Energy Subsidies in the Arab World

The policy of maintaining tight control of domestic energy prices has characterized the political and economic environment in most Arab countries, together with many other parts of the world, for decades. The objectives behind such a policy range from overall welfare objectives such as expanding energy access and protecting poor households’ incomes; to economic development objectives such as fostering industrial growth and smoothing domestic consumption; and to politi- cal considerations, including the distribution of oil and natural gas rents in resource-rich countries. While energy subsidies may be seen as achieving some of a country’s objectives, this paper argues they are a costly and inefficient way of doing so. Energy subsidies distort price signals, with serious implications on efficiency and the optimal allocation of resources. Energy subsidies also tend to be regressive, with high-income households and industries benefiting proportionately most from low energy prices. However, despite such adverse effects, energy subsidies constitute an important social safety net for the poor in many parts of the Arab world, and any attempts to reduce or eliminate them in the absence of compensatory programmes would lead to a decline in households’ welfare and erode the competitiveness of certain industries. Therefore, a critical factor for successful reforms will be the ability of governments to compensate their populations for the reduction or removal of subsidies through carefully designed mitigation measures that protect the poorest and assist the economy in its long-term adaptation. We argue that a reform of energy pric- ing mechanisms in the Arab world may be seen as beneficial from more than one perspective, and as offering potential paths for reform. Nevertheless, this paper recognizes that the current political climate in the region will render the reform of domestic energy prices difficult in practice, such that reform may indeed be a medium- to long-term endeavour

The GCC and the Nuclear Question

For a long time, nuclear energy appeared to be an unlikely scenario for the Gulf Cooperation Council (GCC) states. However, the late 2000s have seen a policy U-turn in the GCC’s attitude toward nuclear power, with the United Arab Emirates and Saudi Arabia now pursuing plans for their own nuclear reactors by the 2020s. The introduction of civilian nuclear programmes to the GCC is symptomatic of a more structural shift in the way the GCC and the wider Gulf produces and consumes energy. Rapidly rising levels of domestic energy consumption have already made the GCC a regional energy consumer rivalling the combined energy demand of Latin America. This renders alternative sources of energy, including nuclear power, an increasingly attractive long-term solution in view of the region’s otherwise rapidly rising drag on its own main export products – crude oil and natural gas. However, nuclear power raises a number of economic, political, and security question in the fragile Gulf region. This energy comment by Laura El-Katiri explores the reasons for the GCC’s pursuit of nuclear power, and questions the economic and political rationale behind the move

Interlinking the Arab Gulf: Opportunities and Challenges of GCC Electricity Market Cooperation

The GCC countries have experienced tremendous economic growth over the past decade as a result of high windfall revenues from their oil and natural gas exports. At the same time, the region 19s own energy consumption, including of electricity, has risen fast, leading to various capacity bottlenecks in the short term with recurrent electricity outages along the Gulf coast for consecutive summers at times of peak demand. In this context, it has been noteworthy that one of the GCC 19s most recent mega-project, the GCC Interconnection Grid, went online in July 2009 with its first phase. The GCC Grid is aimed at enabling the opening of a regional market for electricity, with various potential benefits for GCC electricity supply security, as well as economic benefits. In this paper, Laura El-Katiri tried answering the question to what extent intra-GCC electricity trading could potentially be part of a mid- to long term solution for the GCC states in increasing their electricity sectors 19 supply security as well as their market efficiency. She concludes that potential for commercial trade in electricity between the GCC states does exist, but various features of national electricity markets in the GCC mean this potential is likely to materialise only in the long term. Until then, the GCC Grid stays an expensive but strategically useful piece of infrastructure which may one day form the backbone of a more integrated, regional market

Regionalizing East Mediterranean Gas: Energy Security, Stability, and the U.S. Role

View the Executive SummaryThe East Mediterranean has been witnessing an unparalleled natural resource boom since the late-2000s, when Israel, followed by Cyprus, made its first significant offshore hydrocarbon discoveries in many years. These discoveries have since proven to be substantially larger than any other resources previously explored in the East Mediterranean Sea. At the time of this writing, they consist primarily of natural gas, although liquids are expected to be discovered offshore as well, including in the potentially hydrocarbon-rich waters of Lebanon and Syria. A 2010 U.S. Geological Survey suggests the Levant basin—the area including Cyprus and Israel’s offshore zones, and the offshore and some onshore territories of Syria, Lebanon, and the Palestinian territories—could hold as much as 1.7 billion barrels of oil and up to 122 trillion cubic feet of natural gas, leaving as much as two-thirds of the region’s potential resource base still undiscovered.https://press.armywarcollege.edu/monographs/1472/thumbnail.jp

A Brief Political Economy of Energy Subsidies in the Middle East and North Africa

Energy subsidies are among the most pervasive and controversial fiscal policy tools used in the Middle East and North Africa (mena). In a region with few functioning social welfare systems, subsidised energy prices continue to form an important social safety net, albeit a highly costly and inefficient one. In the mena region’s oil and gas producing countries, low energy prices have also historically formed an important element of an unwritten social contract, where governments have extracted their countries’ hydrocarbon riches in return for citizens’ participation in sharing resource rents. While it is clear that energy subsidy reform will not be the only variable at play, its potential socio-economic dividends are important factors for enabling some common regional objectives—sustainable fiscal policies, fiscal space to invest in key areas, and a more efficient and equitable distribution of scarce resources—to be achieved, helping to promote a more stable political status quo in the long term. If accommodated by effective mitigation measures, reforming energy subsidies in the mena region’s middleincome economies could be a powerful tool for governments—addressing those very profound socio-economic grievances that have contributed to the outbreak of political protest and, in some cases, to an intensification of domestic infighting over political control. In this paper, we look at some of the mena region’s potential avenues for reform. While the past has demonstrated the political difficulty of reforming energy prices, recent experience also shows that the reform of energy subsidies can be achieved, if accompanied by a set of enabling factors

