Just Energy Transitions? Lessons From Oman and Morocco

For Arab countries, the combination of oil price volatility and the accelerating global energy transitions to mitigate climate change poses both an existential threat and an economic and environmental opportunity. Those states not only are hydrocarbon-dependent but also face severe climate vulnerabilities. Many have adopted domestic energy transition plans, but as an economic, not an environmental, response, specifically to generate the new export revenue that will be needed to maintain the political equilibrium and the role of the state and to fund socioeconomic development. Across the region, economic development and energy transition plans generally deprioritize the environment, albeit to varying degrees, potentially exacerbating climate-related vulnerability. As such, it is imperative to make energy transitions climate-resilient and ensure they benefit, not harm, the environment. According to the International Energy Agency, there are three major goals for a climate-resilient energy transition strategy (a mitigation strategy at heart) in the Middle East and North Africa (MENA) region: clean energy, energy security, and climate change adaptation. In addition, a climate-resilient energy transition strategy must include three additional goals critical for economic and environmental sustainability in the MENA and Arab states, namely energy affordability; existing natural resources protection, particularly for water and land; and quality of life and health equity. To ensure socioeconomic development and political stability, the transition must be a just transition, one that is fair, equitable, and able to minimize negative and maximize positive impacts on communities and the environment. This requirement presents the question: To what extent can energy transition pathways be climate-resilient to generate a just transition with environmental benefits in Arab states?

Using illustrations from Oman and Morocco, this piece argues that economically motivated energy transitions should incorporate climate resilience and environmental targets. Nevertheless, significant challenges persist to that end. Failure to address these challenges will hinder just energy transitions and climate resilience and reduce the ability of Arab states, especially wealthier hydrocarbon exporters with higher emissions and net-zero pledges, to achieve both emissions and equitable economic targets.

Global energy transitions away from hydrocarbons have accelerated since the Paris Agreement. In the 2020–2023 period, investments in clean energy globally surged by 40 percent. The acceleration is urgent and driven largely by national commitments to reduce greenhouse gas (GHG) emissions and, therefore, limit global warming to no more than 1.5 degrees Celsius (°C) above preindustrial levels—a threshold that the world is expected to breach by 2027. The UAE Consensus adopted by the 28th Conference of the Parties (COP28) in December 2023 called on the parties to achieve the 1.5°C target through various measures, including “transitioning away from fossil fuels” (articulating fossil fuels for the first time in the twenty-eight years of COP meetings), tripling renewables, and doubling energy efficiency globally by 2030. The reduction of global fossil fuel production and consumption necessary to achieve that target will continue to directly affect Arab countries.

Specifically, the global energy transition threatens the economic sustainability of Arab states, although to varying degrees, forcing changes in their economic and energy structures. The ensuing existential threats are most evident for the economies of hydrocarbon-dependent welfare states of the Gulf Cooperation Council (GCC): Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, and the United Arab Emirates (UAE). For decades, these economies have been overly dependent on hydrocarbon exports as the primary contributor to their governments’ revenue. In 2021 alone, hydrocarbon exports amounted to well over half of government revenue: 60 percent in Saudi Arabia, 63 percent in Bahrain, 74 percent in Oman, and between 80 and 84 percent in the UAE, Qatar, and Kuwait. Hydrocarbons remain the primary energy sources and economic drivers in these countries despite their ambitious strategies to diversify away from hydrocarbons, as articulated in grandiose economic development plans known as Visions (to be realized by 2030–2040). Episodes of oil price collapse, especially that of mid-2014, coupled with declines in oil exports have exposed the depth of economic challenges of hydrocarbon reliance. These price fluctuations forced unprecedented, politically contentious energy subsidy reforms, such as Oman’s energy price reform in 2015 and subsequent phaseouts of water and electricity subsidies. They also exposed the difficulties of implementing urgent economic reforms and diversifications.

Although less-evident, other states liable to be substantially impacted by energy transitions are hydrocarbon net-importing Arab states—most notably Egypt, Jordan, Morocco, and Tunisia. Those states are reliant on energy and energy-intensive imports and suffer significant inflationary waves (including for imported food) and industrial challenges following hydrocarbon price hikes. Crucially, their economies also depend on foreign remittances from labor working primarily in GCC states, constituting substantial shares of gross domestic product (GDP)—28 percent in Lebanon, 10 percent in Jordan, 9 percent in Morocco, and 6 percent in Egypt. Economic downturns in GCC states reduce remittances and, therefore, GDP, in those economies. Against this background, domestic energy transitions offer immense direct economic opportunities with equally immense environmental implications.

Oman and Morocco stand on opposite sides of hydrocarbon exportation, but they share important commonalities that call for closer comparison. Both depend on natural resources—including hydrocarbons and land—for economic sustainability, and their energy transition projects leverage their respective natural resources. They have comparable levels of GDP, total emissions, energy transition targets, and constrained fiscal spaces. Notwithstanding differences across Arab states, Oman faces challenges common to Arab hydrocarbon exporters, and Morocco to importers. As such, this comparative assessment offers insights applicable to just energy transitions and sustainability in Arab states.

Environmental Vulnerabilities and Opportunities of Energy Transitions

The MENA region enjoys tremendous opportunities for energy transitions. It boasts some of the world’s best solar and wind energy potential, and therefore some of the lowest prices, along with established trade relations and a strategic location near centers of demand in Europe and Asia. Combined with hydrocarbon resources, those advantages offer GCC economies potential new export revenue from renewables and clean hydrogen to partially replace expected losses in hydrocarbon export revenue and increase diversification. Clean (low carbon) hydrogen is an especially attractive opportunity. As an excellent energy carrier and storage medium, hydrogen can contribute to decarbonization of fertilizers, petrochemicals, power, transport, and hard-to-abate sectors (those that are difficult to electrify, such as steel and cement). Its share in total energy demand is projected to range from 12 percent to 22 percent by 2050. Because GCC states produce large quantities of “dirty” hydrogen (derived from hydrocarbons), they are also well positioned to be leaders in blue hydrogen, which is conventional hydrogen but with lower emissions using carbon capture technology. GCC states also have a potential comparative advantage in green hydrogen, which is produced using renewable energy to separate hydrogen from oxygen molecules in water without direct carbon emissions (excluding emissions along the supply chain), often using electrolysis. North Africa shares a similar potential comparative advantage in green hydrogen.

