The lure of oil rents and the lack of innovation: Barriers to the roll-out of renewable energy in oil-rich MENA countries

Abstract

This study contributes to a thorough understanding of the interactions between oil rents, innovation and renewable energy generation in 8 oil-rich MENA countries over the period 1996–2020 using Pedroni's panel cointegration tests, panel fully modified ordinary least squares (FMOLS) and dynamic ordinary least squares (DOLS) estimators, and panel Granger causality tests. The main results emphasize that without innovation and good governance, it is difficult to envision real progress in the transition to renewable energy in oil-rich MENA countries. Oil rents exhibit a negative effect on renewable energy generation in MENA oil exporters and non-GCC countries, but in contrast they appear to positively and significantly affect renewable energy generation in the GCC countries. The joint impact of good governance and oil revenues turns out to be undeniably crucial in promoting renewable energy production in the three groups of countries. It is incumbent upon policy makers and relevant authorities in MENA oil-exporting countries to start in earnest to demonstrate their commitment to developing renewable energy sources by allocating a significant and acceptable portion of oil revenues to create a budget wholly devoted to unleashing renewable energy innovation.