North Africa’s Energy Transition: A Key Asset in the War?



Amine Bennis | Italian Institute for International Political Science

With a target of reducing greenhouse gas emissions by at least 55% by 2030 and becoming climate neutral by 2050, the European Green Deal sets out the response chosen by the EU and its Member States to tackle climate and environmental challenges. The Green Deal is formulated as a growth strategy to help boost the competitiveness of European economies by decreasing carbon emissions and decoupling economic growth from resource use. The strategy further seeks to strengthen the EU’s global leadership by establishing environment, energy, and climate partnerships with its partners and neighbours. However, such an agenda fundamentally requires multilateral efforts. This was recognized by the European Commission which highlighted from the beginning the need to leverage on the EU’s influence, expertise, and financial resources under a “green deal diplomacy” as a way of mobilizing neighbours and partners in this shared endeavour. While the US and China are generally regarded as the world’s largest emitters of CO₂, North African countries in the Southern Neighbourhood must not be overlooked as they are also natural partner candidates given their geographical proximity and strong ties with the EU. These states have engaged, at different levels, in the green energy transition, implementing investments and devising policies in renewable energy and energy efficiency. Morocco, Egypt, and Tunisia made clear commitments to decarbonise their economies, while Algeria and Libya are far behind.

By further disrupting supply chains (already affected by the covid-19 pandemic) and food supply, and leading to a sharp increase in oil and gas prices and other commodities, the war in Ukraine could potentially slow down the pace and impact in the short-term the ambitions of the green transition agenda of North African countries. Increased public spending meant to offset social tensions caused by rising prices could put further fiscal strains on indebted countries such as Tunisia or divert budgets initially allocated to promote the green energy transition. The geopolitical impact of the war on Russian gas supply creates a tension between additional gas requests from Europeans to fill in the gap, consequent incentives for fresh gas projects in North Africa, and the target of reducing dependence from such source through additional renewable energy capacity (despite gas being proposed as part of the EU taxonomy).  

European Neighbourhood Policy, EU Global Strategy and the Strategic Compass

Traditionally, the EU Neighbourhood Policy defines European strategic interests as aiming to achieve three joint priorities: economic development for stabilisation, security, migration, and mobility. From a geopolitical perspective, both the EU Global Strategy and the recently adopted Strategic Compass – set to work as a toolkit for EU’s security and defence policy – refer to climate change, dependence on fossil fuels (including on Russia’s energy imports), and the supply of new energy sources, as a source of challenges and instability. Thus, if the EU and its Member States take a geopolitical stance towards North African countries engaged in the green energy transition of the region, including Morocco which is heading towards reaching its 42% electricity target capacity from renewable energies by 2023, the logic of their partnership would support a strengthening of EU’s external relations towards such strategic partners. To that effect, it is worth noting the latest positive developments with Spain joining Germany in a strategic move to endorse the Moroccan proposal for an autonomy status of the Western Sahara under Moroccan sovereignty as “serious, credible and realistic”. This could translate into further partnerships, investments and cooperation in the green energy transition. On the other hand, Spain and Germany will increase their imports of liquefied natural gas from the US to reduce dependence from Russian gas, rather than from Algeria – third largest gas supplier to the EU as of the first semester of 2021 – whereas Italy is seeking additional supply through the Trans-Mediterranean pipeline (Algeria-Tunisia-Italy). This takes place in a context of closure of the Maghreb-Europe Gas pipeline (Algeria-Morocco-Spain) and difficulties to supply additional quantities of Algerian gas to Spain through the MedGaz pipeline (Algeria-Spain). It could lead Algeria to further disregard progress on its already slow green energy transition, bearing in mind cooperation with the EU on that front is limited so far. Egypt could also ramp up its gas supplies to Europe, whilst pursuing its green energy transition agenda, which could strengthen its influence in the Eastern Mediterranean.

EU financing for North Africa’s green transition

In June 2021, the EU adopted the new regulation Global Europe Instrument aimed at funding international cooperation including the Southern Neighbourhood. With an initial budget of €79.46 billion for the 2021-2027 period, of which 30% is for supporting climate objectives, it provides financing through grants, technical assistance, financial instruments, and budgetary guarantees. More specifically, it aims to stimulate investments as a means of contributing to sustainable and inclusive growth, the fight against climate change, and addressing the root causes of irregular migration and forced displacement. The Global Europe Instrument is now the main EU financing platform to promote the green transition worldwide, including in North Africa.