To realize these opportunities, numerous Arab states have adopted local energy transition projects and plans. GCC states have announced net-zero emissions targets, of which energy transitions form a part: in 2021, the UAE pledged to reach net zero by 2050, and Saudi Arabia and Bahrain pledged the same goal by 2060. In 2022, Oman pledged to reach net-zero targets by 2050 and Kuwait by 2060. GCC states also announced ambitious renewable energy targets (ranging from 15 percent in Kuwait to 50 percent in Saudi Arabia by 2030 and in the UAE by 2050), and clean hydrogen and decarbonized hydrocarbons and industries through the use of carbon capture and storage/carbon capture, utilization, and storage (CCS/CCUS) technologies. Nature-based solutions feature strongly, especially in the Saudi Green Initiative and the UAE’s coastal ecosystems. Importantly, hydrocarbons remain an important part of these countries’ energy transition pathways, but in the form of lower emissions hydrocarbons using technology and carbon storage that leverage the region’s geological advantages. But those energy transitions also have an economic motive: domestic-targeted projects, such as renewables, have been delayed, while export-targeted projects, such as green hydrogen, have been accelerated.

For hydrocarbon-importing Arab states, energy security and fiscal balance improvements initially drove expansions in renewable energy. But similar opportunities for new export revenue have driven additional targets for renewable power and plans for green hydrogen. Ambitious renewable energy penetration targets range from 30 percent by 2030 in Tunisia to 52 percent by 2050 in Morocco. Despite their relatively limited fiscal resources, these states lead GCC states in renewable energy.

The environmental opportunities of energy transition pathways are equally important for the region’s livelihood and stability. Arab states are environmentally threatened, and impacts of climate change further exacerbate regional conflict and social upheavals. According to a Stockholm International Water Institute and UNICEF report, in 2018 fourteen of the seventeen most water-stressed countries globally are in the MENA region. The top six among them—Kuwait, Libya, Qatar, Saudi Arabia, the UAE, and Yemen—are all Arab states. In the case of Oman, it has a critical water stress level and ranks fifteenth-most-water-stressed globally, compared with Morocco’s medium level and a water stress global rank of thirty-five. Volatile precipitation patterns have exacerbated water scarcity and caused various extreme natural disasters, including droughts in Morocco in 2022, Oman’s Category 3 Tropical Cyclone Mekunu in 2018, and intense floods in 2022 in Oman and the Gulf region.

Local water demand has exceeded natural replenishment in many areas. Groundwater remains the primary source for agricultural industry and for farms and inland towns, yet it is being depleted at a rate of 1.34 million cubic kilometers per year (km³/yr). Morocco’s water demand in 2020 reached 16.2 billion cubic meters (m³), for drinking and water-intensive agriculture. Recent droughts along with increased water usage are depleting the country’s 29 billion m³ of renewable water resources at increasing rates, with an overuse of water and overexploitation of some aquifers. Reservoir storage capacity loses about 75 million m³ per year because of Moroccan dam silting. Currently, 86 percent of Oman’s water is desalinated (the second-highest rate in the GCC, after the UAE). Desalinated seawater met 3 percent of Morocco’s water needs, but a higher share is expected with desalination responses to drying reservoirs and droughts.

Emissions reduction to limit rises in temperatures is another opportunity. The MENA region is warming at nearly twice the global average, which is partially attributable to increases in total and per capita emissions.

As seen in figure 1, countries’ emissions profiles mirror their economic structure. Relative to others in the region, Oman and Morocco have medium-level emissions: Oman produces 137.2 million metric tons of carbon dioxide equivalent (MtCO₂eq) and Morocco produces 114.8 MtCO₂eq. Yet their production sources have two key differences. First, the energy sector (including electricity) is responsible for around one-third of emissions in Oman, compared with around one-third in Morocco. Industrial processes contribute 22 percent of emissions in Oman, compared with 13 percent in Morocco. In the case of Oman, petrochemicals account for the difference. Second, Morocco’s agricultural and its related waste sector drive 13 percent and 21 percent of emissions, respectively, compared with negligible contributions (1 percent and 3 percent) in Oman. Emissions from the remaining sectors are more comparable, though Morocco’s transport sector produced 17 percent of emissions, compared to 10 percent in Oman.

Although country-specific data are scarce, studies suggest that the MENA region is expected to experience the third-highest GDP losses (6 percent) only from climate-related physical risks, after South and Central Asia and sub-Saharan Africa. Domestic energy transitions will be an important part of reducing local emissions and their ensuing environmental challenges.

Energy Transition Pathways in Oman and Morocco

Energy transitions are an urgent economic priority for Oman and Morocco, but their pathways to these transitions diverge, reflecting differences in their natural wealth and dependence on hydrocarbons. As seen in table 1, their GDP, total energy consumption, and total emissions are fairly comparable. Yet Morocco’s population is more than 8 times greater than Oman’s, so the latter’s per capita GDP, emissions, and energy consumption levels are seven to nine times higher. Both have significant water stresses, but Oman is the more severely stressed of the two.

