The Green Transition, or the Return of Political Economy

The energy transition is often presented as one of the defining horizons of contemporary development policy. Given the urgency of the climate crisis, governments are being encouraged to accelerate the decarbonisation of their economies, promote renewable energy, attract sustainable investment and adapt their productive systems to new environmental constraints. In North Africa, as elsewhere, national strategies are giving growing prominence to solar, wind, green hydrogen and energy interconnections. International partners, for their part, keep launching new financing programmes and support mechanisms for this transition.¹

This reading is, however, incomplete. The energy transition is no longer just a sectoral policy aimed at reducing greenhouse gas emissions. It has become industrial, technological and geopolitical policy all at once. Decarbonisation now raises questions of competitiveness, reindustrialisation, control over value chains, access to critical raw materials and technological sovereignty. Past technological revolutions never spread growth opportunities evenly. They also produced new industrial hierarchies and new forms of dependency. The green transition is no exception.²

This shift calls for placing the climate question within a broader political-economy perspective. In the United States, the Inflation Reduction Act uses the energy transition as an instrument of reindustrialisation and value-chain security. China has spent several decades building dominant positions in solar panels, batteries, electric vehicles and a range of low-carbon technologies. The European Union is likewise seeking to strengthen its industrial base through the Green Deal and the Net-Zero Industry Act. The Gulf states are deploying their financial resources to prepare for the post-oil era. In each case, climate policy and power politics are becoming hard to tell apart.³

For North Africa, this reconfiguration opens promising prospects. The region has abundant solar and wind resources, geographic proximity to Europe, existing energy infrastructure and, in many countries, industrial experience that could ease its integration into the new value chains. Yet these advantages do not by themselves guarantee a development trajectory. The question is no longer whether North African economies will engage in the green energy transition. It is how they will take part, what benefits they will draw from it, and what position they will hold in the new production networks now taking shape.⁴

This question points to an older problem. For more than thirty years, international development policy has been largely built around a paradigm of “transitions”: democratic, economic, institutional, digital and ecological. Despite their different objects, these transformations have often rested on the same implicit theory of change: changing rules and institutions would gradually create the conditions for economic, political and social development.

The experience of several North African countries, however, invites a reconsideration of this assumption. Institutions can change faster than the economic, administrative and social capabilities that give them real substance. We propose to call this phenomenon the “half-transition syndrome”: the gap between the speed at which rules change and the slowness with which the capabilities needed to apply them develop. This phenomenon, already visible in some democratic transitions and economic reforms, now risks repeating itself in the climate field.

The shift to a green economy offers a striking view of the limits of the transitions concept. It compels us to put questions that have been sidelined for too long back at the heart of development. How can productive capabilities be created? How should technological learning be organised? How should investment be governed? How can long-term industrial transformations be financed? And above all, how can a country take part in a deeply interdependent global economy without simply swapping its old energy dependencies for technological and financial ones?

The real stake of the green transition may lie less in moving from one energy system to another than in the ability of states to use this transformation to rebuild their capacity for action. Paradoxically, then, the climate question leads back to a classic development question: the capabilities that allow societies to govern their own transformation.

The energy transition is frequently presented as a break with the development policies of past decades. Yet it belongs to a deeper intellectual history. Since the end of the Cold War, much of international development strategy has been built on the idea that societies evolve through successive stages. “Democratic transition”, “transition to a market economy”, “institutional transition”, then “energy transition” and “digital transition” are distinct objects. Yet they often share a similar picture of change: transform institutions and incentives so that societies and economies gradually converge towards a new equilibrium.⁵

This idea emerged in a specific historical context. After the collapse of the Soviet Union, liberal democracy and the market economy seemed to be the final destination of political and economic development. Debates focused less than before on national industrialisation strategies, the transformation of productive structures or the mechanics of catch-up. They turned instead to institutional systems, governance, market norms and the rule of law.⁶

This was a significant shift. Development theories from the 1950s to the 1980s gave productive structures a central place. Hirschman focused on the multiplier effects of investment, while Gerschenkron studied the institutions that enable industrial catch-up. Structuralist approaches stressed economic diversification and the creation of national productive capabilities. Development banks, planning, state-owned enterprises and industrial policies were then ordinary tools of economic transformation strategies.⁷

From the 1990s onwards, development difficulties were increasingly explained by failing institutions, poor governance, corruption or inadequate regulatory frameworks. International policy placed growing emphasis on administrative reform, transparency, civil society and improving the business environment. Productive transformation came to be seen as the hoped-for outcome of more effective institutions, rather than a process requiring specific policies and capabilities.⁸

This evolution undeniably brought progress. It put the quality of institutions, public accountability, the rule of law and citizen participation back at the centre of development thinking. The challenge is not to set institutions against the productive economy. It lies instead in an implicit theory of change, under which improving the former would gradually produce the latter.

