Energy Transition and Economic Diversification in Egypt: Resolving the Green Dependency Paradox for Long-Term Gains

DOI

10.2991/978-94-6239-743-9_3How to use a DOI?

Keywords

Energy transition; Economic diversification; Green dependency; NARDL model; Resource curse

Abstract

This study examined the green dependency paradox: renewable energy (RE) investments in hydrocarbon-dependent economies may initially constrain rather than catalyze economic diversification. We focused on Egypt, where fossil fuel dependence still exceeds 93%, and applied a Nonlinear Autoregressive Distributed Lag (NARDL) model to data spanning 1990-2023. The goal is to test whether RE expansion affects economic structure asymmetrically. The results reveal a persistent negative long-run relationship. The increase in RE share is associated with a significant decline in economic diversification. Perhaps more striking is that the effects are symmetric for both expansion and contraction (Wald test p=0.251). This symmetry points to what we call a structural implementation failure—an “enclave model”—rather than temporary adjustment costs. Oil price volatility significantly amplifies this relationship indicating that, despite the increase in renewable capacity, Egypt remains vulnerable to external hydrocarbon shocks. We label this phenomenon “green dependency risk.” When RE deployment relies heavily on imported components and lacks domestic linkages, it can reproduce the dynamics of the resource curse by creating a new technological enclave. Comparative analysis with Morocco demonstrates that policy architecture—not the technology itself—determines outcomes. To address this, we proposed a tri-phase policy framework spanning 2025 to 2035. The framework targets import dependencies, linkage vacuums, and arrested innovation diffusion through subsidy reallocation, rising local content mandates, green industrial parks, and regional certification leadership. In short, this study provides evidence quantifying the RE-diversification relationship using asymmetric cointegration. It identifies oil volatility as a key moderator and offers an actionable roadmap for transforming climate imperatives into diversification catalysts in resource-dependent economies.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Ahmed M. Sedgy
PY  - 2026
DA  - 2026/08/11
TI  - Energy Transition and Economic Diversification in Egypt: Resolving the Green Dependency Paradox for Long-Term Gains
BT  - Proceedings of API Conference 2025: Empowering the future: Energy Transition and Economic Diversification in Arab Countries
PB  - Atlantis Press
SP  - 24
EP  - 44
SN  - 3005-155X
UR  - https://doi.org/10.2991/978-94-6239-743-9_3
DO  - 10.2991/978-94-6239-743-9_3
ID  - Sedgy2026
ER  -