Energy policies can strengthen economies of Middle East and North Africa

27 December 2012

Al Bastakiya's old merchant quarter in Dubai, where buildings use the traditional windcatcher cooling design. Increasingly the region can also use energy efficiency and renewables to capitalise on abundant resources besides fossil fuels.

Everyone knows that fossil fuels abound in the Middle East and North Africa, where economies are growing at a rapid clip. But in addition to these traditional fuels, there are some less well known “hidden fuels” for markets and the region that are growing in importance.  They are energy efficiency and renewable energy. The International Energy Agency is offering experience and knowledge that can help tap those resources to enable economic and political change in the region, according to IEA Executive Director Maria van der Hoeven.

“Economic reform will be an important part of the political transition,” she said in assessing recent political changes in the region. “What is less often recognised is that sound energy policies can play a fundamental role in placing economic policy as a whole on a more sustainable footing,” she added, for energy exporters as well as importers in the region.

Strong economic expansion and even stronger population growth have produced strong and continuous increases in regional energy demand, taxing electricity generation systems. Also, the robust growth has increased transport fuel sales to the point where Saudi Arabia and the United Arab Emirates now import gasoline.

Ms. van der Hoeven identified several areas where IEA input can help countries in the region.

Energy efficiency can make a big difference, as buildings’ efficiency  in particular can be improved quickly, freeing up savings for investment in creating businesses and jobs. The region has a rapid replacement rate for housing stock compared with other parts of the world, the result of government housing programmes in a number of countries to address population growth. As a result, energy efficiency can produce benefits more quickly than elsewhere.

The IEA is already working with the Saudi government on energy efficiency policy, focusing on buildings, appliances and transport. Morocco is working with the United Nations Development Program; its efficiency efforts include a building code drafted in 2009 that is contributing to policies aimed at saving 12% of energy by 2020 and 15% by 2030 compared with business-as-usual policies. The opportunities for efficiency are bolstered by Morocco’s forecast of nearly one million new homes built by 2020.

The region also relies heavily on fossil fuel subsidies. This is a global problem: the IEA estimates that fossil fuel subsidies totalled $523 billion in 2011 worldwide, with the Middle East and North Africa contributing to a nearly 30% global increase over the year, though some governments recently have moved to let their domestic fuel prices rise. Subsidies inflate demand, distort economies and reduce incentives to improve efficiency, plus they encourage carbon emissions by keeping the price of fossil fuels far lower than renewable energy. The IEA flagship publication World Energy Outlook provides guidelines on easing subsidies in a manner that seeks to avoid price shocks and provide greater assistance to less wealthy citizens, addressing elements that otherwise can make the lifting of subsidies unpopular.

Finally, the region is ripe for a boom in renewable energy, in particular solar power, offering a new, cleaner energy  that will bring more jobs and a resource that will never dry up. The opportunities for exporting renewable energy in the future should not be overlooked. The IEA is collaborating with the R20 Regions of Climate Action, a group of national and subnational governments, to help Morocco become a solar energy hub, with an eye toward expanding energy access domestically and eventually exporting power around the Mediterranean Basin.

“It seems odd to advocate solar and wind power in an area which holds 50% of the world’s crude oil and 40% of its gas,”said Ms. van der Hoeven. “But even the world’s biggest oil and gas exporters have an interest in diversifying their energy portfolio. International cooperation, in particular the sharing of best practice, can be very helpful in achieving this objective.”

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