January-February 2014

 

With its energy consumption growing twice as fast as its economic growth, the Arab region is among the least efficient in the world. The report of the Arab Forum for Environment and Development (AFED) on sustainable energy points out that a 56 percent reduction in energy consumption can be achieved in the Arab region through the promotion of efficiency measures while maintaining the present productivity levels.

 

The report further highlights the interrelation between water and energy, the latter having a major role in meeting the region's water needs from desalination of seawater to pumping groundwater, distribution and treatment. Strange enough, per capita consumption of fresh water in some of the most arid Arab countries is among the highest in the world, and irrigation efficiency for food production is one of the lowest, at an average of 40 percent.

 

 

AFED report finds that current energy and water pricing policies in most of the Arab countries are conducive to waste and hinder the rapid deployment of energy efficiency, optimization and clean technologies. Consumers, in some of these countries, pay less than 10 percent of the production costs. The report calls for reforming the prevailing policies and pricing mechanisms to contribute to the national development priorities, put an end to waste and achieve a higher level of efficiency. It is evident that up to 90 percent of energy and water subsidies go into the pockets of the rich rather than the poor.

 

 

On the other hand, reviewing energy subsidies shall help attract private sector investments in all forms of energy - not just renewable energy. For example, unrealistic local prices do not help developing natural gas resources in the Arab region due to the lack of investment incentives, although the use of natural gas leads to the adoption of cleaner fuels and renewables. But the gas transport networks in the region are among the least developed in the world. Ironically, most Gulf countries still depend on diesel, rather than gas, for electricity generation, particularly because they are not interconnected by any networks.

 

 

Speakers at the latest AFED conference revealed that the Arab countries have recently started to have a strikingly serious approach to the promotion of efficiency and prevention of waste. Participants came to know about the work of the Saudi Energy Efficiency Center (SEEC), the "Estidama" program of the Abu Dhabi Urban Planning Council (UPC), and the initiatives of the Dubai Supreme Council of Energy (DSCE) - all of which aim at energy and water consumption rationalization. Some private companies gave presentations on solar power generation demonstrating that reform of subsidy policies shall necessarily enhance efficiency levels and promote the cost-effective generation of clean and renewable energy. For instance, the Saudi ACWA Power company presented a model of the 160 MW "Noor 1" concentrated solar power (CSP) plant that it is constructing in Morocco. The plant, which is scheduled to start production in 2015, shall provide electricity for prices that are lower than the real cost of conventional fuelled power generation in Morocco, and yet shall generate profit. Similar examples from Jordan and Egypt were also presented.

 

 

Malek al-Kabariti, former Jordanian Minister of Energy and President of National Electric Power Company (NEPCO) declared that "petroleum is very precious to be burnt; and irrational subsidies of fuel and electricity are the worst measures adopted in the Arab region, going mostly to the rich."

 

 

The real cost of power is not limited to production but also involves evaluating the cost of depleting the reserves of a national resource such as oil and the impacts of uncontrolled local consumption of fuels on public health as a result of air pollution. Governments can use the funds saved through the reform of subsidy policies for providing social benefits covering health, education and employment opportunities. This cannot be achieved by copying a ready-made formula, but rather as part of a comprehensive national plan that defines priority needs.

 

 

An AFED report on green economy demonstrated that a 25% reduction in energy subsidies would free up $35 billion per year. It further highlighted the need of the Arab world to invest $25 billion a year over a period of ten years in order to secure reliable and safe water services. A recent report about Arab water issued last month by the United Nations Development Programme (UNDP) resonated AFED findings, when it estimated that over $200 billion of investments are needed over the next decade to supply the Arab world's water needs. So, can we imagine that all such investments that support the people's health and social conditions can be provided by merely partial reforms of pricing policies?

 

 

The issue of subsidies and energy pricing has drawn unprecedented attention during the closing weeks of 2013. Kuwait formed a ministerial committee to review subsidy policies, and following Dubai's initiative of lifting subsidies, UAE announced that electricity and water rates shall be progressively raised starting initially with a 15% increase. Oman's Minister of Oil and Gas, Mohammed al Rumhi, voiced this new attitude very clearly saying that existing subsidy policies cause loss and waste and are but a real crime that puts the area at risk and undermines its economies.

 

 

Despite all the waste, 50 million Arabs remain without access to secure electricity and 100 million are still in need of clean water, while subsidies go into the pockets of the rich. If really we want to support the poor, it is time to change