Oman

Oman has relied heavily on hydrocarbons since commercial production started in 1967. The fourth-largest hydrocarbon producer in the GCC, in 2021 Oman produced 1.05 million barrels (mb) per day, with 971 mb of oil and 43.6 billion cubic meters (bcm) of natural gas. In the same year, crude oil, gas, and refined petroleum exports contributed 74 percent of government revenue and 54 percent of total export revenue, and industry contributed 30 percent of GDP. The manufacturing sectors contribute 10 percent of GDP but a substantial 34 percent of exports—making Omani exports among the most diversified in the GCC—and promise future exports in decarbonized industries.

Owing to its high dependence on hydrocarbons, Oman has grappled with substantial fiscal pressures, with rising domestic expenditures (especially following the coronavirus pandemic) along with diminishing hydrocarbon export revenues. Temporary surges in oil prices in 2022 triggered by Russia’s invasion of Ukraine improved its fiscal position, yet diversifying government revenue sources remains an imperative. For example, the government’s Social Protection Law paves the way to universal social protection to mitigate the impacts of future oil export revenue declines, but implementing this law requires fiscal sustainability. Finally, wildlife, ecotourism, and rich natural attractions have been drivers of in-country and international tourism, contributing 3 percent of GDP in 2022 (according to official data from the Statistical Yearbook). To diversify its economy, Oman aims to increase this share of GDP to 10 percent by 2040 and attract 11.7 million tourists.

Energy transitions are also an opportunity to diversify the energy mix and release additional hydrocarbons for exports. In 2021, oil and natural gas constituted respectively 9.4 percent and 90.5 percent of the total supply, with only a negligible share from renewables (0.4 percent, or 938 terajoules (TJ)). Since 2008, Oman has been importing relatively small amounts of natural gas, which in 2022 reached 2,076 million standard cubic meters (see figure 2).

Energy transitions are thus pathways for economic diversification. Oman’s Vision 2040 (adopted in 2020) charts the path toward a low-carbon economy. Oman’s National Strategy for an Orderly Transition to Net Zero details the economic aims of the transition: reduced energy system costs; an additional 50 percent of GDP (two-thirds from green hydrogen and one-third from green power capacity); an improved fiscal balance; employment generation and higher social impacts; and security in energy supply through self-sufficiency in power, hydrogen, and hydrocarbons. This plan is intended to reduce the share of hydrocarbons in GDP and increase export diversification. Measures to achieve these aims include increasing shares of renewable energy in power generation: 10 percent by 2025, 20 percent by 2027, and 35–39 percent by 2040, as well as 63 percent efficiency at gas-fired plants by 2027.

Green hydrogen is the other major pathway, especially as Oman is less endowed in hydrocarbons relative to other GCC states. Options for blue hydrogen are limited, but Oman’s significant renewable solar and wind energy resources present ample opportunities for green hydrogen. The government adopted the green hydrogen strategy in 2020, then in 2022 it established an independent entity—Hydrogen Oman (HYDROM), owned by Energy Development Oman and regulated by the Ministry of Energy and Minerals—to lead and manage it. Production targets are ambitious: at least 1 million metric tons (mt)/year by 2030, at least 3.25 million mt/year by 2040, up to 8.5 million mt/year by 2050—a target that exceeds Europe’s total hydrogen demand of 8.2 million mt in 2022. In 2020 and 2021, Oman’s oil company OQ signed concessions and joint venture, creating the Hyport Duqm Project in the Special Economic Zone at Duqm. The planned green hydrogen and ammonia plants in this $2.5 billion facility are expected to produce 2,200 million metric tons of green ammonia per day. If those targets are realized, Oman can be a leading regional center for producing and exporting green hydrogen.

Finally, low-carbon technologies also are playing a pivotal role in the transition. These technologies include hydrogen, electric vehicles, CCS, and energy efficiency, as well as upskilling of labor in said technologies.

Morocco

A hydrocarbon-importer, Morocco boasts a diverse economic structure that nonetheless is dependent on natural resources. The industrial sector contributes around 26 percent of GDP, agriculture 12 percent (but one-third of the labor force), and mining 10 percent. The mining sector mostly is dominated by phosphate, a critical mineral of importance to the decarbonization and energy transitions. Tourism, another key industry, contributes around 7 percent of GDP (as of 2019), owing to Morocco’s central location, relative affordability, rich wildlife, deserts, ecotourism, and natural attractions.

In 2022, Morocco faced interconnected challenges that caused a 7 percent decline in real GDP growth (down to 1.3 percent). They included severe droughts, a global economic slowdown during the coronavirus pandemic, and escalating international commodity and food prices following Russia’s invasion of Ukraine. Despite the destructive Al Haouz earthquake in September 2023, the economy rebounded in 2023, driven by the recovery of agricultural production, a resurgence in the tourism sector, positive contributions from net exports, and declines in global commodity prices (reducing local inflation).

Morocco’s 2030 National Strategy of Sustainable Development, and the subsequent New Economic Development Plan (established by the Special Commission on the Development Model), outlines economic, energy security, and renewables targets. The government implemented various reforms, such as the Mohammed VI investment fund and enhancements of state-owned enterprises governance, to attract foreign direct investment, bolster the private sector, expand employment, and strengthen human capital. Another target is boosting tourism to drive economic growth through various measures, such as the government’s comprehensive reconstruction plan for the High Atlas Mountain region.

Morocco imports about 90 percent of its hydrocarbon energy supply. Its energy mix in 2022 included coal (37.25 percent), hydroelectricity (16.70 percent), fuel oil (7.03 percent), natural gas (17.72 percent), wind (13.48 percent), and solar (7.82 percent). As seen in figure 3, Morocco’s total primary energy consumption consistently has increased by 5 percent annually since 2004.

