The Mediterranean is among the regions that are most affected by climate change. According to the Intergovernmental Panel on Climate Change (IPCC), the region will face a “heightened risk of water shortages, coastal flooding and exposure to potentially deadly extreme heat”, with temperatures growing faster than the global average, impacting sectors such as agriculture, fisheries and tourism. For this reason, the energy transition (with its implications in terms of climate change mitigation and adaptation) is an urgent policy issue for North African countries, even though they have historically only been responsible for 0.88% of global greenhouse gas emissions.
The five North African countries have all signed the Paris Climate Accords and approved plans for their clean energy transition. With the exception of Libya, they all have recently established ministries devoted to the green energy project. In the last decade, the area has increased its renewable electricity production by 40%, driven by the expansion of wind, solar PV and solar thermal power. Morocco is the most advanced country in terms of renewable energy share of electricity capacity and in the promotion of the energy transition. Its policies and pledges are close to following the goal of limiting global temperatures to 1.5°.Egypt has the highest amount of installed renewable energy and ambitious targets for its increase and will host the next UN Climate Conference (COP27) in November 2022. Algeria, Tunisia, and Libya have undertaken the transition with less emphasis and its implementation experiences delays.
Although significant progress has been recorded, the share of modern renewables (which excludes the traditional use of biomass) in final energy consumption is limited, it varies from 7.6% in Morocco to 0.2% in Algeria (2018). Priority has been accorded to the implementation of macro-projects, while the development of off-grid capacity and energy efficiency measures still need to be improved, as well as the decarbonization of key industries such as the energy and the mining sectors.
Political and economic challenges on the path towards the transition
North Africa is a very diverse region from an energy perspective, but energy demand is rising in every country as well as the consumption of fossil fuels (oil accounts for between 45% and 85% of final energy consumption across the region) and the related CO2 emissions, drawn by rising demographic trends, rapid urbanization, and economic growth.
While Tunisia and Morocco are heavily dependent on energy imports, Algeria, Egypt, and Libya are net exporters of oil or natural gas. The five countries have different energy mixes and different sources of electricity generation. Consequently, the path towards a clean energy transition has a different impact on each of their economies and societies, due to the composition of their respective energy mixes, the role of the energy sector and energy imports. For oil-importing countries, the transition is an additional way to reduce dependency on external suppliers and mitigating vulnerability to price shocks. For oil-exporting countries, which are highly dependent on export revenues for their budgets and for the conservation of their rentier configuration, the energy transition could help to satisfy growing internal demand, thus freeing resources for exports.
In this context, it is crucial to assess the political and economic contexts in which energy transition intervenes and is promoted. Many are the socio-political and economic challenges that need to be addressed, especially in a moment when the recovery of the region after the outbreak of the COVID-19 pandemic is still incomplete. In a region in which “reform attempts have so far proved insufficient, with limited tangible results”, energy transitions are hindered by limited institutional capacity, supportive laws and regulations to disclose private investments. Despite recent positive developments, the lack of reliable support mechanisms and clear licensing procedures alongside weak business environments have hampered the potential of the region. Political stability and the fundamentals of local economies play a role in the path towards transition. North African countries could leverage on energy transition as a tool to help them overcome certain structural limitations of their own economies, such as a lack of diversification, industrial development, and unemployment.
In Morocco, the energy transition has been supported at the highest level since its first inception. It is a pillar of the economic modernization effort of the monarchy, and it has been accompanied by a specific set of institutions. The increasing deployment of renewable energy sources is among the goals identified by the “New Development Model” of the country.
In Algeria, the energy sector is essential for the country’s political and economic stability: socio-economic equilibrium is linked to the oil price as the sector accounted for 20% of GDP, 41% of fiscal revenues, and 94% of export earnings in 2019. The collapse of oil prices in recent years has challenged the social contract and the economic outlook of the country. In this context, energy transition in Algeria could contribute significantly to the diversification of the economy and to meet the growing energy demand, freeing resources for exports. The end of the 51/49 rule for investments in renewables, opening to private and foreign investments, could open new promising scenarios.
In Tunisia, renewable energy production remains extremely limited and recent political developments risk further delaying its implementation. Although the current economic crisis does not suggest the prospect for increasing public investments in the field of the energy transition, the recent validation of the construction of 5 new solar PV plants by foreign companies could be perceived as a positive sign.
