The emerging climate-investment nexus

Economic Modernization Vision
(File photo: Jordan News)
Economic Modernization Vision

Hamzeh S. Al-Alayani

The writer is a board member of a Jordanian public-sector government investments management company and a regular commentator on regional energy and industrial matters.

The Neighborhood Investment Platform has cemented the strong partnership between the EU and Jordan, which could leverage up to 2.5 billion euros of public and private (PPP) investments, in line with Jordan’s Economic Modernization Vision. It has the potential to enhance growth and innovation, create quality jobs, develop human capital, and raise living standards and environmental sustainability. اضافة اعلان

The targeted investments will be linked with bilateral and multilateral donors, enabling Jordan to take full advantage of the opportunities offered under the platform and the new system of guarantees by the European Fund for Sustainable Development Plus (EFSD+).

The Russia-Ukraine war has strongly impacted the trajectory of energy dynamics in Europe, particularly the EU’s quest for diversification of energy supplies. While the crisis has also triggered the renewal of demands for clean energy talks and climate policies across and between MENA and Europe, it has also created winners and losers in the race for global energy transition.

According to the Climate Policy Initiative, MENA currently receives the smallest amount of climate finance of any region in the world, an estimated $16 billion a year, with financing needs estimating at $186 billion in the nationally determined contributions submitted by countries pledging climate action.

In Jordan, the disruption of commodity supply chains and increased energy prices have led to a sharp rise in consumer prices, including of electricity, exacerbating the economic downturn caused by the COVID-19 pandemic. Therefore, the Jordanian government has lifted fuel and electricity subsidies to restore fiscal stability.

Renewable energy sources contributed around 29 percent of Jordan’s total energy output by 2022, and the country aims to increase this proportion to 50 percent in 2030. The current energy crisis has motivated the energy transition and the digitization of ecosystems to avoid high-priced electricity bills.

Meanwhile, taking advantage of Jordan’s geopolitics might make the Kingdom a catalyst for a renewed Euro-Mediterranean relationship; moreover, the potential of green hydrogen to become a promising renewable source could help Jordan receive foreign direct investments to achieve the Sustainable Development Goals (SDGs).
MENA currently receives the smallest amount of climate finance of any region in the world, an estimated $16 billion a year, with financing needs estimating at $186 billion in the nationally determined contributions submitted by countries pledging climate action.
Attracting FDI that supports sustainable development is particularly relevant in Jordan, where FDI is a substantial source of external financing; the FDI stock-to-GDP ratio currently exceeds 80 percent.

Sustainable investment is only possible if a solid and robust infrastructure system exists. According to the World Bank, investments of at least $100 billion per year over the next five to ten years can maintain existing MENA infrastructure and build new one. The most significant financing gaps are cross-border infrastructure, road transport, and energy.

High-quality infrastructure is crucial to inclusive and sustainable growth. It can reduce logistics costs, facilitate trade, enhance export diversification, and boost competitiveness. Jordan’s choosing to upgrade its infrastructure provision stands to have a long-term impact on Euro-Mediterranean integration.

The EU-MENA renewable hydrogen partnership, an innovative institutional cooperative framework, may help unlock many barriers and enable a higher degree of Mediterranean engagement. If successfully implemented, it will be a unique opportunity for Jordan to participate in this renewable power transformation from Jordan to the EU market.

Development finance institutions are positioning infrastructure and connectivity at the top of their agendas to promote green and sustainable growth and thus support the EU’s Global Gateway. Therefore, the Kingdom needs to maximize benefits and minimize potential risks by building on the institutional and organizational capacities of the PPPs investments and job employment within this new green paradigm.


Hamzeh S. Al-Alayani is a board member of a Jordanian public-sector government investments management company and a regular regional energy and industrial commentator.


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