Energy Poverty in the Arab World: The Case of Yemen

While much of the emphasis of the literature on energy poverty is on the prevalence of the phenomenon in sub-Saharan Africa and South Asia, little has been written about energy poverty in the Arab world. Traditionally having being seen as one of the world’s most energy rich regions, the Arab world has in recent years often been overlooked as a region which suffers severely from energy poverty itself. In 2002, about 65 million people in the Arab world had no access to electricity, and an additional 60 million were severely undersupplied in both urban and rural areas. In terms of cooking and heating, almost one-fifth of the Arab population rely on non-commercial fuels like wood, dung, and agricultural residues particularly in Comoros, Djibouti, Sudan, Yemen, and Somalia but also in Algeria, Egypt, Morocco, and Syria. This study by Laura El-Katiri and Bassam Fattouh fills a gap in the existing literature by looking at the case of prevailing energy poverty in Yemen, one of the poorest countries in the Arab world. The Yemeni case is particularly interesting because of the country’s status as a net energy exporter. Large segments of the Yemeni population both in rural and urban areas rely heavily on traditional fuels such as firewood and dung while electrification rates in Yemen is relatively low where only 54% of Yemeni households have access to electricity. Decades of underinvestment and lack of necessary infrastructure, and Yemen’s prevailing poverty problem have all contributed to this status, as has the country’s fractured political system

Enabling a Just Transition: Protecting Human Rights in Renewable Energy Projects: A Briefing For Policymakers

This briefing provides guidance to policy- and decision-makers (hereafter, “policymakers”) on the benefits of and strategies for taking a human rights-based approach to renewable energy policy. It highlights the various impacts of utility-scale renewable energy projects on peoples and communities, associated risks for policymakers, and explains how national, regional, and global policies can help mitigate those impacts and risks. The briefing addresses different agents of policy- and decision-making: Host states, where renewable energy projects are proposed or located; Home states where corporations pursuing renewable energy investments, especially investments abroad, are based; Development Finance Institutions (DFIs) financing renewable energy investments, especially those required to comply with environmental and social safeguards; and Intergovernmental bodies concerned with socio-economic cooperation, which can set standards regarding the conduct of renewable energy investments. This briefing is part of a series of publications by the Columbia Center on Sustainable Investment that provide guidance on adopting a rights-based approach to renewable energy deployment

Enabling a Just Transition: Protecting Human Rights in Renewable Energy Projects: A Briefing For Policymakers

Rapid deployment of renewable energy is critical to protecting people and ecosystems from the climate crisis. Policymakers know this, and the much-needed expansion of existing renewable energy generation is anticipated to accelerate under new legislative measures. To truly serve people and the public interest as intended, this global transformation toward low-carbon, sustainable energy systems must respect the rights of Indigenous Peoples and local communities. Their lands are, and will be, host to large-scale renewable energy projects that, in some instances, have led to land-grabbing and forced displacement. Land-intensive renewable energy projects can be carried out responsibly. However, if policymakers do not effectively center human rights in the just energy transition, they may inadvertently cause widespread harm to Indigenous Peoples and local communities, including loss of land, livelihoods, and cultural integrity, along with grave impacts on human rights defenders and workers. Further, conflicts over large-scale renewable energy deployment can erode critical popular support for renewable energy technologies, threatening plans to build more sustainable energy systems in the long-term. This could lead to significant reputational, financial, and legal risks for home state governments, host state governments, and development finance institutions (DFIs). The briefing highlights five key policy priorities that governments, DFIs and intergovernmental organizations should pursue, and outlines diverse strategies that each group of actors can adopt to meet each priority. As part of their just transition efforts, all policymakers must: 1) Recognize and respect human rights, including all legitimate tenure rights, 2) Facilitate meaningful engagement with affected peoples and communities, 3) Advance local-level development, including through co-equity models and benefit sharing, 4) Institute systems to address human and land rights harms, and 5) Protect the safety of environmental, land, and human rights defenders. Strategies outlined in this briefing include, among other things, participatory land use planning, innovative financing and community support mechanisms, co-equity models, mandatory human rights due diligence frameworks, human rights-aligned investment assessment processes, and environmental and social safeguarding policies

The gas exporting countries forum - global or regional gas cartel-in waiting?

The GECF was launched at a meeting of energy ministers in Teheran in May 2001, by the governments of Algeria, Brunei, Indonesia, Iran, Malaysia, Oman, Qatar, Russia and Turkmenistan. The organisation describes itself on its website as ‘a gathering of the world’s leading gas producers aimed at representing and promoting their mutual interests’ with the objective of increasing ‘the level of coordination and [to] strengthen the collaboration between member countries.

Energy Sustainability in the Gulf States – The Why and the How

For many decades, the Gulf states’ significant oil reserves have rendered the region among the most important energy suppliers in the world, and there is similar potential for the region’s natural gas reserves. However, the Gulf states’ rapidly rising regional consumption has begun to play a critical role in the region’s future export prospects, including the size and longevity of domestic oil and gas production, both for domestic and export market supply. This paper by Laura El-Katiri aims to discuss the current and future challenges evolving from the Gulf region’s growing domestic energy use, coupled to its continued, almost exclusive, reliance on oil and natural gas, on the region’s future export potential, as well as the security of its domestic energy supplies. It suggests that only a more proactive Gulf policy response to rising domestic energy consumption can help safeguard the stability of the Gulf’s role as a global energy supplier as well as its domestic long-term energy security; such a policy response would include the diversification of the region’s energy base and the effective management of domestic demand