In Libya, every plan to bet on renewable energies to decarbonize the country’s economy has been jeopardized by the conflict and the institutional division. The coming into power of the Government of National Unity in March 2021 seemed to have created new opportunities for international investments, and two projects on solar energy, in partnership with Total and Eni, were announced to be launched by the end of the year. With rising concerns about the stability of the country, following the postponement of the presidential election, energy transition does not seem to be the priority in this political phase.
In Egypt, the economic outlook remains uncertain although vital economic sectors are starting to rebound. The development of renewables intervenes in a context that has completely changed in recent years especially following the 2015 discovery of the Zohr natural gas field. Renewable energy will satisfy an increasing share of the domestic demand and be exported to neighboring countries.
The geopolitical dimension of the energy transition in North Africa
Gradually, the implementation of energy transition strategies is bringing new dimensions to the foreign policy of countries in the region.
International development assistance has proved key to kick start energy transition in the region through climate change mitigation and adaptation initiatives. Morocco is by large the first beneficiary of this support, followed by Egypt and Tunisia. Compared to its neighbors, Algeria benefits from limited assistance, while no multilateral climate finance funds are allocated to Libya.
International support is also channeled through the European Bank for Reconstruction and Development (EBRD), the European Investment Bank (EIB), and multilateral funds, such as the Clean Technology Fund, and the Green Climate Fund. Programs include, among others, loans and subsidies, technical assistance and capacity building. One of the most iconic symbols of the Moroccan energy transition, the Noor Ouarzazate solar power station, was funded with an amount up to 60% coming from European funds (EU Neighboring Investment Facility, European Investment Bank and the French and German development banks). In both 2018 and 2019, Morocco was the eighth largest recipient of climate finance in the world, receiving around USD 600 million.
Major European energy companies have invested in renewable energy facilities in the region, such as the Italian Enel Green Power and Eni, and the French Engie and EDF Renouvelables. Companies from Gulf Countries (in particular Saudi Arabia and the United Arab Emirates) are very active as well, although it remains to be seen what impact the brand-new Saudi Middle East Green Initiative will have on green transitions in the region in the coming years.
The commitment of bilateral donors in supporting the energy transitions of the region interplays with the foreign policies of North African countries and geopolitical tensions. As such, these dynamics can affect the implementation of energy transitions by either facilitating or interfering with them. For instance, energy bilateral cooperation between Rabat and Berlin, which is the primary bilateral donor to the country and has signed a specific partnership on hydrogen with Morocco, was suspended in Spring 2021. This was primarily caused by a growing diplomatic rift between the two countries over Western Sahara, a territory claimed by Morocco and considered the top priority for Moroccan diplomacy. In contrast, in the context where Saudi-Tunisian relations have been reinforced following the coup de force of President Saïed, the two countries have recently signed a memorandum of understanding for greater cooperation in the field of renewable energy and energy efficiency. Tunis looks at Riyadh for political and economic support in this delicate phase of its history.
Moreover, another interesting international implication of energy transitions in North Africa is that they could also play a role in relaunching regional cooperation and partnership. The region holds a strategic position due to its proximity with European energy markets. There are several projects that could make use of existing infrastructures, or that would favor the construction of new energy interconnections, for the transmission of electricity from renewable sources or the export of green hydrogen (if the technology was sufficiently mature and it was economically feasible). Thus, this could potentially lead to the development of an integrated energy market between both the northern and the southern shores of the Mediterranean. Concerning the transmission of electricity, Italy and Tunisia plan to build an undersea electricity connection, and a network of electrical interconnections is already in place between Morocco and Spain. Looking at the North African region, although cross-border grid interconnections are weak, the region’s countries are developing new projects, such as electricity grids between Algeria and Libya, whileEgypt plans to export surplus power supply produced through renewable energy sources to neighboring countries. Moving to the broader MENA region, there are concrete plans to link up the GCC Interconnection Authority electricity grid to the EU electricity grid via Egypt.Cairo and Riyadh have recently signed a contract for an electricity interconnection project between the two countries.
In conclusion, although the route towards energy transition still faces several challenges ahead and is weakened by political and economic uncertainties, its successful implementation is increasingly becoming important in the countries’ policy agendas. In addition, achieving an energy transition could create new opportunities for sustainable economic growth both at the national and international level. By stimulating internal reforms and attracting international investments, the building of energy interconnections and the trade of clean energy, the transition could become a significant leverage to internal transformations and regional cooperation.
 Not including emissions produced indirectly through hydrocarbon exports.