Climate change environmental sustainability and Moroccan green transition

Hello and welcome to new episode of the interviews dedicated to the launch of the Moroccan of the Oxford handbook, sorry, of the Moroccan economy. Today we will discuss new chapter entitled climate change, environmental sustainability and Moroccan green transition. And to dive into this topic, I'm very glad and delighted to welcome the two co-authors of the two chapters, principal economist and Sabrin, senior economist. Both of them at the policy center for the new south. So thanks for accepting our invitation. Thank you. Thank you very will start with REI. First of all, we know that Morocco has become regional leader in renewable energy. We have developed longstanding experience in the energy transition. But still some facts on the ground say that this is long journey as for for instance the fossil fuels still dominates the energy mix here in Morocco. So why is that and how do you evaluate this this this stance? Absolutely. and think first it's important to acknowledge the progress made so far. So Morocco has built very ambitious renewable energy plan and over the past 15 years it has developed flagship project like Norazataya. it has established very complex institutional framework to develop those renewable energy and started attracting private investment and think we can dive more into that in few minutes and today renewable energy accounts for about 45% of installed capacity in Morocco. however progress in terms of installed capacity is not the same thing as full system transformation. As you mentioned, the big challenge for Morocco is that its energy model was historically built on imported fossil fuels. and today, energy you know, total energy consumption is still dominated by oil product which translates broader dependence on fossil energy across the whole economy and particularly some hard to abate sectors. at the same time, coal still plays an important role in electricity generation because it provides stable, reliable and dispatchable source of energy. Whereas renewable energy requires additional and complimentary investments particularly in terms of storage grid flexibility and transmission infrastructure. Also, there is an energy security dimension that is often overlooked. as mentioned before Morocco imports more than 90% of its energy needs and in such context policy makers need to pursue you know three objectives simultaneously which are decarbonization affordability and security of supply. and as you hinted in your question this shows that the energy transition is not an you know an im immediate transformation is long process and for certain amount of time there will be the coexistence of fossil fuels and renewable energy and also some international events like international energy disruption in global energy markets also highlights the importance of having some backup and reliable capacity in terms of generation while at the same time developing renewable energy which are very abundant in Morocco particularly in terms of solar and wind. so all in all would say that the energy transition in Morocco is not only an environmental model but it's also an economic resilience and strategic autonomy you know model as well. and the real test is to see whether renewable energy could displace fossil fuels in actual generation and in some hard to abate sectors which will require additional investments. As we mentioned at the beginning on the sector discussion subrene we know that Morocco has been or is located in region that highly affected by climate change such as water stress. So there are some sectors that are affected directly by that. There are other sectors that let's say contribute to the contribute to this stance by emitting some some some some gases. so how do you see and how do you assess this this this paranorm panorama sorry across the Moroccan economy? Thank you very much for the question abis. So indeed the relationship between the economy in Morocco and the emissions is relationship of both vulnerability and responsibility. So if we'd like to speak about the first component which is vulnerability, there are sectors that were more severely affected compared to other ones. that can that is mainly related for instance to the deficit in rainfall. Between 2018 and 2023 there have been 35% deficit in rainfall which is classified as extreme deficit. For instance, also heat waves have been more important compared to years before in the past two decades which shows that we are extremely at at an extreme hot spot when it comes to the impact of climate change. The first sector impacted in my opinion is the agricultural sector and this is what we explore in our chapter. Why? It is because water resources are being less available than before. And if we take the direct impact of that on the human side, we can take for instance the wheat production which has been around 8 million in 2018. It dropped to around 6 million in 2022 and only mere of 3.4 millions in 2023. It's because agricultures decide to leave their fields due to the lack of water resources. And this translates to the second sector which is the water sector. and it is through water erosion. roughly around 60% of Morocco's GDP is correlated to the water resources and it is through sectors such as the agricultural one but also through port infrastructures as well which means that the shores of Morocco lose around 12 to 14 cm every year and it keeps going on through different regions in Morocco. And the third component that directly affects the human impacts of climate change on health is on the health of citizens. So in the Moroccan constitution in 2011 the there is an article that states that every Moroccan citizens had right to healthy environment to live in. However, impacts of climate change are unequally distributed through the population which means that aging population and is directly affected more severely by the impacts of climate change. And there are projections of average 11 years going from 72 to 80 by the year 2030 which means that this category of the population will still be severely affected. There is also the rise of health issues that are related to climate change such as the resurgence of malaria that is directly correlated to climate change and also heat waves that are even more extreme as we witness now as we are speaking in Europe for instance that could be still even more severe from Morocco in the upcoming years because of climate change. Now for the sectors that are responsible, they're not directly the