The Green Transition in Oil Dependent Economies in the MENA Region 'Turning off the Pumps, Breaking the Oil Addiction, and Greening the Desert' Case Study: A Non-Oil Future for Saudi Arabia and Algeria?

The Curious Case of the Green Transition: Managing a Historic Shift in Oil Exporting Countries While the Middle East and North African (MENA) region is home to only 6% of the world’s population, it controls 60% of the world’s known oil resources and almost half of the world’s natural gas reserves (Hilmi et al. 30). An additional source strengthens this statement exhibiting that total production of oil in MENA countries accounts for 34,418 thousands barrels per day while that of natural gas amounts to 798.3 billion cubic metres per year (Exhibit 3). Due to scientific consensus on anthropogenic climate change, oil is considered a controversial energy source and therefore deserves special attention. Trends towards non-carbon based and sustainable energy sources are gaining momentum worldwide. Meanwhile, trends towards clean energies are gaining momentum worldwide. Given its large number of oil-dependent countries, this will have profound ramifications for the MENA region. Although the classification of strong and weak green performers has been a contentious process, these data are nonetheless the most reliable sources available to date. Under this classification, Saudi Arabia ranks fourth and is considered a modest performer. Algeria, ranked fifth, is considered a slightly weaker performer (Tagliapietra, 2017, 20). Saudi Arabia is presumed to be in the top group of oil exporters, meaning that oil revenues account for 40% of GDP. Algeria ranks in the second tier, which consists of countries whose oil revenues range from 20 to 40% of their GDP (Tagliapietra, 2017 16). If taken as a common denominator, ‘green energy’ is analytically useful in comparing Saudi Arabia and Algeria as they embark on the path to non-carbon energy solutions. There are several foundational, yet still unanswered, questions about energy sector transformations in petroleum exporting countries. First, why would MENA countries transition to green energy before they exhaust their petroleum reserves? Second, when will commercially viable oil reserves be depleted? Lastly, what are the tradeoffs between economic development and a Green Transition? As Eckart Woertz, the Director of the GIGA Institute for Middle East Studies in Hamburg, argues, the use of clean energy is still limited in the region, particularly compared to Europe (Cochrane). If this is the case, then what incentive structures are likely to influence decision making in this domain? While a complete analysis of these questions is beyond the scope of this paper, establishing a basic understanding of both supply-and demand-side incentive structures serve as a foundation for rational economic and policy decisions. Certainly, reforms and programs are undertaken in MENA countries to switch to clean energy. Both Saudi Arabia and Algeria have proposed programs and reforms that incorporate sustainable objectives. Examples include Algeria’s National Strategy for the Fight Against Poverty (2005–2015) and Five-Year Plan (2010–2014) and Saudi Arabia’s Vision 2030 (Tagliapietra el a. 4). Therefore, given that major industries within these economies are expected to be fundamentally transformed by a Green Transition, it is analytically useful to use a horizontal approach in understanding these complex changes. This essay explores the notion and implications of sustainability in MENA countries, since the challenges are most acute in oil-dependent economies. Specifically, how might the future look if MENA countries successfully transition to predominantly, if not exclusively, non-carbon based sustainable energy resources? The Green Transition in the MENA region is a set towards reforming petroleum extraction, refinement, and export processes.