This view was consistent with the international context of the post-Cold War decades. In a global economy marked by growing trade openness and relative confidence in the stability of international markets, foreign investment and integration into global value chains could appear to be the main drivers of productive transformation. The role of public policy was then largely to create the institutional environment in which these mechanisms could work.

The proliferation of “transitions” extended this logic. Each new challenge brought its own regulatory frameworks, indicators, targets and best practices to guide economies towards a new equilibrium. The ecological transition fits into this narrative. Climate roadmaps naturally prioritise emission-reduction targets, standards, financing mechanisms and incentive schemes.⁹

But the changing international context now makes the limits of this view more visible. Geopolitical fragmentation, the return of industrial policy, technological competition and supply-chain security have brought back to the fore questions that seemed to have lost their centrality. Which industries does a country master? Which technologies does it own? How does it finance long-term investment? What skills can it mobilise? How well can it negotiate with foreign investors and steer their investments?

The ecological transition does not resolve the problem of institutions; it widens it. An effective institution can no longer simply guarantee stable rules or a market-friendly climate. It must now enable learning, coordinate investment, strengthen skills and gradually increase an economy’s ability to manage its own transformation. This is exactly where the half-transition problem appears.

“The ecological transition does not resolve the problem of institutions; it widens it.

The record of recent decades’ transitions looks more mixed once we separate the transformation of rules from the building of capabilities. Democratic transitions, economic reforms and governance initiatives have often produced new institutions. These changes, however, have not always been matched by the development of the economic, administrative and social capabilities needed to consolidate them.

North Africa is a striking example. The political aspirations that emerged in the early 2010s ran into economic and social challenges that were far harder to overcome. Expectations rose while several economies struggled to create enough jobs, investment and prospects for social mobility. Political institutions could be changed within months. Productive structures, public administrations, education systems and labour markets could not be changed at the same pace.¹⁰

This mismatch calls into question the idea that institutional reforms spontaneously create the capabilities needed for their own success. A constitution does not automatically produce an effective administration. Economic liberalisation does not mechanically create a competitive industry. In the same way, adopting ambitious climate targets does not instantly bring into being the firms, engineers, banks, technologies and administrations needed to meet them.

“A constitution does not automatically produce an effective administration. Economic liberalisation does not mechanically create a competitive industry.

The problem therefore stems from two timescales existing side by side. Norms, laws and formal institutions can be changed relatively quickly. Capabilities, by contrast, are the product of a cumulative process. They require investment, experimentation, learning, the acquisition of knowledge and the gradual building of networks between institutions. They take time to develop.

We propose to call “half-transition syndrome” the situation in which the rules of the game change faster than the material and institutional conditions that make them effective. The transition then exists in norms and targets, but remains incomplete in the capabilities that should give it economic and social substance.¹¹

This disconnect can produce a paradoxical effect. Reforms meant to strengthen the state can sometimes weaken its capacity to act, when they disrupt existing forms of coordination without building, at the same time, the institutions that could replace them. Old regulations then disappear before new capabilities are fully developed.

The ecological transition could reproduce this mechanism on a new scale. Climate commitments, environmental rules and trade restrictions are emerging quickly, while the industrial, technological and financial capabilities needed to respond to them are developing much more slowly. Countries without sufficiently developed industrial ecosystems thus risk adopting the norms of the transition without mastering the technologies or financing needed to capture its benefits.

