The political economy of Middle East and North Africa oil exporters in times of global decarbonisation. Bruegel Working Paper 05/2017

Tagliapietra, Simone (2017) The political economy of Middle East and North Africa oil exporters in times of global decarbonisation. Bruegel Working Paper 05/2017. [Working Paper]

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Abstract

Endowed with half of the world’s known oil and gas reserves, the Middle East and North Africa (MENA) region is a cornerstone of the global energy architecture. This architecture is currently undergoing a structural transformation, prompted by two different forces: decarbonisation policies and low-carbon technology advancements. The energy literature offers no comprehensive analysis of the potential impact of the global energy transformation on the MENA region. This paper seeks to fill this gap by investigating the following research question: are MENA oil exporting countries equipped to prosper in times of global decarbonisation? Making use of the Rentier State Theory and of a business-as-usual projection of the exploitation of oil resources in MENA countries, we highlight on the lack of incentives for MENA oil exporters to pursue paths of economic diversification. On the basis of a scenario-based analysis, we illustrate that, should the Paris Agreement on climate change be implemented, MENA oil exporters would see their oil rents decline over the next few decades. MENA oil-exporting countries are still not adequately equipped to prosper in a decarbonising world.Therefore, decarbonisation should represent an incentive for MENA oil exporters to pursue structural processes of transition from rentier to production states.

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