In addition, in February 2021, the European Commission proposed a Renewed partnership with Southern Neighbourhood – A new Agenda for the Mediterranean, with an updated regional policy agenda to focus on sustainable long-term socio-economic recovery and job creation. As part of such an agenda, the Commission proposed an Economic and Investment Plan for the Southern Neighbours listing a series of flagship investments and projects that could be financed under the Global Europe Instrument to further contribute to sustainable and inclusive growth. Flagship 9 contemplates the deployment of innovative financing instruments including green bonds; Flagship 10 aims to promote energy transition by pushing for the green economy in Egypt, supporting Morocco in achieving its renewable energy and energy efficiency targets and accelerating the energy transition in Algeria. Hence, the EU and its member states are the largest donors of development aid in the world and the biggest contributors of climate financing with France, Germany, Italy and Spain driving the forces in North Africa. In the context of the private sector, leading investors include the Danish Vestas, French Engie and EDF Renewables, German Siemens-Gamesa, Italian Enel Green Power, Spanish Abengoa, and Acciona.

However, with “only” €19.32 billion dedicated to the whole Neighbourhood under the Global Europe Instrument, this budget remains limited in terms of financing the implementation of the 2030 National Determined Contributions of North African countries. The monetary needs of specific North African countries range at USD 40 billion for Morocco, USD 73.04 billion for Egypt, and USD 19.4 billion for Tunisia. Similarly, the new joint initiative ‘Global Gateway’ from the European Commission and the EU High Representative for Foreign Affairs and Security Policy, which similarly resembles a tentative response to China’s Belt and Road Initiative, does not appear to have mobilized new money for green investments, but will rather benefit from the funding of the Global Europe Instrument (and other existing initiatives). However, the planned creation of a European export credit facility (as part of the Global Gateway), although targeted to address distortion of competition, could also be a tool useful in mitigating the risks of emerging markets and may therefore attract additional renewable energies investments in North Africa.

The use of the EU Projects of Common Interest is another source of funding for green energy connectivity infrastructure across the Mediterranean. Within this framework, eligible projects can apply for grant funding under the Connecting Europe Facility. Thus far, only the Elmed 600 MW project of an electricity interconnection between Tunisia and Sicily has attracted interest. A recent initiative to promote renewable electricity trade between Morocco and the European Internal Energy Market deserves greater attention as it shows to be promising. The connection of the Ukrainian electricity network to the European grid could generate further momentum for cross-Mediterranean interconnection projects as a stability instrument to mitigate fragile contexts in the Southern Neighbourhood, such as faulty power plants or electrical load shedding. To date, the most notable achievements in renewable energies in North Africa benefitting from European funding include: an Egyptian 240 MW wind farm in the western coast of the Gulf of Suez, the first photovoltaic plant connected to the national electricity grid at Kom Ombo in Aswan, Morocco’s solar projects with the completed 580 MW Noor Ouarzazate complex and the ongoing 1,600 MW Noor Midelt initiative. 

Developing a North African green hydrogen industry to help decarbonise the EU

The EU’s goal of climate neutrality by 2050 is challenging, especially since several member states will struggle to produce all renewable energy needed to achieve such a target. As such, they may need to rely on partners and allies. In July 2020, the EU adopted a new strategy for energy system integration and a new strategy for hydrogen to promote the use of green hydrogen in its Member States. This policy focuses on hydrogen as a potential carbon free replacement for fossil fuels as it is produced by electrolysis coupled with renewable energy. Imports of green hydrogen from North Africa over long distances using gas pipelines or ships could support the EU decarbonisation. Additionally, promoting green hydrogen could serve to develop local and regional green hydrogen industries as well as create new industrial products such as green fertilisers, cement and steel which are three significant outputs of North African economies. Such projects will require partnerships between European and North African countries engaged in hydrogen strategies (like cooperation between Morocco and Germany on green hydrogen, which resumed after a year strain on relations), with pioneers such as Morocco which devised a strategy and a cluster to promote the emergence of a hydrogen industry, and Egypt which signed several partnerships with Siemens and Scatec to commission pilot projects.

Amine Bennis is an international legal counsel at the Italian Institute for International Political Science.

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