The European Union’s Carbon Border Adjustment Mechanism (CBAM) illustrates this tension. It aims to limit carbon leakage and to prevent more carbon-intensive products from gaining a competitive edge over European producers subject to tighter climate constraints. From the standpoint of partner countries, however, its application raises a development question: regulatory requirements may advance faster than the investments that would allow the industries concerned to decarbonise.¹²

The point is not to set environmental standards against development. It is to understand under what conditions the former can contribute to the latter. A climate policy that changes the constraints placed on firms, without at the same time strengthening their capacity to invest and innovate, can create a new asymmetry. Economies that have already mastered transition technologies will be able to adapt quickly. Those that depend on imported technologies, capital and skills, on the other hand, will bear a larger share of the adjustment cost.

This situation highlights a deep contradiction in the European Union’s policy towards its southern neighbourhood. The EU seeks at once to accelerate its partners’ decarbonisation, secure its energy supply and protect the competitiveness of its own industries. It also pursues a largely common climate policy, while its industrial policies remain heavily shaped by the national priorities of its member states.¹³

The ecological transition thus forces a change of focus. The question is no longer only which reforms to implement, but how to develop the capabilities economies need in order to adapt. For a transition to be truly lasting, it must bring about changes in the productive structures, skills, financial systems and administrative bodies that make it tangible.

This change of direction is also visible beyond government. The recent repositioning of the Open Society Foundations reflects a broader intellectual shift. An organisation historically associated with civil society, rights and democratic governance now gives greater weight to economic prosperity, state capacity, industrial policy and productive transformation. Democracy remains the ultimate goal, but the material conditions for sustaining it are back in the foreground.¹⁴

The return of capabilities therefore does not mean abandoning institutions. On the contrary, it raises a more demanding question: which institutions truly foster the accumulation of capabilities within a society?

The ecological transition makes this question all the more urgent because it is not limited to improving environmental standards. It also brings with it a simultaneous reorganisation of technologies, investment and global value chains.

The ecological transition has become one of the main arenas of international industrial competition. In the United States, the Inflation Reduction Act explicitly links decarbonisation, innovation, industrial investment and supply-chain security. In China, long-term investment has produced powerful industrial ecosystems across a range of low-carbon technologies. The European Union is currently seeking to reduce its vulnerabilities and strengthen its industrial base.¹⁵

The climate question is thus caught up in a broader transformation of the global economy. Photovoltaic panels, batteries, wind turbines, electrolysers, smart grids and storage systems depend on complex value chains that require critical resources, industrial components, software, engineering, finance and intellectual property. Reducing dependence on hydrocarbons therefore does not necessarily mean reducing economic dependence. Dependencies change form.

“Reducing dependence on hydrocarbons therefore does not necessarily mean reducing economic dependence. Dependencies change form.

For North Africa, this transformation comes with a paradox. The region has major assets for taking part in the energy transition: abundant renewable resources, proximity to the European market, existing infrastructure and industrial experience in certain sectors. Yet natural resources can never be a development strategy in themselves. Their impact depends on how they fit into productive and institutional structures able to turn a rent or a comparative advantage into learning.¹⁶

The experience of global value chains is instructive. Several North African economies have successfully integrated into sectors such as automotive, aerospace and electronics. This integration has created jobs and built production capabilities. Yet it has not always brought a matching command of research, intellectual property, strategic technologies, finance or the lead functions of value chains.

The green transition could produce a similar pattern. North Africa would then become a major producer of renewable electricity and hydrogen, decarbonised molecules and certain industrial components, while continuing to import much of the technology, equipment, software and financial services needed to produce them. In short, fossil-fuel dependency would be partly replaced by green dependency.

This notion should not be read as an argument against economic openness or foreign investment. Interdependencies are an integral part of the contemporary economy. Economic dependency arises when an economy engages in trade without gradually strengthening its ability to shape the terms of that trade. It results from an asymmetry in the capacity to learn, innovate, finance and govern productive transformations.

What matters is not only the amount of investment attracted, but also the capabilities it helps build. Does a new plant create a network of domestic suppliers? Are local firms developing new skills? Are universities engaging in industrial research? Can engineers master, then adapt, imported technologies? Are financial institutions gaining command of the latest economic trends? Are administrations learning to negotiate with investors and support the emergence of new sectors?¹⁷

These questions change how industrial policy should be assessed. Megawatts installed, investment volumes and export values remain important, but they are no longer enough. It is now essential to measure the learning gains a policy generates.

