What viable alternatives can Iraq pursue to transition toward having a more diversified economy—one that reduces environmental harm and improves human well-being? This is the dilemma facing Iraq, a rentier state that relies heavily on fossil fuels for nearly everything, even as it faces a climate crisis that threatens the state, society, and biodiversity alike.

At the Conference of the Parties to the United Nations Framework Convention on Climate Change (COP29), held in Baku, Azerbaijan, Iraqi President Abdul Latif Rashid delivered an underwhelming speech on Iraq’s vulnerability to the far-reaching impacts of climate change. 

While acknowledging Iraq’s heavy reliance on fossil fuels, President Rashid cited several documents, strategies, and plans aimed at paving “practical pathways for both the public and private sectors to fulfil Iraq’s climate commitments”, attracting local and foreign investments, and mobilising financial resources “to confront climate change challenges and move toward a more sustainable future”. 

He informed the attendees that Iraq is working to fulfil its climate agreement obligations and related international frameworks, with a goal to reduce greenhouse gas emissions, build resilience to adapt to the effects of climate change, and gradually transition to renewable energy. 

However, the promise-laden speech bears little resemblance to reality. While the president highlighted achievements that have yet to materialise in Iraq’s shift away from fossil fuels to clean energy, the latest World Bank reports reveal that Iraq ranked third among the world’s top nine gas-flaring nations. 

In 2023, the World Bank identified the Russian Federation, Iran, Iraq, the United States, Venezuela, Algeria, Libya, Nigeria, and Mexico as the top nine countries for gas flaring. These countries accounted for 75 per cent of global gas flaring despite producing only 46 per cent of the world’s oil. 

Iraq’s wasted sun 

While Iraq relies on fossil fuels for 98 per cent of its electricity production, the global shift away from fossil fuel dependence continues to gain momentum. In 2022, wind and solar power reached a record high, generating 12 per cent of the world’s electricity—up from ten per cent in 2021—according to Ember’s 2023 report. 

Iraq receives over 3,000 hours of sunshine annually, out of a total of 8,700 hours, making it one of the world’s most promising countries for harnessing clean energy to generate electricity. However, despite significant efforts—such as QatarEnergy’s acquisition of a 50 per cent stake in TotalEnergies solar power project in Iraq, which is expected to reach a maximum capacity of 1.25 gigawatts—the country still faces challenges in this field.  

QatarEnergy stated that the solar energy project, set to be developed in phases and begin operations between 2025 and 2027, “will be capable, once completed, of delivering up to 1.25 gigawatts of peak solar electricity”. The project will use two million high-efficiency, bifacial solar panels and is expected to supply electricity to approximately 350,000 homes in Basra province. 

This initiative is part of a larger venture known as the Gas Growth Integrated Project in Iraq, valued at 27 billion US dollars. The broader goal is to enhance Iraq’s electricity supply through various methods, including capturing gas from three oil fields—rather than flaring it—and using it to fuel power generation stations. 

Iraq’s transition from fossil fuels to clean energy faces challenges that extend beyond the electricity sector. The economy is heavily reliant on oil revenues, with annual budgets based solely on the price of oil per barrel. This means that both the public and private sectors move forward—or backward—depending on the state of global oil markets. Additionally, the current infrastructure, built around fossil fuel systems, would require significant overhauls to accommodate alternative and renewable energy sources—another major obstacle which Iraq must address.  

A key issue with Iraq’s infrastructure is its deep reliance on fossil fuels. To sustain daily life and business operations across both public and private sectors and to meet basic service needs, the country must continue to rely on oil while simultaneously investing in renewable energy and honouring its international climate commitments. 

This challenge is further compounded by outdated investment laws, the long-stalled Oil and Gas Law that has languished in parliament for years, the absence of a secure environment to attract clean capital, and the political, economic, and social instability that stands in the way of this transformation. Together, these barriers pose a major threat to Iraq’s clean energy ambitions. 

High-sulphur fuel 

In November 2024, Iraq’s state-owned Oil Marketing Company (SOMO) announced a tender to purchase additional shipments of high-sulphur diesel, scheduled to arrive in December, following an earlier expression of interest in another shipment in October. The company seeks 85,000 tonnes of diesel with a sulphur content of 2,500 parts per million (ppm). 

This marks the second time SOMO has sought to purchase diesel with a sulphur content of 2,500 ppm, shipments that are essential for operating oil refineries in central and southern Iraq, including Baghdad’s Doura Refinery, which has been the subject of complaints and suspicion over its emission of noxious gases, locally referred to as the “sulphur smell phenomenon”. 

Iraq’s integrated Gas Growth Project is not the country’s only solar power initiative. According to oil and energy researcher Jaafar Al-Barrak, Iraq has pursued several alternative energy projects since 2019. These efforts have resulted in government contracts with various international companies, including PetroChina (China) to develop a 750-megawatt solar project in Al-Muthanna; Masdar (UAE) for a 1,000-megawatt project; and Power Construction Corporation (Saudi Arabia) to establish a 1,000-megawatt station in Al-Najaf. 