Energy transition priorities, outlined in the National Climate Plan 2020–2030, include growing a diverse renewable energy sector and the development of new indigenous resources. One of the first Arab countries to adopt renewable energy, Morocco successfully increased total installed capacity from renewable energy sources, which is currently 38.2 percent (4,031 MW) of total installed electrical capacity—the highest among Arab countries. The expansion was motivated by energy security and the reduction of import costs and dependence. It was aided by enhanced legislative and regulatory frameworks governing renewable energy projects by the private sector and various amendments in existing laws on renewable energy, self-production of electrical energy, and electricity sector regulation. The National Agency of Electricity Regulation was established and launched various energy reforms that supported renewables expansion. Morocco’s National Plan for the Development of the Use of Natural Gas aims to completely replace coal-fired plants by 2050. Thanks to these measures, natural gas imports were reduced by 86 percent between 2017 and 2022 (down from 1,150 million to 160 million standard m³). Notable projects include Noor complex, with its Noor Ouarzazate concentrated solar power plants (operating since 2016); the Ain Beni Mathar and the Tarfaya wind farms (operational since 2009 and 2014, respectively); and the Abdelmoumen pumped-storage hydroelectric plant.

The National Office of Electricity and Potable Water targets an installed electrical capacity of 10 gigawatts (GW) from renewable energy by 2030 (4.5 from solar, 4.1 from wind, and 1.3 from hydropower) and to raise renewables’ share in power to 52 percent by 2050. To support these expansions, Morocco is concurrently expanding its power grid infrastructure. Other targets include reducing GHG emissions in other sectors—such as transport, building, industry, agriculture, and energy efficiency—to reduce energy consumption by 15 percent from 2016 levels by 2030.

A notable success in Morocco’s energy and economic diversification is becoming a net exporter of electricity in 2019 (928 GW), compared with 3,374 GWh of imports the previous year. With an electricity system interconnected with Algeria and Spain, it is the only Arab state with a power cable linking it to the European grid. Morocco aims to export additional electricity to Europe.

Green hydrogen is potentially Morocco’s largest energy transition ambition. The Roadmap to Green Hydrogen, published in 2021 under the National Hydrogen Commission, expected demand of up to 30 terawatt hours (TWh) by 2030 and 307 TWh by 2050. A $27.2 billion investment in green hydrogen was announced in the Dakhla-Oued Ed-Dahab region. If the necessary renewable energy infrastructure is available, Morocco could produce 1.2 million tons of green hydrogen annually by 2030 (about 4–5 percent of projected global demand) and 2.7 million tons annually by 2040. The strategy sees output as future exports in the international market of hydrogen, green ammonia, and synthetic fuels, especially to Europe. Also, in the long term, it sees uses in local decarbonization—including green ammonia feedstock for local agriculture, industry, residential heating, and transport. If these targets are realized, Morocco, like Oman, can become a leader in the green hydrogen market.

Environmental Targets in Energy Transition Plans and Nationally Determined Contributions

Key to climate-resilient energy transitions is prioritizing the environment in economic development and energy transition plans and the supporting regulations and policies. Importantly, from an institutional perspective, both Oman and Morocco incorporate the environment and promote low-carbon economic growth in their energy transitions and development plans.

In the original version of the published Visions, Oman was the only GCC state with environment-specific targets. Oman’s Vision’s objectives explicitly state ensuring a “balance between environmental, economic and social requirements, according to sustainable development guidelines.” Its main pillars are people and society; economic development (with environment performance indicators, such as the Environmental Performance and Water indices); government and institutional performance; and sustainable environment. Oman adopted plans for carbon neutrality, such as the Carbon Control Target Plan (rooted in the Vision) and a net-zero National Strategy. In 2018, Oman adopted the National Strategy for Adaptation and Mitigation to Climate Change for 2020–2040, to identify strategic actions to address negative impacts on vulnerable sectors and transition to a low-emissions economy. As part of its climate-resilient development, Oman also adopted the 2020–2040 National Spatial Strategy to anticipate climate change impacts on urban areas and integrate adaptation and mitigation into new developments.

Similarly, Morocco has environment-specific objectives in its 2030 National Strategy of Sustainable Development. The strategy also proposed a national plan to prevent and respond to climate risks, including the promotion of innovative technologies. The subsequent New Development Model also emphasized reducing climate risks and energy costs (through renewables and low-carbon energy) and increasing competitiveness. The National Energy Strategy and Climate Plan and Climate Change Policy outline guidelines for building climate resilience in water constraints, agriculture, fisheries, health, biodiversity, and transport infrastructure. Morocco’s National Adaption Plan 2020–2030 was adopted in 2022 to enhance local adaptive capacity. Similarly, the National Strategy for Natural Disaster Risk Management 2020–2030 was created to promote risk prevention and improve long-term preparedness.

Nationally Determined Contribution (NDC) submissions to the United Nations Framework Convention on Climate Change are another important road map to align decarbonization and energy transitions efforts with environmental sustainability. In these submissions, mandated by the Paris Agreement, parties communicate their objectives for GHG emissions reduction and successively update them. Yet here, as in the case of renewable energy, Oman lags behind Morocco in relative terms, despite its significantly higher emissions and net-zero targets by 2050. In its 2021 Second NDC report, Oman has committed to a 7 percent reduction in GHG emissions by 2030 (compared to the Business-As-Usual—BAU—scenario), reducing approximately 125.25 MTCO₂eq. Meanwhile, in its 2021 Second NDC report, Morocco aims to reduce its GHG emissions by 45.5 percent by 2030 (compared to the BAU scenario), the equivalent of 77.5 MtCO₂eq.

