Climate challenges and energy transition opportunities in MENA

The MENA region faces a mounting climate threat. In the worst-case climate scenario of global temperatures reaching 4°C above pre-industrial levels, countries like Algeria, Iraq and Saudi Arabia might grapple with summer temperatures soaring by up to 8°C by the century’s close. The fluctuating patterns also threaten the Mediterranean coastlines, with rainfall potentially halved, while regions like the southern Arabian Peninsula might face intensifying floods. Coastal cities like Tunis might experience a sea level rise of 1.2 meters by 2080.

Besides being vulnerable to the effects of climate change, the MENA region has a significant role to play in mitigation efforts because of its deep ties to hydrocarbons. While as consumers of hydrocarbons the people of the region have historically contributed little to climate change, the region’s fossil fuel production has made it home to some of the world’s top per capita carbon emitters.

Authorities in the MENA region must urgently address climate change and pursue energy transition; citizens simply cannot afford the luxury of inaction. Besides being vulnerable to the effects of climate change, the MENA region has a significant role to play in mitigation efforts because of its deep ties to hydrocarbons. While as consumers of hydrocarbons the people of the region have historically contributed little to climate change, the region’s fossil fuel production has made it home to some of the world’s top per capita carbon emitters (when scope 3 emissions are counted), including Bahrain, Kuwait, Qatar, Saudi Arabia and UAE. On the current trajectory, greenhouse gas (GHG) emissions from the region could triple by 2060.

However, in the shadow of these looming challenges lie many opportunities. MENA is bathed in a substantial portion of the earth’s solar energy. A single square kilometer in solar energy potential can rival the energy from 1-2 million barrels of oil every year. If harnessed efficiently, this could substantially contribute to global electricity supply. Wind energy potential, high in nations like Egypt, Morocco and Tunisia, also offers promise.

Transition to low-carbon energy in MENA: an imperative and an opportunity

Transitioning to a low-carbon energy system in MENA isn’t just an environmental imperative—it’s an economic and political one. Embracing renewables could invigorate economic growth, inspire industrial diversity and open doors to significant employment opportunities. For instance, Morocco’s shift in this direction could usher in nearly 400,000 jobs in the next twenty years. Uptake of renewables would also contribute to regional energy security in the long term. For example, Jordan aims to be a regional hub for renewable energy and to export through existing and planned interconnected transnational grids; it has already exported electricity to Palestine and is planning to expand exports to Lebanon and Iraq. In addition, the International Renewable Energy Agency projects that renewables could provide 53 percent of energy to the region by 2050 if governments institute the right policies.

While MENA governments acknowledge the critical importance of transitioning to low-carbon energy systems and leveraging the region’s renewable energy potential, achieving this transition requires not just political and economic will, but also the right financial mechanisms. Given the extensive economic and employment opportunities renewables can bring, as demonstrated in countries such as Morocco and Jordan, the international climate finance community must support the region’s effort to address the financial underpinnings of this shift. Climate finance mechanisms can bring the needed support. By harnessing tools such as grants, concessional loans, green bonds, and sukuk, the region’s governments and private sector can better navigate the financial challenges posed by global economic shifts and ensure the accessibility and affordability of green energy.

Finance remains an obstacle to MENA’s energy transition

In the 2015 Paris climate agreement, developed countries (Annex I) committed to assisting developing countries (Annex II) with climate finance to help them mitigate and adapt to climate change. MENA, mostly composed of Annex II countries, needs these funds to address its climate-related challenges. OECD data from 2020 indicate that the region attracted a flow of climate finance averaging between $2 and $3 billion annually since 2012. This steady flow, while additive, is modest when juxtaposed against the region’s pressing needs and vast potential for sustainable growth.

MENA countries are grappling with a substantial funding gap for the effective implementation of adaptation and mitigation measures, and concurrently, the international community is also struggling to allocate funds for climate projects in the region. A 2022 United Nations Economic and Social Commission for Western Asia policy brief, using OECD data and nationally determined contributions (NDCs) concluded that MENA countries, including Egypt, Iraq, Jordan, Mauritania, Morocco, Palestine, Sudan and Tunisia, now need a total of USD 570 billion in climate funding. Notably, Egypt, Iraq and Morocco account for USD 450 billion of this required funding. But MENA received a mere 11 percent of climate finance over the period 2000-2020, with a meager 4 percent deriving from UNFCCC climate funds.