Additionally, the government has allocated 65 billion Iraqi dinars, approximately 50 million US dollars, to install solar energy systems in 546 government buildings, including the Parliament building and the Government Palace. 

Solar and alternative energy projects in Iraq and their costs 

Al-Barrak stated that a full transition to alternative energy requires strategic planning and substantial investments to develop renewable energy farms and modernise Iraq’s electricity grid. The country currently needs approximately 35,000 megawatts to meet its national energy demands. 

But can Iraq truly abandon oil? Al-Barrak doesn’t think so. “It would be political and economic madness to abandon such a cheap and abundant energy source in favour of costly alternatives that are expensive to produce and maintain,” he said, noting that the cost of producing a single barrel of oil is under ten US dollars. In comparison, its sale price exceeds 60 US dollars. 

In an interview with Jummar, he added that Iraq recently launched its fifth and sixth oil bidding rounds to expand exploration both onshore and offshore, a move that could boost production if new wells are discovered. 

Muhammad Saleh Salman, Professor of Economics at the University of Baghdad, told Jummar that oil has been the backbone of Iraq’s economy since its discovery in the 1920s and remains one of the country’s most vital economic resources. Oil revenues dominate the economy, providing liquidity and funding the national budget. 

Salman attributes Iraq’s dependency on oil to its abundance and ease of extraction as an exploitable natural resource, with estimated reserves of around 145 billion barrels and relatively low extraction costs compared to other resources. 

He further explained that Iraq’s reliance on oil revenues stems from its failure to diversify its income sources. Decades of political and security turmoil have devastated other economic sectors, leaving oil as the primary driver of economic recovery and a crucial source of liquidity to sustain the country’s deteriorating infrastructure.  

Low-carbon hydrogen 

Iraq could explore investments in low-carbon hydrogen—whether blue or green—as part of global efforts to mitigate the environmental and economic risks associated with the risks of fossil fuel dependence. 

According to the United Nations Economic and Social Commission for Western Asia (UN-ESCWA), low-carbon hydrogen helps in reducing reliance on fossil fuels, both as a source of export income and within the domestic energy mix. 

In 2023, a report by the Capgemini Institute, covered by Asharq Al-Awsat newspaper, revealed rising investments and demand for low-carbon hydrogen across various sectors. The report stated that “Hydrogen demand has increased by more than ten per cent across multiple industries and regions over the past three years, and further growth is expected—especially in traditional hydrogen applications, such as petroleum refining, chemicals, and fertilisers.” 

According to Aramco, the growing global momentum positions hydrogen as a key element in the transition to more efficient and affordable energy. It has the potential to replace high-carbon fuels in a wide range of applications, including power and heat generation, fuelling trucks, and industrial processes in hard-to-decarbonise sectors such as construction, steel, and cement. 

Aramco anticipates that countries will invest approximately 570 billion US dollars in hydrogen production by 2030. Iraq could follow in Saudi Arabia’s footsteps in this regard—Saudi Arabia has already launched a 12 billion US dollar facility at the Jazan refinery to produce hydrogen, steam, and electricity. A significant portion of the hydrogen will be derived from the non-associated Jafurah gas field, which is set to begin operations in 2025. 

Saudi Arabia has already built the first hydrogen fuelling station and successfully operated a small test fleet of hydrogen-powered vehicles, including cars and buses, in a local environment. This is an experiment that Iraq should closely observe and aim to replicate before it’s too late. 

Iraq has no choice but to innovate and catch up with the rest of the world, especially as countries that began diversifying their income sources, transitioning to alternative energy, and reducing their dependence on fossil fuels years ago are now reaping the benefits. The damaging effects of fossil fuels are becoming increasingly evident, and their eventual depletion is inevitable. 

If Iraq fails to act, it risks facing severe economic and environmental challenges, many of which are already surfacing, including widespread pollution and climate change. These issues threaten both society and the country’s biodiversity and are contributing to conflicts in local communities that are already suffering from water and energy shortages. 

Joining the fragile states 

At COP29, a coalition of fragile states submitted a message to the United Nations. They called for an increase in financial aid to over 20 billion US dollars annually to address the natural disasters and security crises affecting their populations. 

This group is one of several advocating for funding to prepare for the impacts of extreme weather, as countries negotiate a new annual financing target. 

Known as the G7+, this international coalition of fragile states was the first to issue the appeal. Recently, countries such as Burundi, Chad, Sierra Leone, Somalia, Timor-Leste, and Yemen—some of the world’s poorest nations—have joined the initiative. Iraq was also among the countries that joined the group in search of financial assistance despite having an annual budget for 2024 that exceeds 155 billion US dollars, primarily reliant on oil revenues, with only a minimal allocation for environmental protection.