This distinction is key to understanding the difference between joining a value chain and achieving productive transformation. An investment can drive a rapid rise in exports without requiring deep changes in the host economy’s capabilities. Conversely, a more modest project can have more lasting effects, for example through new suppliers, the training of engineers, the development of research activities or the acquisition of new administrative skills.

The literature on global value chains has shown that integration does not automatically lead to upgrading. How it unfolds depends largely on interactions between firms, the spread of knowledge and the ability of domestic actors to master increasingly complex functions.¹⁸

The risk of green dependency lies in participation in the transition not being matched by corresponding upgrading. A country can thus become essential to a value chain while remaining dependent on the actors that control technological progress, finance, regulation or market access.

This question matters all the more because the energy transition is increasing the weight of technology and knowledge in defining economic sovereignty. Owning a natural resource or energy infrastructure is still crucial, but it is no longer enough. Research, engineering, innovation systems, financial expertise and administrative capacity are becoming essential components of strategic autonomy.¹⁹

From this perspective, competition between external partners should not be read only in terms of investment volumes. European, Chinese, American and Gulf actors offer distinct packages of capital, technology, market access and diplomatic relations. North African states should focus less on choosing an exclusive partner and more on improving their ability to negotiate with several partners. They must turn this competition into learning opportunities.²⁰

The green transition then becomes a test of the state’s strategic capabilities. The real danger is not that North Africa is excluded from the new value chains. It is that the region takes an active part in them without strengthening its institutions enough to draw lasting benefits over the long term.

This perspective brings back a question that had partly vanished from the development debate: the strategic state. But this state can no longer be modelled on one that seeks self-sufficiency or decides alone how resources are allocated. In a deeply interconnected economy, its role changes: to organise the acquisition of knowledge and to regulate interdependencies.

The classic opposition between autonomy and dependency is becoming less and less relevant in a global economy where no country can master on its own all the technologies, capital, raw materials and knowledge needed for the ecological transition. Even the major industrial powers depend on complex international networks.

The question is therefore how to regulate these interdependencies.

This distinction leads us to reconsider the notion of economic sovereignty. It can no longer be reduced to self-sufficiency. It is better understood as a state’s ability to keep room for manoeuvre in an interdependent world: by diversifying its partners, assessing investments against its own objectives, negotiating technology transfers, strengthening national skills and adjusting its strategy as international conditions change.

This understanding echoes the notion of agency highlighted during the discussions at the Tangier workshop. States clearly do not control the transformations of the international system. They can, however, build the capabilities that allow them to influence the terms on which they take part in it. Agency is not simply a matter of political will; it stems from an accumulation of institutional capabilities.²¹

These capabilities are spread across many organisations. Administrations negotiate and regulate. Universities produce and spread knowledge. Firms experiment and innovate. Development banks finance long-term investment. Specialised agencies coordinate innovation policy. Local and regional authorities organise part of the transformation on the ground. Professional bodies help knowledge circulate more freely.

The strategic state does not simply centralise every function within central government. Its role is rather to coordinate exchanges between institutions whose learning processes complement one another. The system’s success depends less on the individual performance of its parts than on their ability to learn and work together in synergy.

This approach corresponds to the notion of “embedded autonomy” put forward by Peter Evans: the state must have autonomous institutional capabilities while maintaining close ties with economic actors in order to understand their constraints, align their investments and stimulate industrial learning.²²

Industrial policy then takes on a new meaning. It is no longer limited to protecting certain sectors or subsidising firms. It becomes a policy for building capabilities: the technological capabilities of firms, the research capacity of universities, the financial resources of banks, and the negotiating and collaborative skills of administrations.

Management capabilities themselves become a strategic advantage. Low-carbon technologies are evolving rapidly, value chains are changing, international standards are shifting and geopolitical alliances remain uncertain. Industrial policy can therefore no longer be designed as a fixed plan applied over several decades. Institutions must be able to test, evaluate and adjust their policies, and to identify and correct their mistakes.

The strategic state thus becomes, in part, a learning state. The capacity for institutional learning is itself a productive resource.²³

Finance plays a pivotal role in this process. Development banks, sovereign wealth funds, investment agencies and blended-finance mechanisms do more than supply capital. They select projects, assess technologies and share certain risks, building up information along the way. They also help steer productive trajectories.²⁴

In other words, managing capital is partly akin to steering the industrial revolution. An economy that relies entirely on foreign financial institutions for its strategic investments has little room to determine the pace and direction of its transformation. This does not mean it should reject international capital. It means it must strengthen its own national financial capabilities so that it can negotiate, co-finance and select projects in line with a broader strategy.