One key environmental concern for Morocco is the large land requirements for its renewables and hydrogen ambitions, a consideration that can affect its agricultural resources and impose on Indigenous peoples’ land. To demonstrate these requirements, a 1 GW plant, set on about 0.17 square kilometers (km²) of land, would need 1,000 GW of electrolysis and occupy an area equivalent to the island of Manhattan in New York City. Morocco already has faced significant opposition and conflicts over energy and tensions regarding extractive industries’ access to land in various renewable energy projects, such as Noor Ouarzazate and in the disputed Western Sahara. The ensuing effects include increasing land grabs, displacement, and additional vulnerabilities for people in already vulnerable situations, especially agricultural workers and Indigenous peoples. These green hydrogen, phosphate, and renewable energy projects along with their export targets to Europe have generated strong opposition to Morocco’s energy transition, citing green colonialism.

It is not surprising that Oman and Morocco are ahead of most other Arab states in efforts pertaining to the environment; environmental attractions drive tourism in both countries. Nevertheless, relative to economic considerations, some environmental targets are vague and require further specificity to protect the environment and ensure climate-resilient energy transitions. Development plans in both countries would benefit from additional, specific targets beyond reducing carbon footprints and pollution. Examples include efficient resource management as well as the protection of water resources. Such targets will be important because the plans for Oman’s economic diversification and Morocco’s economic development aim to expand certain industries—notably energy transition, tourism, and industrial exports—that can have negative impacts on the environment.

Challenges to Achieving Energy Transitions and Emissions Targets

Indeed, both Oman’s and Morocco’s ambitious energy transition projects can contribute to equally ambitious targets for emissions reduction, domestic decarbonization, and energy sustainability. Yet an assessment of current trends points to challenges in each country’s ability to realize its emissions targets.

Significant Water Requirements of Renewable Hydrogen Production

Water is the main natural resource that is potentially at risk in energy transition plans, particularly green hydrogen. Viable green hydrogen production requires production at scale using electrolyzers on large areas of land and ample water. The massive water requirements will exacerbate existing water scarcity in Morocco and more so in Oman.

To demonstrate these water requirements and their impacts, for every kilogram of hydrogen produced, 9 kilograms of water must be consumed, based on the electrolysis reaction stoichiometry. Oman’s planned capacity to produce no less than 1 million metric tons of hydrogen annually by 2030 would require 9 million metric tons of water. And its target to produce no less than 3.25 million metric tons by 2040 would require 29.25 million metric tons of water. Similarly, Morocco’s planned capacity to produce 2.7 million metric tons of green hydrogen per year by 2040 would require 24.3 million metric tons of water.

For hydrocarbon-importing economies, there are additional vulnerabilities in the relatively large agricultural sector, in which water is a key input. Morocco’s renewable energy projects in the agricultural-rich Guelmim-Oued Noun region have depleted its water and impacted its water-rich crops. Similarly, potable water resources have been depleted in cleaning and cooling down solar panels in the Noor Power Station. Future expansions of renewable-based green hydrogen can affect farmers, consumers, agricultural products, poverty levels, and the local biodiversity.

The water intensity of green hydrogen stresses limited water resources, which already are being depleted by rising water demand and climate change. Further constriction of water availability would increase the vulnerabilities of local communities and compound the environmental and financial costs to address them. All of the Arab countries’ green hydrogen ambitions face this risk, but the vulnerabilities are significantly higher in the Gulf states and Jordan, which are more water stressed than countries in North Africa. As such, seawater desalination offers the only potential suitable solution for green hydrogen production in Morocco, Oman, and the MENA region—but this technology is not without its own challenges.

Impacts of Seawater Desalination for Renewable Hydrogen Projects

Indeed, seawater desalination plants will be the most suitable option to achieve scale in green hydrogen projects, especially if multipurpose desalination facilities are deployed. At present, the cost of desalinated water remains relatively low, around $1 per m³. Yet this use can have significant challenges and environmental impacts.

Two challenges are immediately apparent. First, hydrogen plants might compete with domestic water needs that are met by desalination, especially in Oman. Second, water desalination is an energy-intensive process, and because it often relies on fossil fuels, it will generate high emissions unless it is powered by renewable energy (excluding emissions of the construction and maintenance of renewable energy). Saudi Arabia recorded the world’s lowest energy-consuming desalination plant, operating at 2.27 kilowatt hours (kWh). By comparison, wastewater treatment plants require, on average, 0.13–0.79 kWh/m³ of treated water. Even state-of-the-art desalination plants produce more than 1 kilogram of CO₂ for each cubic meter of freshwater produced.

The third challenge is cost: desalination is very expensive and will require massive amounts of renewable electricity in a net-zero world. Even though new technologies have reduced desalinated water costs, seawater desalination plants and infrastructure (of different types) are still expensive to construct and maintain, and the technology is expensive to acquire. In the MENA region, which is home to 43 percent of global desalination processes, desalination expenses were expected to reach $4.3 billion by 2022.

Fourth, and potentially most risky, is that seawater desalination has serious environmental and ecological considerations, especially increased water salinity. The process of disposing of the brine resulting from the desalination process back in the sea or ocean increases the existing salinity level of sea or ocean water. Even state-of-the-art desalination plants result in more than 1 m³ of brine for each cubic meter of freshwater produced. Owing to desalination, the small, almost landlocked Persian Gulf has seen a relatively rapid rise of salinity concentration and is now about 25 percent saltier than typical seawater. Although this level might be sustainable under present brine discharge activity and current salinity level in the present climate, it will not be sustainable in the future with higher desalination plus the evaporation caused by climate change. Thus, the Gulf of Oman, despite its varying salinity, is therefore significantly at risk. Moreover, the resulting brine that is disposed back in the water has toxic levels of concentrated salt and chemical residue, thus seriously harming the ecology and marine and coastal ecosystems where it is disposed. This risk is detrimental for both agricultural sectors and seawater in Oman and Morocco.