ones that are affected because electricity accounts for around 40% of the emissions and it's because of the high high the rising demand in electricity consumption and it's because also of people moving to cities the in Morocco which means the demand is concentrated even more in Moroccan cities. second we have the transportation sector and this is directly linked to the what mentioned just before and it is one of the most stubborn sectors to decarbonize or what we call the hard to abate sectors. This is due as mentioned to higher transportation demand in cities but also to higher ownership levels of private vehicles and to less efficient model of public transportation that would help us reduce the emissions in this hard to obey sector. We have seen some very contrasted elements when it comes to the agricultural sector because we have seen drop in emissions when it comes to agriculture. But this is not due to more efficiency in energy consumption in this sector. It's linked actually to water stress in the agricultural sector which means that the concentration of the emissions just moved from the agricultural sector to rather water dalination that is used for agricultural needs. which means at the end that decarbonizing the economy is going to be the challenge of the future because we need to tackle the hard to abate sectors as mentioned but also to make sure that when we decarbonize one sector it is not at the expense of another hidden element that goes into the same one. So so you mentioning the the climate change vulnerability that Morocco is suffering from. So how Morocco is coping with this with this with this challenge and and and what are the concrete initiatives that are driving Morocco for instance renewable energy deployment. So there are blocks of answers to to this question. So the first layer or the first block is the national energy strategy that was defined in 2009 then that was reviewed again by 2016 and 2020 and the the foundation of of this strategy is really trying to have clear view of what are the demand outlooks for the future. to make sure that there is diversification in the energy mix to make sure that electricity is well distributed across sectors and there are foundations that really are there to make sure that this strategy does not leave leave any aspect behind. Second, there is the laws that enable us to have some changes when it comes to the strategy and to have implementation of this strategy. The most important one is the law 1309 that we look at in our chapter and it's the one that opened the contribution of private actors into the production of renewable electricity in segment that was initially owned and controlled only by the states. Second, there is also the law 8 8612 and this one is very important because it also opens the way for public and private partnerships when it comes to renewable energy projects and it's allowed us to have 1.2 two billion euros of financing when it came to the normals project as well and then there is the institutional panorama of actors that are the pillars of this sector. So we have mazen which is the Moroccan renewable energy agency which was before created only for solar projects then it was by 2020 extended to all areas of renewable energy and to quite recently also including green hydrogen as well. We have also lity and at it name states it is there to regulate tariffs and to make sure that everything in the market of electricity is controlled and it also was extended to include natural gas and also all the value change of sources of energy. And finally we have the most important actor which is Lun and which is the the national utility for water and electricity which has dual role of both being the the important market actor but also the one that it that that's regulates and that distributes electricity. So we have different also examples of how renewable energy projects are deployed whether through the Tarfaya wind project that was mentioned by whether it is by the solar complexes in what is that in medas as well and also the green hydrogen strategy that comes here to complete the outlook with 1 million hectares that are allocated for for project owners from different countries that would like to collaborate with Morocco for green hydrogen. think that the panorama today is full of different strategies that complements the the the focal one that has the objective that is very commonly stated of 52% of renewable energy and the from from capacity of 52% that goes into the electricity from renewable energy sources and it goes through 20% of wind 20% of solar 12% of hydropower and this is what the future will be looking like it's panorama of laws that are implemented of actors that have very focal role to play and it's very important to make sure that going forward that each actor has their role that are clearly stated and that the laws enable them to make to play their role effectively. So Sabrin you are saying that the vision is is is clear and the road map is full designed to this energy transition but seems to be that there are challenges in terms of the implementation and here went to pick rein's mind on this. So what are the different bottlenecks that you see that you have addressed in your on your chapter? Absolutely and as Sabrin mentioned Morocco does not lack you know strategies. is it has over the past two decades it has adopted rather comprehensive policy framework centered as was mentioned around the national energy strategy renewable energy legislations climate plans and long-term targets. However, the main challenge lies in translating those ambitions into operational outcomes. So the main bottleneck is about regulatory complexity and implementation gaps. So many laws were adopted to liberalize renewable energy production and expand self-generation. However, their full implementation was delayed because of missing secondary regulation and this creates uncertainty for private investors and limit the access to the market. The second bottleneck is about institutional coordination. So as was mentioned, Morocco has developed rather sophisticated ecosystem centered around the ministry maz and other entities. and while these institutions play very important role, their priorities are not always aligned. also there are many coordination challenges that arise among them and slow progress in sector that is undergoing rapid technological and regulatory transformation. And this delays risk delay in decision making. And the third challenge is about market structure. So Morocco has made good progress to open the