Foster & Partners architects will design the car-free city, housing 50,000 residents by 2016. Masdar’s research institute, founded in partnership with the Massachusetts Institute of Technology, will be located in the 6.5 sq km development that aims to turn into an alternative energy cluster for 1,500 ­businesses.

“Masdar City will become the world’s hub for future energy,” said Sultan al-Jaber, Masdar’s chief executive. “By taking sustainable development and living to a new level, it will lead the world in understanding how all future cities should be built.”

The UAE capital is seeking to meet rising utilities demand while also developing expertise in renewable energy that will safeguard the emirate’s influence in the energy business once oil runs out. The city aims to address the inefficient water use, round-the-clock air conditioning and car-obsessed culture, which have combined to give the UAE one of the world’s worst environmental records.

By blending waste management with renewable technologies such as solar and wind power, Masdar says the city will use 75 per cent less electricity and less than half the amount of water of conventional cities, saving the equivalent of $2bn in oil costs over 25 years.

The city will need “virtually no landfill” for waste.

To maximise energy efficiency, the city’s narrow thoroughfares will draw on the traditional architecture of the old walled towns of the Middle East. Carbon emissions saved by these techniques will then be monetised through carbon credits under the Kyoto Protocol’s clean development mechanism.