Improving national governance systems

Governance challenges in the region impede the effective pursuit of climate finance. Notably, many countries lack comprehensive frameworks to adeptly harness, manage and supervise such funds. The UN offers guidance on instituting “integrated national financing frameworks.” However, the absence of detailed sectoral plans, strong governance, clear climate finance policies, accurate cost estimates for NDCs, and strategies for engaging the private sector makes it challenging for regional governments to determine which green projects to support and how to finance them. These shortcomings can also deter potential investors or donors.

Improving international climate finance schemes

Developed countries mainly provide public finance such as loans, resulting in an increase in borrowing countries’ public debt levels. Stakeholders can institute an array of alternatives to avoid compounding the financial burden on debt-laden countries that seek to advance their energy transition. For instance, debt-for-nature swaps—in which a portion of a developing country’s foreign debt is forgiven in exchange for local investments in environmental conservation measures—could be a double boon. And transparency in public climate finance accounting can instill confidence among domestic and international investors.  To improve their access to climate finance and the terms on which it is provided, MENA countries can support related international initiatives.

Tapping public and private sources of climate finance

According to the World Bank, MENA receives the least climate finance of any region. To bridge the financing gap, governments in the region should try to mobilize both public and private sources of funding. Regarding public finance, according to the International Monetary Fund, significant amounts of international public climate funds remain unused: “[W]orldwide deposits in climate funds have totaled $35 billion (from $43 billion in pledges). Of that amount, only $28 billion has been set aside for approved projects.” By putting together bankable projects, MENA countries could try to tap into these funds. In addition, countries in the region could mobilize domestic public finance by e.g., increasing public revenues or sovereign wealth fund investments.

Regarding private sector funding, banks, pension funds, insurance entities and domestic capital markets can play pivotal roles in financing climate mitigation efforts (though it is more challenging to get private funding for adaptation). The private sector accounts for a substantial proportion of climate finance on a global level. This increased consistently from 2011 to 2020, representing approximately 50 percent of total accumulated finance provided over the period.  To further tap into these funds, MENA countries can improve their investment environment (e.g., through improving overall governance, which can be weak in the region), as well as using tools like sovereign green bonds or green sukuk or other methods to allow private financing of public or otherwise unprofitable projects, such as co-financing. Green bonds differ from regular bonds because they are specifically designed to finance climate-related investments.. Additionally, sovereign guarantees can minimize perceived risks for the private sector. However, evidence is limited on how well such “blended finance” works in practice.

MENA governments could encourage domestic private investors to shift toward low-carbon investments by strengthening requirements for firms to disclose or mitigate climate-related risks, and requiring domestic financial sectors to dedicate a share of its investments to climate finance.

Recommendations for governments at COP28

For governments of donor nations and advanced economies:

• Develop a nuanced understanding of the MENA region’s diverse challenges and potential. Climate finance donors must provide tailored support in line with national priorities. They should combine this with active assistance to MENA governments to develop capacities to manage and invest climate finance.
• Generate and heed lessons from developed countries’ failure to deliver the USD 100 billion dollars committed in Copenhagen in 2009. The new collective quantified goal (NCQG) (initiated by parties to the UNFCCC at COP21) for a long-term financial plan needs to be built upon such lessons. The NCQG should include specific and clear criteria in collection, distribution and financial instruments, prioritizing grants for developing countries that are already swamped with debt.

For MENA governments:

• Build regional alliances. Collaborative initiatives, borne from shared challenges, can magnify impact.
• Introduce agility to investment strategies, seizing opportunities that align with sustainable development goals without awaiting ideal conditions. Governments should approach climate funders with bankable projects grounded in a holistic vision for their countries.

Abderrahim Assab is an economic and financial analysis specialist and a PhD researcher at the University of Edinburgh Business School. Hala Al Hamawi is PhD researcher specializing in climate finance politics at Nottingham Trent University.

This post summarizes key points discussed during the Arabic-language online event “Energy Transition and Climate Finance in MENA” held on 31 August 2023 as part of the webinar series: MENA Energy Transition and the Road to COP 28.

