Climate change, in particular increasing water scarcity, could further threaten Iraq’s fragile social contract under an oil-led growth model that has been a source of economic volatility. According to the new World Bank Group’s Country Climate and Development Report (CCDR), Iraq faces the challenge of moving away from total oil dependance towards a more diversified, private sector-led economy that creates jobs and builds human capital while also building resilience to climate change.
The report seeks to reconcile Iraq’s development goals and climate ambition, offering policy options for economic diversification and transformation.
Iraq is one of the most vulnerable countries to climate change shocks both in financial and physical terms, including temperature rise and water scarcity. The country is quickly running out of water, and in a business-as-usual scenario, the widening gap between water supply and demand is expected to increase from around 5 billion to 11 billion cubic meters by 2035. Water scarcity and suboptimal water quality can significantly reduce crop yields and affect agri-food systems, threatening food security and adversely impacting GDP.
Iraq’s carbon emissions have more than doubled over the last decade alone. The country has one of the highest levels of carbon intensity (emissions per GDP) compared to its regional and income peers. Almost three quarters of the country’s emissions are attributed to the electricity, oil and gas operations and transport sectors. Decarbonization pathways for the electricity sector can bring significant additional growth and productivity gains.
Despite being one of the largest oil producers in the world and almost doubling its oil production in the past decade, Iraq’s development indices resemble that of low-income countries. Climate change is fueling inequalities and the risk of unrest in a society already eroded by years of conflict and violence.
“Without key structural reforms, Iraq’s pursuit of a resilient, inclusive and diversified growth path will not materialize,” said Jean-Christophe Carret, World Bank Mashreq Country Director. “Delays in implementing these reforms will make it harder for Iraq to cushion the adverse physical and fiscal effects of climate change and to afford its growing investment needs, including in the water and power sectors.”
To address these combined challenges, the Iraq CCDR prioritizes actions in three focus areas: adaptation, with a focus on the water-agriculture-poverty nexus; mitigation, with a focus on decarbonizing Iraq’s energy value chain; and managing the macro-fiscal implications of the transition to a low-carbon economy.
The CCDR estimates that Iraq would require around US$ 233 billion in investments by 2040 to respond to its most pressing development gaps while embarking on a green and inclusive growth pathway. The report prioritizes these investments in ways that reflect their urgency, synergies, and tradeoffs. “No-regret” measures, recommended in the initial five years (starting in 2022), offer Iraq the chance to respond to development needs and establish foundations of climate action while achieving low-carbon transition benefits at relatively low economic cost. Short- to medium-term measures, recommended over the coming 10-year period, are critical for Iraq to build economic and social resilience and to set a greener transition.
The preparation of the Iraq CCDR adopted a “people centric” approach to reach a deeper understanding of current climate change effects and inform the analysis and policy recommendations. Extensive engagements and consultations were conducted with various stakeholder groups. A CCDR advisory group comprised of representatives from the Government of Iraq, the private sector, and academics was also established.
An in-depth presentation and discussion of the report with all concerned stakeholder groups in Iraq will be organized and announced soon.
World Bank Group Country Climate and Development Reports: The World Bank Group’s Country Climate and Development Reports (CCDRs) are new core diagnostic reports that integrate climate change and development considerations. They will help countries prioritize the most impactful actions to reduce greenhouse gas (GHG) emissions and boost adaptation while delivering on broader development goals. CCDRs build on data and rigorous research and identify main pathways to reduce GHG emissions and climate vulnerabilities, including the costs and challenges as well as benefits and opportunities from doing so. The reports suggest concrete, priority actions to support the low-carbon, resilient transition. As public documents, CCDRs aim to inform governments, citizens, the private sector, and development partners and enable engagements with the development and climate agenda. CCDRs will feed into other core Bank Group diagnostics, country engagements, and operations to help attract funding and direct financing.