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Executive Summary
The systemic waste of natural resources in the Gulf is eroding economic resilience to shocks and increasing security risks. The six Gulf Cooperation Council (GCC) countries now consume more primary energy than the whole of Africa. Yet they have just one-twentieth of that continent’s population. Almost 100% of energy is produced from oil and gas without carbon dioxide abatement. If the region’s fuel demand were to continue rising as it has over the last decade, it would double by 2024. This is a deeply undesirable prospect for both the national security of each state and the global environment. Output generated is not commensurate with energy used. Energy intensity regionally (units of energy per unit of GDP) is high and rising in contrast to other industrialized regions, and this is driven by systemic inefficiencies. The situation threatens sustainability on several levels, and is exacerbated by groundwater depletion and an increasing reliance on oil- or gas-fuelled desalination.
Between 2011 and 2013, Chatham House worked with partner institutions, policy-makers and technical experts in Saudi Arabia, the United Arab Emirates (UAE), Oman, Qatar and Kuwait to support practical strategies to reduce energy intensity. This report is based on the discussions at six workshops which included representatives of over 60 local institutions with a critical interest in and influence over domestic energy. To our knowledge, this is the first report to offer practical recommendations that address the
key challenges of governance, political commitment and market incentives from a GCC-wide perspective.
Remarkable progress is evident in the clean energy targets and efficiency strategies that have sprung up across the region since 2009. Recognizing the risks in the current system and the economic potential from new sectors, GCC governments have dramatically scaled up plans that emphasize ‘sustainable energy’ transition. For Saudi Arabia securing future hydrocarbons export capacity is a priority. Across the region, remaining ahead in the energy industry and preparing for multiple resource stresses and price volatility are common drivers. The ballooning costs of subsidies – and in the case of the UAE and Kuwait, gas imports – make a clear business case for government-led efficiency interventions. Estimates by the International Monetary Fund of the energy subsidy burden on individual governments ranged between 9% and 28% of government revenue in 2011. This is more than is being spent on either health or education, and highlights a missed opportunity to improve the living standards of those who need it most.
All GCC countries now have clean energy plans or targets and there are several impressive steps towards conservation. These include Saudi Arabia’s emerging efficiency master plan, Abu Dhabi’s comprehensive cooling plan, the integration of energy strategy in Dubai, innovation in green buildings standards in the UAE and Qatar, and Oman’s and Dubai’s work towards cost-reflective utilities pricing. Comprehensive development strategies that aim at a ‘low carbon pathway’ or ‘green growth’ are also emerging (in Qatar and the UAE).
But in all GCC countries the effectiveness of plans hangs in the balance, chiefly owing to governance challenges, lack of market incentives and unpredictable political support.
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Executive Summary
The systemic waste of natural resources in the Gulf is eroding economic resilience to shocks and increasing security risks. The six Gulf Cooperation Council (GCC) countries now consume more primary energy than the whole of Africa. Yet they have just one-twentieth of that continent’s population. Almost 100% of energy is produced from oil and gas without carbon dioxide abatement. If the region’s fuel demand were to continue rising as it has over the last decade, it would double by 2024. This is a deeply undesirable prospect for both the national security of each state and the global environment. Output generated is not commensurate with energy used. Energy intensity regionally (units of energy per unit of GDP) is high and rising in contrast to other industrialized regions, and this is driven by systemic inefficiencies. The situation threatens sustainability on several levels, and is exacerbated by groundwater depletion and an increasing reliance on oil- or gas-fuelled desalination.
Between 2011 and 2013, Chatham House worked with partner institutions, policy-makers and technical experts in Saudi Arabia, the United Arab Emirates (UAE), Oman, Qatar and Kuwait to support practical strategies to reduce energy intensity. This report is based on the discussions at six workshops which included representatives of over 60 local institutions with a critical interest in and influence over domestic energy. To our knowledge, this is the first report to offer practical recommendations that address the
key challenges of governance, political commitment and market incentives from a GCC-wide perspective.
Remarkable progress is evident in the clean energy targets and efficiency strategies that have sprung up across the region since 2009. Recognizing the risks in the current system and the economic potential from new sectors, GCC governments have dramatically scaled up plans that emphasize ‘sustainable energy’ transition. For Saudi Arabia securing future hydrocarbons export capacity is a priority. Across the region, remaining ahead in the energy industry and preparing for multiple resource stresses and price volatility are common drivers. The ballooning costs of subsidies – and in the case of the UAE and Kuwait, gas imports – make a clear business case for government-led efficiency interventions. Estimates by the International Monetary Fund of the energy subsidy burden on individual governments ranged between 9% and 28% of government revenue in 2011. This is more than is being spent on either health or education, and highlights a missed opportunity to improve the living standards of those who need it most.
All GCC countries now have clean energy plans or targets and there are several impressive steps towards conservation. These include Saudi Arabia’s emerging efficiency master plan, Abu Dhabi’s comprehensive cooling plan, the integration of energy strategy in Dubai, innovation in green buildings standards in the UAE and Qatar, and Oman’s and Dubai’s work towards cost-reflective utilities pricing. Comprehensive development strategies that aim at a ‘low carbon pathway’ or ‘green growth’ are also emerging (in Qatar and the UAE).
But in all GCC countries the effectiveness of plans hangs in the balance, chiefly owing to governance challenges, lack of market incentives and unpredictable political support.
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