Economic Research Forum (ERF)

The green transition in MENA economies: challenges and policy pathways

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The economies of the Middle East and North Africa are at a critical turning point. Global decarbonisation pressures, energy market volatility and technological transformation are increasingly challenging hydrocarbon-based growth models. This column argues that the green transition is not only an environmental necessity but also a strategic economic imperative.

In a nutshell

Structural constraints complicate the green transition; success will depend on governments’ ability to redesign economic governance, strengthen institutional capacity and implement forward-looking policies.

Opportunities in renewable energy investment, green job creation and financial reform provide a viable pathway towards sustainable transformation.

Countries that act decisively will not only mitigate future risks but also position themselves as key players in the emerging global green economy.

The economies of the Middle East and North Africa (MENA) have historically relied on oil and gas exports as their primary engines of growth. This dependence has exposed them to external shocks, including price volatility and geopolitical instability (World Bank, 2023).

As the global economy moves towards decarbonisation, this growth model faces increasing risks from declining long-term demand for fossil fuels to tightening constraints on carbon-intensive investments (IEA, 2022).

Structural barriers to green transition

Rentier economic structures create significant obstacles to reform. High dependence on hydrocarbon revenues often reduces incentives for diversification, while centralised governance systems limit policy flexibility (Hertog, 2010).

Investment and technology gaps

Despite possessing some of the world’s highest solar and wind energy potential, MENA countries face major constraints in mobilising capital and accessing advanced green technologies (IRENA, 2023).

Labour market and social implications

The green transition will inevitably shift labour demand from traditional energy sectors to emerging green industries. Without targeted policies, this shift may lead to structural unemployment and social pressure (ILO, 2022).

Policy opportunities

The green transition also presents several strategic opportunities for MENA economies:

  • Economic diversification and reduced reliance on oil revenues.
  • Green job creation in renewable energy and clean technologies.
  • Attraction of foreign investment in sustainable infrastructure.
  • Enhanced geo-economic positioning through green energy diplomacy.

Policy recommendations

To enable a successful transition, policy-makers in MENA should consider the following actions:

  • Reforming energy subsidy systems to reduce fossil fuel consumption and provide incentives for clean energy adoption.
  • Strengthening institutional frameworks to improve transparency and attract green investment.
  • Investing in education and workforce reskilling to prepare labour markets for green economy demands.
  • Developing green financial markets, including green bonds and sustainable investment funds.
  • Promoting regional cooperation in technology transfer and joint renewable energy projects.

Conclusion

The green transition in MENA is not optional: it is an inevitable response to global economic transformation. Success in this transition will depend on the ability of governments to redesign economic governance, strengthen institutional capacity, and implement forward-looking policies. Countries that act decisively will not only mitigate future risks but also position themselves as key players in the emerging global green economy.

Further reading

Hertog, S (2010) Princes, Brokers, and Bureaucrats: Oil and the State in Saudi Arabia, Cornell University Press.

IEA, International Energy Agency (2022) World Energy Outlook 2022

ILO, International Labour Organization (2022) World Employment and Social Outlook 2022.

IRENA, International Renewable Energy Agency (2023) Renewable Energy Market Analysis: Middle East and North Africa.

World Bank (2023) MENA Economic Update.

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  • Kamran Yeganegi
    Kamran Yeganegi
    Assistant Professor, Department of Industrial Engineering, Islamic Azad University

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