"An energy transition that fails to engage with fossil fuel-producing countries and their needs could have profound implications for regional and international security and the stability of global energy markets," they said in an opinion column published by The Guardian.
Iraq, Opec's second-largest oil producer, is one of the least diversified exporters in the Middle East. The country, which is estimated to have 8.4 per cent of the world's proven reserves of oil, derives close to 90 per cent of government revenue from the sale of crude. Baghdad suffers from the vagaries of the oil markets, which affect its ability to finance several infrastructure and utility projects in the country.
"If oil revenues start to decline before producer countries have successfully diversified their economies, livelihoods will be lost and poverty rates will increase," Mr Allawi and Mr Birol said.
"In a region with one of the youngest and fastest-growing populations in the world, economic hardship and increasing unemployment risk creating broader unrest and instability."
Iraq has taken tentative steps to restructure its economy away from fossil-fuel dependency as the world prepares to reach net-zero emissions by 2050.
A white paper on economic reform submitted to Parliament by Mustafa Al Kadhimi's government last year recommended phasing out subsidies to critical sectors in Iraq's economy, notably power.
Iraq is diversifying its energy sources and tapping solar energy to plug its power deficit. In June, Abu Dhabi's Masdar signed an agreement with Iraq’s National Investment Commission to develop photovoltaic projects with a minimum capacity of two gigawatts.
Mr Allawi and Mr Birol stressed there was more potential to develop solar projects in Iraq.
"The worst potential solar sites in Iraq get up to 60 per cent more direct energy from the sun than the best sites in Germany," they said.
"And yet the solar plants that Germany has built to date together offer two-and-a-half times the electricity capacity of all Iraq’s operational oil, gas and hydropower plants combined."
Iraq could continue the momentum building across oil-exporting states in the Middle East, such as Saudi Arabia and the UAE, which have begun to diversify their power mix through various renewable rounds.
Iraq is forced to import electricity from neighbouring states as its war-ravaged infrastructure still provides limited power. Baghdad has spent $120 billion over the past seven years to meet its electricity requirements, IEA data shows.
Last year, the Paris-based agency said it was stepping up its support for Iraq as it faced delays in implementing critical projects due to the fall in oil prices from the Covid-19 pandemic.
Multilateral institutions have also urged the country to curb the flaring of gas, which could be processed and used for generating power.
Iraq plans to eliminate gas-flaring by 2022. The World Bank estimates about 16 billion cubic metres of gas from Iraqi fields were flared in 2015, costing the economy billions in lost revenue.
"The decarbonisation strategies of different countries will be shaped by their individual circumstances. In Iraq, oil and gas production accounts for as much as 40 per cent of total greenhouse gas emissions, before any of this is even burned to fuel cars or produce electricity," Mr Allawi and Mr Birol said.
"This makes the country’s recent commitment to curbing gas-flaring – an unnecessary and harmful practice where natural gas from oil wells is burned into the air – all the more important."