Governing for Energy Transition in Rentier States

Abstract

Climate change has led to increasingly strong pressures for all states to decarbonize their energy systems and economies. Energy system decarbonization faces socio-institutional barriers to phase out of hydrocarbons, which are highly integrated into global energy and economic systems. To address these barriers, the energy governance literature provides insights into the factors that influence socio-technical transitions, including the transition from hydrocarbon to low-carbon energy. Yet, when it comes to country scales, many of these studies focus on the transition pathways from the perspective of the energy importer and developed countries, leaving perspectives of the hydrocarbon rich developing states relatively unexplored. Unlike the importer countries, hydrocarbon rich countries have local access to fossil fuels, which they subsidize for domestic use, and export for fiscal revenues. These conditions make energy transition a uniquely challenging and path-dependent process for the hydrocarbon exporting countries.

This thesis identifies the salient factors for energy transition to a low-carbon energy system and economy for the hydrocarbon rich-nations that rely heavily on fiscal incomes from fossil fuel exports – referred to as “rentier states” (Mahdavy, 1970). The identification of factors consists of universal, rentier, and country-levels, using a multi-level perspective (MLP) framework. The universal and rentier aspects aim at identifying the factors that increase pressure for (i.e. landscape factors) and resist against (i.e. regime factors) decarbonization of the energy systems and economies, respectively, at global and rentier state levels. The country-level aspect of the research is a case study on Iran – which is a rentier state. The Iranian case study allows to analyze interactions between the identified landscape and regime factors, in the real world-context of a rentier state. The case study identifies the influences of those factors on the path for decarbonizing the energy system and economy in Iran. To fulfil these objectives, the research analyzes the literature and relevant global, regional and national documents in the realms of energy governance, climate, technologies, and political economy. The research uses interviews with former Iranian officials in senior governmental positions to compensate for the scarcity of Iran-related documents and literature relating to energy transition, and to reduce the gap between the academic and real-world standpoints in the research.

The thesis’ findings on MLP dynamics among the influential factors on Iran’s path for decarbonization identify the centralized governance of the energy system as a leverage regime factor that impedes rentier states’ efforts in decarbonizing their economy. Moreover, the thesis concludes that while energy mix and economic diversifications are both necessary approaches for phasing out of hydrocarbon resources and revenues, these strategies may be difficult to be pursued in parallel in the rentier states. In addition, the thesis finds that phasing out of fiscal crude revenues at the upstream of the energy sector [through economic diversification] could obstruct the path for phasing of fossil fuels in the downstream [under energy mix diversification].