This logic makes it possible to move beyond the choice between openness and sovereignty. Foreign investment can indeed play a key role in North Africa’s energy transition. Its contribution to development, however, will depend on its ability to produce effects that reach beyond the financed project: local suppliers, engineers, mastered technologies, financial expertise, administrative knowledge and research infrastructure.

The aim is not to maximise investment in general, but to increase its learning content.

This perspective also leads us to rethink how the success of the transition is measured. Environmental indicators will naturally remain essential: emissions avoided, renewable capacity installed, energy efficiency and reductions in carbon intensity. But they should be joined by other indicators, such as the share of local value added, the density of supplier networks, investment in research and development, the number of engineers trained, the ability of national financial institutions to finance new industries, and the progress of domestic firms into more complex technological segments.

The central question then becomes less “how much does the transition produce?” than “what does the economy learn to do because of it?”

This distinction is decisive for North Africa. The region could become a major supplier of renewable energy to Europe without this deeply transforming its productive structures. Equally, it could draw on European demand, Chinese investment, Gulf capital and its own resources to gradually develop new industrial capabilities.

Which trajectory prevails depends on the political and institutional capacity to direct investment towards a cumulative learning process. Neither is determined by technology itself.

The green transition can thus be understood less as one more sector than as an opportunity to rebuild the capabilities that drive development. It brings investment, creates new markets, upends comparative advantages and forces governments to rethink their infrastructure. It can therefore become an instrument of productive transformation, provided that public policy goes beyond simply installing energy capacity.

The green transition is generally presented as a new chapter in international development policy. In reality, it may mark the end of an older intellectual cycle.

For several decades, much of development policy was organised around a succession of transitions: democratic, economic, institutional, digital and then ecological. Although these transitions differ, they often share a common theory of change: changing rules and institutions should gradually lay the foundations of a new economic and social equilibrium.

The North African experience suggests that norms can change faster than the capabilities needed to put them into practice. We have called this the half-transition syndrome. The problem is not reform as such, but the gap between how fast rules change and how fast capabilities are built.

The ecological transition makes this contradiction especially visible today. It imposes new norms, but it also opens a competition for technologies, investment, raw materials and value chains. It therefore cannot be thought of solely as a process of environmental compliance.

North African economies are probably not at risk of missing this transition. Their available resources, their proximity to Europe and the scale of the investment to come make their participation highly likely. The risk is rather that they take part without sufficiently transforming the foundations of their development.

An economy can produce more renewable electricity and remain technologically dependent. It can export green hydrogen without mastering the electrolysers that produce it. It can attract billions in investment without having the financial structures needed to select and finance its own projects. And it can integrate further into global value chains without improving its capabilities in knowledge, technology and decision-making.

In other words, the green energy transition can lead to green dependency. This dependency, however, is neither inevitable nor synonymous with international openness. It arises when interdependencies are not matched by a proportional increase in the capacity to act.

Sovereignty must therefore be understood differently. It cannot be reduced to self-sufficiency or isolation. It lies in the ability to manage interdependencies: diversifying partnerships, negotiating investments, strengthening national skills, directing finance and keeping enough room for manoeuvre to adapt a development strategy to changes in the international system.

This perspective strengthens the role of the state, but in a different form from the one it took in the industrialisation strategies of the twentieth century. The contemporary strategic state does not necessarily control the entire productive system. Instead, it builds the institutional frameworks that allow firms, universities, banks, administrations and research centres to learn and work together.

The ecological transition can thus become more than a climate policy. It can offer an opportunity to rebuild productive, technological, financial and administrative capabilities that extend well beyond the energy sector.

The key question for North Africa is therefore no longer only how to succeed in the green transition. It is to understand which new capabilities this transition will allow societies to acquire.

Perhaps we are witnessing the true return of political economy. After several decades dominated by the question of which reforms to implement, development is coming back to a more fundamental question: how does a society acquire the capabilities that allow it to lead its own transformation?