At the Amazon Summit in Belém do Pará and in various international climate meetings, including Climate Week in New York, the agenda on the future of the Amazon has regained prominence. This is largely thanks to the leadership of Brazil’s president, Luiz Inácio Lula da Silva, and Colombia’s president Gustavo Petro, despite their different approaches to oil and gas exploitation in the Amazon basin.

The widespread growth of illicit activities in all Amazon countries is limiting their ability to implement joint measures for conservation and sustainable development. Including the Amazon as an essential part of climate negotiations could help reach these objectives. To that end, a common vision is required through a systematic approach that combines political, economic, and social considerations.

Facing a point of no return

The Amazon basin is home to the planet’s most extensive tropical forests, serving as a crucial carbon sink to mitigate the effects of climate change. But alarming estimates by scientists from 2021 warn that the Amazon would turn the carbon sink into a carbon emissions source, with estimates that deforestation is nearing 20 percent, a point at which the region would lose its regenerative capacity.

This would lead to a point of no return with permanent change to the water cycle in the Amazon basin, resulting in extensive forest loss, drought, flooding, and a conversion to savanna ecosystems. This scenario would accelerate climate change at local and global levels, creating a catastrophic loss of biological diversity with devastating planetary impacts, especially for local populations.

Since Lula da Silva took office as President of Brazil, his progressive climate positions, as a global leader on the issue, have led to a reduction of deforestation levels in the Brazilian Amazon to the lowest level in six years, with a 33 percent drop in the first six months of his administration. This is a notable decrease despite the policies put in place by his predecessor, Jair Bolsonaro. Similarly, Colombia reported a positive decline in deforestation, which experts estimate has fallen by 26 percent in the Amazon in 2022 and by 29 percent for the country overall.

However, not all countries have demonstrated strong signs of a clear public policy commitment to fight deforestation and to conserve these vital ecosystems, let alone an energy transition policy. For instance, Peru, despite having ratified treaties and international agreements to fight deforestation, has not managed to reduce its deforestation rates, nor curb the encroachment of illicit economies. In 2022 alone, the Amazonas department experienced deforestation of over 6,000 hectares, which is a new upturn after the historic spike of 2020. These figures reflect weakened environmental institutions in the country, undermined by legislative proposals that run counter to the goals of environmental prevention and protection of Indigenous Peoples. Peru kept a low profile at the Amazon Summit, with no concrete proposals put forward.

The Belém Declaration: a step forward

During the Amazon summit, members of the Amazon Cooperation Treaty Organization (ACTO) signed the Belém Declaration, which includes 113 objectives and cross-cutting principles for implementation across 18 thematic areas. These objectives include strengthening cooperation against illicit activities, the creation of the Intergovernmental Scientific and Technical Panel for the Amazon to reduce deforestation, and establishing a working group to evaluate a financial mechanism for Amazon cooperation within the ACTO framework. This mechanism aims to facilitate cooperation and the allocation of non-reimbursable financial resources. The declaration sends a message to developed countries, urging them to finance tropical forest conservation and deliver the funds already pledged under the Paris Agreement commitments.

The Belém Declaration lacks specific targets to curb deforestation and growing illicit economies. In addition, the request by Indigenous Peoples representatives and civil society organizations to protect 80 percent of the Amazon by 2025 was not approved. There was also no consensus on the reduction of dependence on fossil fuels, nor on specific targets for the eight countries of the Amazon biome to begin a progressive change in their energy systems.

The Amazon basin countries have different approaches in this regard. Gustavo Petro was explicit in his position to prohibit fossil fuel exploration and exploitation throughout the Amazon, while Brazil continues to promote the development of hydrocarbon activities. Ecuador is a different case, as the country held a national referendum to keep the crude oil in the ground indefinitely in Block 43, which overlaps with the Yasuni National Park. Nonetheless, the Guillermo Lasso administration has repeatedly highlighted the economic losses that this decision will entail for the State and for local communities. The Peruvian government has also diverged from the objective of eliminating fossil fuel development, continuing instead to promote hydrocarbon exploitation and the development of new oil fields.

Seizing the opportunity of climate negotiations

“The global warming era has ended, and the era of global boiling has begun.”  These alarming remarks by United Nations Secretary General António Gutérres amplified the call for renewed climate action and underscored the need to accelerate a just and equitable transition from fossil fuels to renewable energies, stopping the expansion of oil and gas and gradually eliminating carbon by 2040. 