Even though Morocco has greater availability of water than Oman, the quality of Morocco’s water also suffers increased salinity from its agricultural dependence. Salinity is one of the greatest concerns over water quality in Morocco, along with increased water pollution resulting from substantial use of fertilizers and pesticides. Increased salinity is a threat to already fragile water resources—whether freshwater or brackish water, as well as the bottom of rivers and oases—owing to overuse of water and overexploitation of some aquifers. This threat is critical given its indirect effects on health, agricultural employment, agricultural products, and food security. That said, the increasing salinity of seawater is not as problematic for Morocco as it is for Oman; Morocco’s access to the Atlantic Ocean ensures larger movements of water and currents, thereby dispersing the brine at faster rates than in Oman.

Finally, and as a consequence of the aforementioned four challenges, reliance on water desalination will require securing appropriate brine-cleaning technology—which, like renewable energy infrastructure, is costly. This task is complicated by the difficulty in estimating the resulting brine component, because the amount of water produced from desalination plants depends on the source (such as fresh or brackish) and the technology employed. Arab states must also incorporate wastewater recycling with desalination for a more sustainable water use.

Mismatch Between Emission Targets and Energy Transition Plans

For energy transitions to be climate-resilient and achieve emission reduction targets, energy transition plans must reflect sources of emissions and the planned NDCs. Renewables and green hydrogen can indeed contribute to both Oman’s and Morocco’s decarbonization efforts. Differences in emissions structures should ideally mirror and drive each country’s emissions reduction strategy. Yet Oman lags behind Morocco in emissions reduction targets by 2030 despite its higher emissions and its net-zero targets by 2050. Also for Oman, as for other Arab hydrocarbon exporters, there is a mismatch between announced energy transition plans and emissions targets, compared with the hydrocarbon importer Morocco.

As evidence of this mismatch, the energy sector (which includes electricity) generates around 64 percent of emissions in Oman (see figure 2), yet the announced efficiency and targets of renewable energy targets (20 percent of total electricity) by 2030 can reduce emissions by only 7.4 percent. This reduction matches the 2030 targeted emissions reduction (7 percent of the 2030 emissions levels). However, it is very minimal, given the country’s emissions and its projected net-zero target date. Oman’s National Strategy for Orderly Transition yields a substantial reduction of approximately 97 MTCO₂e by 2050, yet even the strategy indicates that those projections are insufficient to reach net-zero emissions by 2050, leaving around 10 percent of emissions unaccounted for. Closing the large gaps in emissions reductions requires substantial decarbonization to reduce GHG emissions’ intensity in oil and gas operations, both upstream and downstream, and in other industries. Oman’s commitment to achieve Zero Routine Flaring by 2030 is a step in the right direction. But, according to the abovementioned strategy, one of the country’s emissions reduction pathways is using carbon capture for enhanced oil recovery: the marginal (per unit of output) emission would decrease, but the total would increase. As green hydrogen is intended to meet only 5–10 percent of Oman’s domestic decarbonization needs, a large part of the sultanate’s industrial decarbonization, especially in the hard-to-abate sectors, cannot be realized without producing and using green inputs or CCS/CCUS technology, both of which have financial and technological constraints.

Morocco’s mismatch between targets and transition plans is much smaller, predominantly because its emissions are significantly lower than those of Oman and because it has a well-established renewables sector. Reaching emissions targets would require expanding the percentage of renewables’ share in electricity to 52 percent by 2030 (20 percent solar, 20 percent wind, and 12 percent hydropower). This goal is possible based on historic trends and current investment plans. Yet a lack of access to finance and land could prove to be a hindrance. Beyond renewables, Morocco’s planned addition of 3,900 MW of natural gas generation capacity can help reduce emissions if it replaces coal, which produces significantly higher emissions than gas. Morocco’s plans also include emissions-reducing measures—in forestry, land use, waste, and agriculture—using green ammonia. Given its high production cost, the use of green ammonia, however, could drive up the prices of agricultural goods. Without costly subsidies or local low-cost green fertilizers, local farmers and farming communities as well as poor consumers could be harmed as a result. The ensuing negative impacts are substantial and could exacerbate existing poverty: in 2021, an estimated 6.4 percent (2.38 million) of Morocco’s population was multidimensionally poor, and an additional 10.9 percent (4.03 million) was vulnerable to multidimensional poverty. These trade-offs suggest that decarbonizing the agricultural industry would come at the cost of a just transition and socioeconomic development.

To mitigate this issue, decarbonizing agriculture should focus on local and low-cost technologies, while more expensive decarbonization methods should support larger transportation infrastructure (despite lower emissions than agriculture) to drive a larger-scale reduction in emissions along with socioeconomic benefits.

Limited Renewables

Achieving green hydrogen export and local decarbonization targets requires sufficient renewable energy infrastructure. Beyond water scarcity, this issue is the main challenge for Oman and other MENA hydrocarbon exporters, given the slow expansion of renewable energy infrastructure (see table 2 below) coupled with a simultaneous rise in electricity demand (among the highest globally). In contrast, hydrocarbon importers like Morocco have readily available renewable energy resources.

Oman will require approximately 50 TWh of renewable electricity to achieve its 2030 green hydrogen targets—an amount that exceeds its entire electricity system and current infrastructure. Similarly, for Morocco to meet its 2040 green hydrogen export targets, it would need to expand its capacity eightfold to 78.7 GW by 2040 through new additional capacity of solar photovoltaics (26 GW), wind (10 GW) and concentrated solar power (10 GW) by 2040, along with 36–38 GW of electrolyser capacity. Its Green Hydrogen Roadmap would require 2 GW in renewable energy sources. Additional capacity will be needed for electricity exports. Thus, both Oman and Morocco will require substantial additional renewable energy infrastructure simply to be ready to produce green hydrogen.

