84 PERSPECTIVES ON BUSINESS AND ECONOMICS | VOL 42 | 2024 other countries, helping them meet their climate commitments (United Nations Climate Change, n.d.). This arrangement has motivated both Singapore and South Korea, two major greenhouse gas emitters, to sign agreements with Morocco regarding the future trade of carbon credits, which Morocco is potentially well equipped to supply through its renewable energy transition (Anouar, 2022; Rahhou, 2024). As of the time of writing, the details of how carbon trading under Article 6 will be regulated are still under active negotiation by the Parties to the Paris Agreement. Once more detailed frameworks are established, however, international carbon trading may represent a substantial revenue stream that Morocco can leverage to fund its green transition. Smaller-scale carbon trading may also represent a financial opportunity for Morocco. The country lacks practical financing options for smaller renewables projects, which may be less attractive to private investors due to their lower returns (Choukri et al., 2017). For these types of projects, voluntary carbon markets, which allow organizations or individuals seeking to offset their own emissions to purchase carbon offsets from projects that reduce greenhouse gas emissions or remove them from the atmosphere, are a potential financing mechanism. In Morocco, the High Atlas Foundation, an NGO dedicated to promoting sustainable economic development in rural parts of the country, has recently pioneered the sale of carbon offsets to fund reforestation projects (Yang, 2022). An offset-based strategy might also be effective for financing small-scale renewables projects that might not otherwise receive investment. Whether the sale of offsets becomes an effective source of financing for small-scale projects in Morocco may depend on how successfully robust international quality standards for carbon offsets can be developed. Offset prices dropped dramatically in 2023, due primarily to investigations casting doubt on the ecological validity of the carbon offsets currently traded in voluntary markets (L, 2024). Market regulatory reforms Morocco has proposed major regulatory changes to help the electricity sector move in a low-carbon direction. Currently, the national electric utility ONE is responsible for all electricity transmission; it also produces a significant percentage of Morocco’s power (42% as of 2017) through plants that it owns and operates. Prior to 1994, ONE was responsible for all domestic electricity generation; now, however, a majority of the country’s power is supplied by IPPs selling energy from their plants to ONE under PPAs as well as by other IPPs selling renewable energy to private clients in their own free market. Despite the increasing entry of private players into the power sector, ONE retains a monopoly on transmission in addition to being involved in generation and distribution; it is the only vertically integrated actor, making it difficult for private power producers to compete and contributing to a lack of investment in renewables projects (IMF, October 27, 2023). To boost private investment in renewable power generation and distribution, Morocco plans to complete the liberalization of its power sector, with ONE gradually transitioning out of generation entirely (Choukri et al., 2017). Eventually, other components of the electricity value chain, such as transmission and distribution, will also be opened to private competition. Domestic carbon pricing One potential solution for promoting decarbonization is the implementation of a carbon price for the power sector. Carbon pricing encompasses a variety of policies, including carbon taxes and emissions trading schemes, that impose a cost on carbon emissions, thereby seeking to create incentives for emitters to reduce their consumption of fossil fuels. These types of policies are appealing because they create not only a financial incentive for emitters to change their behaviors but also an additional revenue stream for the regulating government, generating funds that can be reinvested into renewables projects or other social or environmental initiatives. Morocco has yet to pass legislation implementing a carbon pricing scheme for the power sector despite numerous announcements in recent years that suggest an intention to pursue one. In a policy brief, Berahab et al. (2021c) proposed the implementation of a short-term carbon tax followed by a medium- to long-term national emissions trading scheme, which could eventually be linked to international carbon markets such as the EU Emissions Trading System (European Commission, n.d.). According to the IMF, the Morocco Ministry of Economy and Finance is willing to design and implement an initial carbon tax by as early as February 2025 (Padin-Dujon, 2024). However, given Morocco’s history of sluggishness on the issue––domestic carbon pricing systems have been under study since at least 2012 without resulting in any policies––it may be wise to treat this timeline with some skepticism (Nachmany et al., 2015). A major reason for Morocco to introduce carbon pricing sooner rather than later is that it may help improve the attractiveness of renewable energy projects to potential investors, thereby accelerating
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