Gutérres’ declaration was a preamble for Climate Week, held in New York, leading up to the annual negotiations to be held at the next Conference of the Parties (COP), in less than two months in the United Arab Emirates, a country that has come under fire for being one of the largest fossil fuel producers in the world.

During Climate Week, President Petro shared his country’s approach, with Brazil and other ACTO member countries, to “revitalize the amazon rainforest,” emphasizing the need to allocate sufficient financial resources to “replace the productive and predatory activities that have taken place there.” Petro has also proposed swapping foreign debt for investment in Amazon conservation, a consideration included in the Belém Declaration.

Similarly, President Lula urged developed countries to meet their climate finance commitments, arguing that a USD100 billion funding plan was already insufficient to address the alarming rate of Amazon deforestation.

The remarks made by Colombia’s and Brazil’s leaders were geared toward attracting financial resources in the context of the upcoming COPs, especially COP30 in Belém do Pará in 2025. This may partly explain the reactivation of and efforts to shore up the institutional structures of the ACTO, and the need to develop a shared vision for governance in this biome, as well as joint initiatives with other tropical countries such as the Democratic Republic of Congo, and Indonesia.

The upcoming climate negotiations offer a unique opportunity for the Amazon basin countries to prevent the region from reaching the dreaded “point of no return” while securing the international financing needed. The Belém Declaration provides a good starting point. But its successful implementation hinges on the ability of ACTO countries to align objectives and set concrete joint minimum targets to curb deforestation and illicit activities, and to formulate security and energy transition policies. Coordinating these efforts presents a key challenge for the region, given the varying priorities and specific political, economic, and social contexts in each country.

From Declaration to implementation

While the Belém Declaration addresses crucial aspects of Amazon basin governance, successful implementation will require more than rhetoric and urgency alone. ACTO countries need to agree on a shared action plan that is applicable in each territory. There are still no region-wide strategies of this nature, meaning that the risk of reaching a point of no return is still afoot. Critical issues remain, such as rising deforestation in several countries, the encroachment of illicit economies in the Amazon basin, or rising violence in the triple border between Brazil, Colombia, and Peru, an area currently under dispute among various armed groups. In addition, governance problems erode states’ ability to implement effective strategies.

In part, ACTO’s historic passiveness and the limitations of the Belém Declaration in failing to enshrine concrete and ambitions commitments to reduce deforestation or gradually eliminate fossil fuels can be explained by each member country’s differing visions and capacity.

To build a common vision for the Amazon, the approach cannot be solely environmental; a system-wide view is needed, encompassing political, economic, and social factors. The level of consensus and engagement that the countries in the Amazon biome can reach and translate into an action plan for the Belém Declaration will be key for successful outcomes from the next COP, and to position the Amazon at the center of the global climate debate. To secure meaningful climate funds for the Amazon, the governments of the region must demonstrate firm and strategic commitments. They need to undertake coordinated strategies to guarantee the conservation and sustainable development of this essential biome for the global climate.

This post has been translated from Spanish.

The inaugural Africa Climate Summit (ACS), which took place earlier this month, marked a significant milestone in the continent’s climate dialogue. Bringing together 18 heads of state, experts from various sectors, civil society representatives, global climate leaders and development partners, the summit resulted in the Nairobi Declaration on Climate Change and Call to Action.

This declaration committed participating governments to accelerating climate-positive growth, strengthening coordination across the continent, and mainstreaming adaptation into development policies. It called upon Africa’s partners to meet their climate finance commitments and reduce bottlenecks that have prevented African countries from accessing funds to deploy renewable energy and other necessary technologies. 

This week the baton passed from Nairobi to New York. The outcomes and lessons drawn from ACS hold significant relevance for delegates to the UN Climate Ambition Summit convened by U.N. Secretary-General António Guterres. In the Nairobi Declaration Africa’s leaders illuminate critical pathways toward sustainable climate action, offering valuable insights that can inform and inspire the discussions, commitments and decisions in New York.

For Africa’s resource-rich nations, heavily dependent on mineral and fossil fuel extraction, the Nairobi summit presented an opportunity to explore a transition toward cleaner and sustainable energy sources.