Green hydrogen production can provide momentum and incentives to expedite renewable electricity infrastructure. Oman has impressive existing infrastructure to support green hydrogen exports, but its renewable energy challenge is steeper than Morocco’s. Oman is significantly behind its target for local consumption: 0.4 percent of total production compared with a 30 percent target in 2030. There is a risk as to whether construction of hydrogen-supporting renewable energy for exports will be prioritized over local needs.

Securing the required renewable infrastructure requires access to funding (currently insufficient in both countries), access to land, and infrastructure development. Moreover, both countries—but Oman in particular—will need to determine the renewable energy and hydrogen share required to decarbonize certain domestic industries and increase renewable energy targets to a level that meets both rising local electricity demand and green hydrogen export demand, while reducing conventional hydrocarbon consumption in industries.

Technology-Dependent Targets With Consistent Low Research and Development on Low-Carbon Energy

Achieving the planned shift toward a low-carbon economy at an economically viable scale necessitates access to and adoption of clean technologies. Green hydrogen specifically is currently not economically viable. Green hydrogen prices need to drop from current levels of $5 to $12 per kilogram of hydrogen (kg H₂) to $1.5 to $2/kg H₂ to compete with “dirty” hydrogen (absent carbon taxes). In fact, one of the pillars in Morocco’s hydrogen plans by 2050 is the reduction of production costs for hydrogen and hydrogen-based fuels. In Oman and Morocco, renewable energy costs are among the lowest globally, so reductions in costs of green hydrogen production will be driven mostly by electrolyzers’ technology and efficiency. To mitigate the aforementioned negative impacts of desalination, Oman and Morocco will need access to technologies that can produce hydrogen from splitting seawater, currently a nascent technology.

For other energy transition targets, Oman and Morocco will require decarbonization solutions and technologies that include lower-cost desalination, brine-cleaning technology, batteries, energy efficiency, and negative emissions solutions. Strategic integration of low-carbon and carbon removal technologies is especially fundamental for hydrocarbon exporters. Oman’s net-zero strategy explicitly emphasizes the need for advancing research and development in these sectors, which must go beyond the enhanced oil recovery in which it led the region for decades.

However, a key challenge across the Arab world is low levels of investment in carbon removal and clean energy technologies. Research and development spending as a share of GDP in 2021 was equally negligible in Oman (0.3 percent) and Morocco (0.71 percent). These shares were lower than the 3–4 percent average in advanced economies with per capita income levels comparable to GCC states, and they were also lower than other hydrocarbon exporters such as Australia (1.8 percent), Norway (2.3 percent), and the United States (3.45 percent). Therefore, the required technologies must be delivered from external investors or corporations.

Both Morocco and Oman have improved the overall investment climate to attract partners in hydrogen projects, a point that will help in technology acquisition. Oman seeks to invest in carbon reduction and other technologies. A key source for Morocco will be to leverage climate finance and Article 6 of the Paris Agreement to facilitate carbon mitigation technology transfer and deliver sustainable development co-benefits. Nevertheless, even if technology transfer is ensured, the required technology (especially in batteries and carbon capture technology) is currently not viable at scale or affordable in current market conditions. For Oman, as for other hydrocarbon exporters, meeting decarbonization targets requires the adoption and deployment of viable carbon-removal technologies at rates significantly higher than those of current markets.

Finance and Regulation Gaps

Gaps in financing and in industrial and decarbonization regulations are likely to challenge Oman’s and Morocco’s ambitious energy transition targets. Oman’s NDC submission proposes to fill these gaps through access to finance and technology, capacity building (also included in Morocco’s submission), and institutional strengthening.

Infrastructure, technology, and decarbonization efforts all require massive amounts of funding. To demonstrate, Oman’s hydrogen targets require additional investments of approximately $230 billion, mostly from the private sector and foreign direct investments. Morocco’s renewable energy and gas targets by 2027 will require investments of $9 billion to $13 billion and more than $104 billion for its hydrogen plans. The use of local funds for energy transitions will be limited and can divert funds from other urgent development priorities. Thus, both countries will find it critical to secure external funding. In fact, Morocco’s NDC makes its emissions reduction targets conditional on access to finance and support from the international community. External funding sources will vary, ranging from foreign investments to climate finance to the private sectors, into which both countries have tried to tap. For example, Oman sought to improve its investment climate, and Morocco requested a Resilience and Sustainability Facility from the International Monetary Fund in 2023 to “address climate vulnerabilities, bolster its resilience against climate change, and seize the opportunities from decarbonization.”

The private sector is expected to play an important role in energy transitions, especially in technologies in Oman and in renewables in Morocco. Yet the oligopolistic nature of the private sector, most notably in the case of Oman, reduces competition, economic efficiency, and resilience. Institutional strengthening, private sector and microeconomic reform, and competition regulation will thus be key to increasing economic resilience and productive capacity. Finally, despite both countries’ impressive reforms in renewable electricity and orderly transitions, significant regulatory gaps exist pertaining to decarbonization, as discussed below.

Policy Insights for Climate-Resilient and Just Energy Transitions

Based on the cases of Oman and Morocco, this study has four key takeaways. First, even in the more environmentally friendly Arab countries, the environment remains a secondary thought after economic considerations in energy transition plans—which at their heart are climate change mitigation solutions. Second, both Oman and Morocco offer important examples of institutional frameworks that incorporate the environment in energy and development plans and, thus, have capacity to advance climate-resilient energy transitions. Third, the main challenge facing Arab states’ ability to achieve climate-resilient and just energy transition pathways is bridging large gaps and minimizing trade-offs among environmental sustainability, socioeconomic development, and energy transitions. Finally, bridging these gaps requires integrative policy and comprehensive, actionable reforms with deliberate long-term policy solutions and access to technology and finance.