electricity market but but the electricity sector is still only partially liberalized and grid access is still complex and tariffs are not always cost reflective which weakens competition and limits the participation of the private sector. but as you mentioned you know Morocco does not start from scratch and these challenges are not only you know you know exist in Morocco alone but you can find them also in other developing countries and we have to keep that in mind and this go back to my answer at the beginning that we need to you know pursue three objectives at the same time affordability energy transition meaning decarbonization but also energy security and Morocco has you know the division the institutions exist and it has demonstrated that it has the capability of developing flagship large scale projects. Now the next step is to ensure you know the execution of this institutional framework that it works well and that the regulatory reforms are carried out in the ground. So execution would say is the key word in in in your response. So in meanwhile there is global context that is pushing for energy transition and Morocco has to navigate because it presents some opportunities it presents also some some challenges. So how do you see how do you position Morocco within this global context? How do you think that in terms of the global regulation, the commitments that Morocco has taken the last couple of of years also in terms of our partnerships with our partners, economic partners? How do you see Morocco could navigate all this and at the same time make sure that it it fully benefits from the opportunities of of of this ambition all the ambitious strategies that we are implementing. think will start and think the first layer to this answer is really answering sub question which is energy transition at what cost and this is where energy efficiency is very important question that we need to address in the upcoming years which means that we need to reduce the intermittency of renewable energy sources to make sure that they are more reliable but also to make sure that energy transition is not looked at in silos and also transfers into other sectors and other blocks such as for instance into transport transportation sector as mentioned it can also transfer to housing more efficient housing that includes the norms of an energy transition. The second layer think is more towards how we are working with our external partners whether including the green components from the beginning till the ending of exporting or producing the end products or the end source of energy and this is something that is more even more striking in the world that we are today. We are at the tomorrow maybe of the hormone trade crisis which means that our relationship with our partners whether it is with renewable energy sources or with conventional energy sources has to be looked at with very critical eye and this is where having clear idea of what the future of consumption of energy will be looking like and the future of supply of energy will be looking like is very important in order to avoid any mismatch in the future. finally would say one of the most important blocks as well is the block of financing this energy transition and this is clearly related also to the components of climate change as we are looking at increasing our means of adaptation to climate change because mitigation is an answer that has to come very fast. It is short-term answer but adaptation is what you do even before and this is where Morocco and other countries from the region lack the the necessary financing. So in nutshell would say really strategic planning for the energy needs also rationalizing the relationship with external partners when it comes to energy and finally mobilizing the necessary finance for this energy challenges ahead. Yeah, would like to to to pick up on what Sabin has said and and focus on challenge that think deserves particular attention which is the the carbon border adjustment mechanism or CBAM if we are talking about Morocco in in its global context and simply put the CBAM is EU's way to impose to impose carbon price on imported goods. So the idea is relatively straightforward. European companies already pay carbon you know price on their emissions through the the European emission trading system. And now the EU's intend to you know make sure and ensure that you know imported goods are also facing the same environmental standards in order to avoid what we call carbon leakage. And so far the SE bump is restricted to limited group of of of project of products including iron and steel, aluminium, cement, you know, hydrogen and and and electricity and is extend intended to be extended in the future and it has entered full implementation since January 2026. So since then importance into the EU must report on the carbon that is embedded in their products and eventually pay price if their emission exceeds certain amount. So this is very important for Morocco because the EU is Morocco's main trading partner. And if we look at the seabbank covered good we we we realize that Morocco exports about only 4% of these goods to the to the EU which seems relatively small and hints to limited you know impact in the short term. However, the full significance of the CBAM extends this small number because what CBAM teaches us is that in the future competitiveness and and carbon is becoming competitiveness factor and in the future companies will look not only on on you know price or quality of their products but also on the carbon content of their products and for Morocco this creates both challenge and an opportunity. So it's challenge because its industry is still you know carbon intensive and it may you know generate some costs for Morocco and make them you know lose some competitiveness ground in EU markets. But the opportunity is that Morocco has invested lot in renewable energy and has embarked since 2009 on an energy transition which could you know gives it leverage you know if we can if we succeed you know in decarbonizing these hard to abate sectors like you know industry. It could give it give it this competitiveness edge and transform trade constraints into an opportunity but only if we address the challenges that we have discussed so far. Thank you so much Sabrina for this insightful presentation. Thanks dear audience. So for those interested into deep diving into this topic, do recommend that you read the chapter which is available on our website. So thank you lot and see you in new interview addressing new topic.