However, skepticism prevailed among civil society activists and representatives of African regional institutions who felt that they had heard similar promises before from African governments and the international donor community. In the lead-up to the summit, NRGI suggested five areas of focus for resource-rich countries. Reflecting on the summit’s outcomes, here we highlight three steps that African governments, regional institutions, activists and international donors can take to translate the Nairobi Declaration into impactful measures for resource-rich African countries, in anticipation of December’s COP28 and beyond.

1. Open up space for public dialogue

The Nairobi Declaration recognizes the dual challenge faced by African countries, including resource-rich ones: the need to accelerate climate mitigation and adaptation while promoting economic development and energy access. This requires mechanisms for public involvement in just transition planning and an inclusive, people-centered vision for the transition that prioritizes fair distribution of benefits and costs; protects vulnerable communities; promotes skill development, decent jobs, equity and social inclusion; and ensures active public engagement. Unfortunately, in many resource-rich countries, decision-making around energy transition planning has remained confined to the corridors of power walked by policy makers and political elites.

The Nairobi summit regrettably failed to significantly advance public dialogue on energy transition. Despite calls from African activists for meaningful representation of civil society and communities on the front lines of climate impact, the summit was dominated by high-level government officials and investors, with limited space for discussions on the human impact of climate change and the governance of the transition from a people-centered perspective.

Moving forward, African governments must establish open consultative mechanisms for public engagement in understanding energy transition opportunities and challenges. Failure to do so could allow special interests to dominate policy processes and deepen citizens’ distrust.

International institutions, including the African Union and multilateral development banks, as well as donors, must prioritize governance and public participation in future milestone meetings. They should ensure adequate funding for national and local participatory processes in advance of such events and as part of national transition planning. Democratizing the energy transition agenda, aligning it with people’s aspirations, and securing broad-based support are imperative to navigate the complexities and build a sustainable and equitable future.

To accelerate global capital mobilization effectively and address the crises of climate change and development, decisive action on inclusive and effective international tax cooperation is essential. For example, United Nations Resolution A/C.2/77/L.11/REV.1 aims to reduce Africa’s annual loss of $27 billion in corporate tax revenue by at least 50 percent by 2030 and 75 percent by 2050 through curbing profit shifting.

2. Get specific

While the Nairobi Declaration touches on key drivers of change for resource-rich countries, it lacks specificity. Notably, the signatories omitted from the final version references to accelerating the development and value addition of Africa’s green transition minerals. While the declaration vaguely alludes to this goal, calling for more energy-intensive processing of Africa’s raw materials to take place on the continent, it falls short of outlining specific goals related to transition minerals and commitments from African governments and institutions. The continent’s governments must cooperate and coordinate to develop economically viable cross-border value chains.

The African Union’s Green Minerals Strategy, presented at the summit, can serve as a crucial tool for aligning government policies. Nevertheless, African officials must commit to specific actions to harmonize policies, promote cross-border collaboration, develop costed plans for value addition, and establish governance priorities. This push requires coordination among regional institutions and individual governments, emphasizing good governance, transparency, and public dialogue to avoid repeating the mistakes of past resource booms. Development partners must support African governments and civil society in strengthening policies, enforcement, and public oversight to prevent a one-sided geopolitical game.

Another central theme at the summit was climate finance, emphasized in the declaration’s calls for global capital mobilization, honoring unmet global finance commitments, and reducing the risks and costs of green investments for African governments. While donor nations and multilateral organizations present pledged approximately USD 26 billion at the summit, these promises must translate into tangible support to realize greenhouse gas reductions in Africa. Resource-rich countries must closely examine the intersection of public revenues, investment plans and transition ambitions, developing clear agendas to mobilize and use finance strategically. People-centered planning processes are crucial to building national consensus and leveraging external funding opportunities. Just energy transition partnerships (JETPs) can play a pivotal role in this process, exemplified by the JETP in Senegal, which can serve as a test case for scaling up energy access and renewable deployment. Achieving this will require governments’ commitment to transparency and public engagement to ensure that JETPs serve public rather than vested interests.

