable development, signed the Paris Agreement on August 2, 2016. Before officially signing the document, Astana showcased its commitment to the Agreement’s goals by presenting its Nationally Determined Contribution (NDC) under the UN Framework Convention on Climate Change, which includes goals to:
- Unconditionally reduce GHG emissions by 15% by December 2030, compared to 1990 levels.
- Conditionally reduce GHG emissions by 25% by December 2030, given additional international investments, access to low-carbon technology transfer mechanisms, Green Climate Fund financing, and flexible mechanisms for transition economies.
In December 2020, at the Climate Ambition Summit, Kazakhstan’s President Kassym-Jomart Tokayev announced a new target of achieving carbon neutrality by 2060, reaffirming Kazakhstan’s commitment to the Paris Agreement, formally approved in February 2023.
The “Strategy for achieving carbon neutrality of the Republic of Kazakhstan by 2060” outlines national approaches, strategic state policy directions for transforming the economy to ensure well-being, sustainable economic growth, and equitable social progress. As part of this effort, favorable conditions have been created in Kazakhstan for implementing renewable energy projects.
Since 2018, the selection process for such projects has been conducted through an auction mechanism with a guaranteed purchase of renewable energy by a single buyer. On one hand, this approach ensures transparency and clarity in the selection process for projects and investors; on the other, it promotes a focus on more efficient technologies and projects that minimize the impact on end-user tariffs from the addition of renewable energy capacities.
Another mechanism supporting the sector is the annual tariff indexation, which facilitates the continued growth of the renewable energy sector and helps achieve specific development targets. Both Kazakh and foreign investors are provided equal opportunities for obtaining preferences. Notably, since 2013, Kazakhstan has operated the only National Emissions Trading System in the CIS (KazETS), aimed at encouraging enterprises to reduce emissions and promote green technologies.
Currently, Kazakhstan has 147 renewable energy facilities with a total installed capacity of 2.9 GW, including 59 wind farms, 46 solar power plants, 39 hydropower plants, and 3 biogas plants. In 2023, renewable energy facilities produced 6.675 billion kWh, or 5.92% of the total electricity generated.
Companies like General Electric, Eni, Total, Hevel Solar, and HydroChina are already successfully operating in this sector. Major projects for the construction of wind and solar power plants are being prepared with foreign investors such as Total, Masdar, and Acwa Power.
By the end of 2023, 16 new renewable energy facilities were commissioned with a total installed capacity of 495.57 MW. By 2030, the country plans to commission an additional 7 GW of renewable energy capacity, aiming to increase the share of renewables in the energy balance to 15%.
According to the Government of the Republic of Kazakhstan, the concept of transitioning to a “green” economy has been in progress for over 10 years. During this period, the share of renewable energy in the country’s energy mix has reached 4.5%. Waste processing has reached 25% for industrial waste and 39% for consumer waste.
In 2023, investments directed toward the green economy in Kazakhstan reached 201 billion tenge, a 3.8-fold increase from the previous year. Investments in renewable energy totaled 199.8 billion tenge, with 1 billion tenge dedicated to reducing greenhouse gas emissions and 186 million tenge to energy-saving and efficiency-enhancing technologies.
Thus, Kazakhstan demonstrates a growing potential for the development of renewable energy and other green technologies, both in constructing new power plants and localizing the production of necessary components.
For Kazakhstan, balancing economic stability with embracing the energy transition is highly important. By investing in advanced hydrocarbon processing and expanding renewable energy capacities, the country could play a key role in the global shift toward a low-carbon future, while also addressing its own environmental challenges.
The upcoming COP29 climate conference in Baku will be a crucial platform in the fight against climate change, where comprehensive proposals on emissions reduction, transition to green and nuclear energy, and solutions to regional environmental issues will be presented.
