This article is part of a series that draws on the conclusions of a high-level workshop on economic diversification and the energy transition held on the sidelines of the American University of Kurdistan’s annual Middle East Peace and Security (MEPS) Forum in November 2022.


The next few decades will be crucial for Iraq and the Kurdistan Regional Government (KRG) as global changes reshape the energy sector. The push for sustainable development, the Paris Agreement climate goals, and associated efforts in areas like renewable energy, climate change, and environmental protection will bring about a transition across the sector, affecting everything from employment and working patterns to governance. These changes will likely present a number of challenges for Iraq, especially if the country fails to take the radical steps needed to adapt to the energy transition.

In 2035, oil-consuming countries, including the U.S. and nations across Europe, will begin to reduce their demand for fossil fuels to cut back on harmful emissions. As a result, forecasts suggest that demand will decrease to about 70% of what it is now in 2050, at the same time that the population of Iraq will reach 75 million, up from around 42 million at present. This suggests there is a looming crisis on the horizon, as Iraq's economy is still heavily dependent on oil revenue, which accounts for around 94.4% of its total revenue. Moreover, Iraq still flares gas associated with oil production, the cost of which is estimated at $2.5 billion per year in lost revenue, and this burning also contributes greatly to exacerbating climate problems, environmental pollution, and the spread of disease.

Serious work is needed to address these issues and better prepare for the coming changes in the energy sector, and especially the energy transition. With this in mind, Baghdad and Erbil will need to take a number of targeted steps and enhance their level of coordination.

Fix the lack of disaggregated data: There is a need to develop better and more transparent data, as one of the biggest problems hindering energy sector governance is the lack of available, accurate, and properly categorized data, including on workers and broken down by age. Although the energy sector is the main financier of all government institutions and other types of public expenditures, the nature of employment in the sector is affected by the government’s financial situation and general approach. Prime Minister Mohammed Shia al-Sudani’s government, for instance, has expanded state spending by increasing the number of jobs in the public sector and the beneficiaries of social protection. Making it easier for young graduates to work in the energy sector is essential and will also help to ensure that new technologies and applications are continuously absorbed and implemented in production processes.

Better governance will strengthen the incentive system: Building productive formulas that include employees, equipment, and other types of expenditure and revenue, whether in the electricity or the oil sector, will help to increase revenue and provide greater flexibility for existing workers. Currently, consumers pay for just 8% of electricity consumed, and the payment of wages to employees is affected by broader issues with government expenditures, leading at times to months-long delays in payment. Meanwhile, improvements in the power supply have not been reflected in salaries for sector workers, contributing to a broader morale problem and creating a lack of enthusiasm on their part to provide better service or further develop their skills.

Create an indicator for youth employment in the energy labor market: Iraq needs to create an innovative indicator capable of providing detailed information about the number, type, and condition of workers in the energy labor market. The governments in Baghdad and Erbil need to work together on this issue given the importance of the energy sector, and especially renewable energy and energy transition measures. This is essential to improve governance in the sector and will help decision makers to make better informed choices.

Make it easier to transition science, technology, engineering, and mathematics (STEM) graduates into the energy sector: STEM graduates face difficulties accessing the energy labor market, which underscores the need to bridge the gap between educational institutions and the energy sector. Making it easier to transition graduates to work in the sector and start businesses is a must. Addressing this issue will require understanding global contexts, amending laws, and adopting new policies to strengthen the links between graduates and the energy labor market.

Provide vocational training for young people, especially in renewables: Renewable energy projects can take many different shapes and forms, ranging from small to large scale. Carrying them out, however, requires significant specialized training and skills. Installing renewable energy stations, for example, necessitates a number of technical skills, in addition to knowledge of mathematics and software. This, in turn, requires vocational training centers that can provide the necessary training as well as entities that can offer project financing.

Expand financing for clean energy projects: In January 2022, the Central Bank of Iraq (CBI) launched a financing initiative with capital of $685 million to encourage renewable energy projects. These initiatives need to consider a number of different factors, including the nature of the beneficiaries, the type of projects, and the benefits they provide for young people, including by gender, geography, and type of business. It will also be important to involve state-owned and private banks in financing clean energy projects and to have financing facilities available for young people and STEM graduates.

Address gender-based barriers to sector employment: Women make up half of the population in Iraq and the KRG, around 21 million out of a total of 42 million. However, only 1.5 million women are involved in the labor market, in both the public and private sectors. Women tend to work largely in traditional jobs or areas dictated by social custom. The energy sector is considered non-traditional work for women and they generally do not participate in energy projects; if they do, it is often to perform clerical or secretarial work. In certain areas, Iraqi law also limits women’s ability to work in the sector. Labor Law No. 37 of 2015 in federal Iraq and law No.71 of 1987 in the KRG prohibit women from working in difficult conditions or at night. Such legislation needs to be amended or abolished. Providing safe, secure transportation is another important issue that must be addressed as well. Sometimes women do not have the ability to reach work sites because they are located in the countryside or other difficult-to-access areas. The authorities need to ensure access for working women by securing highway transportation routes and addressing legitimate safety concerns. Women also face other difficulties in the workplace. There is often not much concern for their privacy, as working environments in Iraq are generally designed with men in mind. Access to childcare is frequently an issue, for instance.

The governments in Baghdad and Erbil need to work together to put in place policies, legislation, and capabilities to create a suitable ecosystem to promote the growth of businesses in non-traditional energy sectors. Better governance will help create opportunities for sustainable development, including business sustainability, and make it easier for youth to enter the workplace. But if these governments are unable to keep up with global developments in the field, the Iraqi economy may face significant risks going forward, reducing opportunities for economic diversification, increasing dependency on non-productive government jobs, adding to the burden on state spending, and making it more difficult to reduce emissions and halt environmental degradation. The results will be painful, especially for youth, and could lead to displacement, migration, conflict, and social unrest, potentially putting society at large in danger.


Salam Jabbar Shahab is the director of the Iraq Policy Group.

Photo by ASAAD NIAZI/AFP via Getty Images

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