The economic opportunities of energy transitions, which have motivated Arab states, are important for these states’ economic sustainability. Green economic development and hydrogen opportunities can advance economic diversification, boost non-oil revenue, and create new export revenue sources. Nevertheless, energy transitions have large socioeconomic and environmental trade-offs. Funding them can reduce the available funding for competing, urgent development priorities, especially in the more constrained fiscal spaces of hydrocarbon importers and poorer hydrocarbon exporters. Targeted energy transitions are also water intensive and threaten further depletion of water resources that are already stressed due to climate change, overexploitation, pollution, evaporation, and increased salinity. Other potential negative (environmental and other) impacts of targeted energy transitions exacerbate climate vulnerabilities through fiscal, economic, social development, and inflationary pressures. As such, energy transitions will have direct negative impacts on people in vulnerable situations, especially the poor, women, Indigenous peoples, the youth, the elderly, and workers in impacted industries (especially agriculture and hydrocarbons).

Energy transition pathways also offer environmental opportunities for Arab states. These opportunities go beyond industrial decarbonization and effective emissions reduction, both of which must be leveraged to foster environmental sustainability. Oman and Morocco are both well-positioned to realize these opportunities as the environment features in their development and energy transition plans, and they have promising legislative and regulatory frameworks governing energy projects. But energy transitions, especially green hydrogen plans, can both enable and hinder the achievement of climate-resilience and just energy transitions. The challenges of green hydrogen production are not insurmountable, yet overcoming them is a very steep challenge.

Although these challenges are common for all Arab states with hydrogen aspirations, hydrocarbon exporters have more financial ease but otherwise steeper challenges and, therefore, are at risk to lag behind hydrocarbon importers. This risk results from their intended ongoing dependence on and use of hydrocarbons in their energy mix and pro-export energy transitions, which depend predominantly on carbon removal technology as their main decarbonization pathway. Even in Oman, where the main energy transition pathways are renewables and green hydrogen, carbon removal is key for industrial decarbonization.

Further policy measures will be essential to achieving a just energy transition that is also climate resilient. Based on the analysis of Oman’s and Morocco’s energy transitions, the following are key policy insights applicable to both countries and to Arab states at large.

First, positioning the environment and climate resilience in both development and energy transitions is an imperative. Doing so requires establishing specific sectoral action plans and targets. Those targets must be designed in a way that would significantly enhance a sustainable approach to energy transitions (and other mitigation policies) and enhance adaptation and resilience to maximizing economic and energy sustainability and socioeconomic development.

Second, renewable energy for domestic energy and decarbonization needs must be prioritized over export-oriented green hydrogen production. To that end, a valid first policy option is to dedicate existing renewable energy targets or projects to meet local power demand and to use any incremental renewable power generation to decarbonize the grid. Separate hydrogen-related renewable targets can be set and met subsequently or in parallel.

Third, Arab states need to strengthen resource governance as well as limited or weak climate, decarbonization, and competition regulatory frameworks. They need to fill regulatory gaps and inadequacies, especially pertaining to emissions classifications and carbon removal, capture, storage, and transportation. Filling these gaps is especially critical for hydrocarbon exporters where hydrocarbon industries and CCS/CCUS will play a larger role than in hydrocarbon importers. Microeconomic and competition regulation will also be necessary.

Fourth, given the massive water requirements of energy transition plans, Oman and Morocco (like the rest of the Arab states) must adopt significantly high rates of wastewater recycling, better water retention technology, and climate-smart technologies for agriculture. These efforts must involve more than merely desalination if these countries are to ensure water sustainability and a just energy transition.

Fifth, poverty-reducing measures are required, especially for farmers and low-income households that will be impacted by reduced water or higher agricultural and other products.

Sixth, governments must undertake climate risk and impact assessments in the energy sector to quantify the financial, environmental, and socioeconomic impacts of the transition. These assessments must be accompanied by regionwide cooperative frameworks, enhanced social dialogues, and the inclusive participation of locals. The measures derived from these assessments can drive evidence-based policies and solutions to manage the trade-offs between economic and energy targets.

Finally, access to finance must be a priority for achieving a climate-resilient and just energy transition, for which many Arab states will require external funding and climate finance. Sources can include grants, concessional financing, and (as in the case of technology transfer) foreign investors. Arab states can also leverage existing efforts and avenues for climate finance, such as the Arab Initiative for Mobilizing Climate Finance for Water. Further, a just transition in Arab states is not possible without access to climate finance, especially in middle-income hydrocarbon importers. Not only do those states have low historical and actual emissions, but also they are largely harmed by climate change and have the ambitions for and potential to meet global demands of green energy. Climate finance will therefore contribute not only to adaptation and mitigation but also to ensuring that those countries do not bear the brunt of energy transitions. Failure to address these challenges will hinder efforts to secure climate-resilient, just, and equitable energy transitions. Such failure will accelerate existing political, economic, and environmental challenges and will perpetuate the ongoing existential threat that short-sighted energy policies pose to the MENA region as a whole.

In this series on climate change, vulnerability, and governance, Carnegie scholars and contributors analyze how climate change impacts socioeconomically vulnerable populations and infrastructures and shapes governance systems and capacities in the MENA region.

For more in the series, see:

• Assessing Climate Adaptation Plans in the Middle East and North Africa
• The Looming Climate and Water Crisis in the Middle East and North Africa
• On the Margins: Civil Society Activism and Climate Change in Egypt
• Vulnerability and Governance in the Context of Climate Change in Jordan
• Assessing Climate Vulnerabilities in Amman City
• Climate Vulnerability in Libya: Building Resilience Through Local Empowerment
• What Tunisia’s Municipalities Can Contribute to Climate Adaptation
• Climate Change in the Middle East and North Africa: Mitigating Vulnerabilities and Designing Effective Policies

Acknowledgments

The author thanks Ritheka Sundar for research assistance.