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ľ¹ÏÓ°Ôº¡¯s Office of the Chief Economist for the Middle East and North Africa (MENA) region has launched a research program on ¡°Decarbonization and Diversification in the Middle East and North Africa¡±. The program aims to produce a series of publishable academic research papers. The main objective of the program is to build a new body of empirical work describing how decarbonization, diversification, and adaptation to climate change will impact MENA countries and their economic structures and populations.

Climate shocks are more frequent in MENA compared to the rest of the world and have been increasing in recent years. Moreover, the costs of climate shocks as a percent of GDP also appear to be higher in MENA. Economic development, urbanization, and growing populations have also put pressure on water and land resources, with climate shocks deepening the problem further by shrinking the supply of these already scarce resources.

In this context, decarbonization and diversification are crucial parts of the policy agenda in MENA to help countries with both their climate mitigation and adaptation efforts. The purpose of this research program is to promote publishable academic research in key areas to attempt to answer important questions related to the challenges posed by climate change, the global energy transition, and economic diversification.  The program welcomes submissions of research proposals to be sponsored by the program focusing on the following broad topics:

Research Question 1: What are the consequences for growth from decarbonization?

This question focuses more on the impact of decarbonization and the energy transition on the economy as a whole. It can include many components, such as (i) changes in a country¡¯s comparative advantage and trade, (ii) the growth effects from implementing mitigation and adaptation measures, (iii) fiscal effects and their relation to growth, etc.

Research Question 2: Who are the winners and losers in individual MENA countries from changing the energy mix from fossil fuel dependence towards the adoption of green energy?

This question focuses on distributional issues within countries, across sectors and factors of production. Many questions can be subsumed within this question, such as (i) the effect of the energy transition on labor markets in terms of job creation and skills required; (ii) gender impacts; (iii) impacts on poverty rates and the middle class from changing energy prices, access to electricity, jobs, etc.; (iv) the effects on the potential for an increase or decrease in social tensions; (v) the impact on local health outcomes and environmental quality, etc.

Research Question 3: Will economic diversification driven by decarbonization help reduce the economic volatility of MENA economies?

Decarbonization and the energy transition will imply economic restructuring, particularly in the fossil fuel-producing countries, which are both large producers and exporters. Hence, an important set of corollary questions to the decarbonization questions above is: what are the benefits and challenges of diversification? Will economic diversification driven by decarbonization help to reduce economic volatility? For oil-exporting countries, can decarbonization measures help diversify exports and increase productivity, leading to a more sustainable long-term growth model?

Research Question 4: Is economic diversification a form of innovation? And, if so, do market failures hinder innovation and diversification?

Another set of questions focuses on innovation. If discovering how to produce new goods or to transform industries intensive in brown energy to ones more intensive in green energy is costly, there may be market failures like those associated with innovation. Firms may lack the incentive to be the first to invest large sums only to see others imitate them, lowering profits such that they are unable to recoup their investments. In addition, network effects (charging stations for electric vehicles, a skilled labor pool for installing and maintaining renewable energy technology, researchers, etc.) and barriers (such as regulatory hurdles for permitting or net metering) may discourage investment by firms or technology adoption by consumers, thereby hindering innovation. Such market failures could explain why many governments have centralized energy diversification plans, such as for solar farms. What market failures and barriers are relevant in MENA countries, and what specific policy responses are needed to address these?

Research Question 5: Is diversification the result of market flexibility?

If, as part of the diversification process, a country requires factors of production to move from one sector of the economy to another, the costs of factor mobility must be low. Inflexible labor markets or politically connected firms with privileged access to credit, or excessive regulations or other forms of friction preventing the movement of capital, labor, etc. would impede the economic structural diversification necessary to promote decarbonization. Strong institutions, credibility, and public trust are also important components of the nimbleness of economies. What barriers to movement of capital, labor and other factors of production are relevant in MENA countries, and what specific policy responses are needed to address them?

Interested authors should submit their research proposal(s) via email to mnaclimate@worldbank.org. Each research proposal should be at most 1,500 words (approximately three single-spaced pages), excluding references. They should consist of at least three sections:

• Motivation: This section should provide a clear statement of the issue(s), the knowledge gaps the research will address in light of existing literature, and how the proposed research will contribute to knowledge about the subject.
• Methodology and Analysis: This section should identify the research question, the hypothesis to be tested, and the research methodology. If data are used, the proposal should describe the data used in the analysis. In addition, it should describe the analytical technique (e.g., econometrics) and explain the rationale for using the selected methodology.
• Research Team and Timeline: Please list the names and affiliations of the research team expected to be involved in the research and the research timeline.

Key criteria for selecting authors and coauthors include the following:

• Proven track record of publications in peer-reviewed journals.
• Demonstrated expertise in conducting research on the issues of decarbonization, climate change, the energy transition, or diversification.
• The research proposal must be feasible, in that the data are available and the methodology is clearly explained.

The deadline for submitting proposals is Monday, July 31, 2023. Selected author(s) will be informed no later than the first week of October. Only authors of accepted proposals will be notified.

For each accepted proposal from author(s) outside the World Bank, the author(s) are eligible to receive research support in the amount of US$ 7,000. To qualify for the support, authors of accepted proposals are expected to submit first drafts of their research papers to the research program for feedback by March 30, 2024. Revised drafts of accepted proposals are expected by June 7, 2024. Best papers might be selected for a conference organized by the research program in July 2024.

The research program is led by Ernest Sergenti (co-TTL) and Hoda Assem (co-TTL) at the World Bank under the guidance of Roberta Gatti (Chief Economist of the MENA Region at the World Bank) and Daniel Lederman (Deputy Chief Economist of the MENA Region at the World Bank). The team also includes Carolyn Fischer (Research Manager, DECSI) as an adviser to the program.

Questions or comments about the submission of proposals should be addressed to mnaclimate@worldbank.org.