International efforts to combat illicit financial flows and boost domestic resource mobilization—such as the Addis Ababa agenda and the UN resolution on international tax cooperation—can play an important role in leveling the playing field and boosting African governments’ efforts to finance a just transition. But multi-national companies must vigorously implement them, and bolstering government enforcement capacity is essential. Policies requiring company reporting on their tax payments on a country-by-country basis and publication of beneficial ownership information are also needed. And the demand for transition minerals necessitates accelerated steps toward operationalizing the automatic exchange of tax information.

3. Get organized

African leaders can navigate the energy transition successfully, establish sustainable and resilient energy systems, and contribute to a more environmentally friendly and prosperous future, in line with the African Union’s Agenda 2063. However, achieving this vision will require the continent’s political leadership to organize better and develop clear agendas.

It also requires the involvement of citizens and civil society. To secure an equitable energy transition and to advance climate action, civil society organizations (CSOs) can:

• Invest in collaborative coalitions. Form coalitions that bring together organizations, activists, and individuals committed to advancing the energy transition agenda. Collaborate with experts in climate change, renewable energy, environmental justice, and related fields to create a united front that can effectively engage and exert pressure on regional and international authorities to expand consultation and decision-making spaces for diverse representation.
• Increase awareness and skills. Recognize the varying levels of awareness and understanding of the impact of a just energy transition among different groups. Launch a comprehensive awareness-raising, skills enhancement, and advocacy campaign to educate stakeholders about the implications of the transition in Africa. Invest in mobilizing grassroots support through community engagement to ensure local communities are informed advocates for clean energy solutions, effectively influencing decision-makers.
• Participate and engage decision makers. Establish effective communication channels with government policymakers, regional institutions, and other stakeholders involved in climate negotiations and energy policy. Advocate for inclusivity in decision-making processes and civil society participation and representatives in official delegations and advisory committees.
• Shape the narrative. Invest in research and development to generate evidence-based policy recommendations that support the energy transition agenda from an African perspective, considering regional nuances. Collaborate with experts in energy, economics and environmental science to create robust proposals tailored to the African context.
• Deepen international collaboration. Form partnerships with international organizations, NGOs and climate-focused institutions that can provide resources, expertise and global visibility. Collaborating with international allies helps to amplify messages and drive support.
• Monitor progress and demand accountability. Continuously monitor government and corporate commitments to the energy transition agenda. Use the Nairobi Declaration as a foundation to hold governments and international institutions accountable. Recognize that energy transition and climate advocacy are long-term efforts and be prepared to adapt strategies as circumstances evolve.

Turning the Nairobi Declaration into concrete progress for Africa’s resource-rich countries demands a holistic approach. It requires public dialogue, participation, representation with key actors and civil society organizing to actively engage in shaping the transition. Governments, international partners and corporations must collaborate to ensure that the energy transition benefits all and contributes to a sustainable, equitable future for Africa.

NRGI experts engaged with a variety of partners at the COP27 climate conference in Sharm El-Sheikh, Egypt, which took place in November 2022. They advocated for a just and equitable energy transition that unlocks economic opportunity and sustainable development in resource-rich countries, and shared the following summaries of key discussions around resource governance and a just energy transition.

Learn more about NRGI's activities at COP27 with this microsite.
 

Nafi Chinery

Ana Carolina González Espinosa



Ana Carolina González Espinosa (Spanish)



Ana Carolina González Espinosa (French)



Silas Olan'g



Abir Yahyaoui



Thomas Scurfield


 

In advance of the COP27 climate conference in Sharm El-Sheikh, Egypt, which took place in November 2022, NRGI spoke to stakeholders in its priority countries in Africa and Latin America and aggregated their voices and perspectives. Find out what they want from their countries’ energy transitions below, and learn more about NRGI's activities at COP27 with this microsite.

Voices from Africa



Solomon Kusi Ampofo, Friends of the Nation, Ghana



Magdalena Gisse, Tanzania Young Feminist Movement



Victoria Ibezim-Ohaeri, Spaces for Change, Nigeria



Nafi Chinery, NRGI



Charles Wanguhu, NRGI governing board



Lucain Nyassi Tchakounte



Lucain Nyassi Tchakounte, NRGI (with French subtitles)
 

Tijah Bolton-Akpan



Justine Mponda, Africa Youth Transformation, Tanzania



Lina Marcela Tobon Yagari, Colombia



Charles Ofori, ACEP, Ghana



Ranin Koshi, Peru