Rabat - As the European Union is on the verge of entering a new recession on the backdrop of the looming threat of energy shortage, energy sovereignty is now at the forefront of state policies.

In the wake of the Ukraine war and the west-imposed sanction on Russian energy products, countries around the world are accelerating the adoption of green energy as a viable and sustainable alternative form of energy to guarantee energy security.

In an interview with Morocco World News (MWN), Ricardo Mourinho Felix, the vice-president of the European Investment Bank (EIB), said that Morocco has “perfect conditions” to reach energy autonomy and cushion its economy from future shocks that could spill over into the energy market.

Given its unique disposition to generate green energy, Felix argued, Morocco is currently on track to reach energy sovereignty.

“Morocco is very advanced, the share of renewables and in particular wind power in Morocco’s energy mix is well above natural gas,” the EIB official said. This creates perfect conditions for the country not to be dependent on this type of shock.”

At the end of 2021, the share of renewable energy in the electrical production capacity mix stood at 37%.

While the figure is below Morocco’s Paris Agreement target of 42%, the country expressed confidence that the share will increase to 52% by 2030. In October 2021, the Moroccan government further announced a strategy that would increase the share of green mix to 80%.

“Morocco has a very ambitious program in the green transition, and it has great conditions to do this transition in a very successful manner,” Felix explained while expressing the EIB’s interest in further investing in the North African country’s energy projects.

The EIB has already allocated substantial funds to finance several green projects across many fields spanning energy production, energy efficiency, and green transportation.

Noting the European bank’s efforts to finance Morocco’s transition to a greener economy, Felix said that the EIB is “extending loans and green loans to Morocco that the MASEN, ONCF, to all the companies that are moving forward in the green transition being the production side of the energy, being on energy efficiency, soft transportation, to have the amount of funding they need.”

In November 2022, the EIB signed a €192.4 million financing deal with Morocco’s national railway operator, ONCF, to cover 80% of the funds needed for the construction and rehabilitation of low-carbon railways in the country.

EIB and Moroccan SMEs

Between 2017 and 2022, EIB injected $2.5 billion into the Moroccan economy to scale a number of sustainable projects, devoting 40% of its financing to small and medium-sized enterprises (SMEs) and industry, 20% to renewable energy, 19% to sustainable transport, and 16% to health and education.

Regarding the financing the EIB is allocating for Moroccan SMEs, Felix explained that the European bank extends indirect credit lines to SMEs using financial intermediaries such as banks and risk-sharing instruments.

That means the EIB shares the risk associated with lending money to sub-prime SMEs, allowing Moroccan banks to issue loans for companies that are considered as too risky.

“When it comes to SMEs, we need to go through financial intermediaries,” Felix told MWN. “And that’s the work we are doing, not only extending financing and risk-sharing instruments, but also technical assistance so that financial intermediaries can reach SMEs, and support them in doing these SMEs where they are more vulnerable.”

EIB’s most recent efforts on this front were made in October 2022, when the bank signed an $8 million guarantee deal with Morocco’s largest banking group, Bank Populaire (PB).

According to a statement from the European bank, “this guarantee will enable BCP to take more risks, and allow financing of around €50 million in investments for Moroccan exporter SMEs.”

In addition to the credit line, the EIB committed to providing technical and financial expertise on “decarbonization, productivity and digitalization with a view to strengthening value chains with the European Union.”

Climate Risk Management in Morocco

Mitigating the effect of climate change on the Moroccan economy has emerged in recent years as a crucial part of the government’s strategy. Through a number of strategies and plans with international partners, the country is actively working to consolidate the resilience of its economy in the face of climate-induced catastrophes, especially when it comes to agriculture.

“I know from public authorities the central bank is looking at climate risk in a very serious manner, which is also something that we are looking at. Many central banks in Europe and the world are looking at this. Morocco is at the forefront of this assessment,” Felix said of Morocco’s efforts to meet the climate challenge.

The EIB is equally part of these efforts. In September 2021, the bank co-invested $200 million with Moroccan agriculture-focused bank Credit Agricole to support the bank adapt its financing structures to the challenges and opportunities emerging from climate change.

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