Subsidies hurt Mena energy performace: Report
Manama, January 21, 2014
Despite being top energy exporters, countries in the Mena region fare poorly in a new energy performance index due to the high fuel subsidies and the dominance of fossil fuels in the energy mix.
Norway tops The Global Energy Architecture Performance Index Report 2014 that ranks energy systems of 124 countries according to economic, environmental and energy security indicators.
The report prepared by the World Economic Forum in collaboration with Accenture is designed to help countries spur their efforts to meet energy challenges and opportunities in innovative ways, a statement said.
Norway is followed by New Zealand and France on the list. The top 10 places are dominated by EU and OECD countries with the exception of Costa Rica and Colombia.
The top performer in the Mena region is Tunisia. The country's performance relative to other countries in the region is driven by it achieving the highest regional performance in environmental sustainability.
Among the Gulf countries, the UAE topped the list at 88. Qatar was placed at 90, Saudi Arabia 91, Kuwait 105, Oman 111 and Bahrain 118.
The low performers in the Mena region are also the lowest performers globally: Lebanon (123) and Yemen (124).
Yemen’s low ranking performance arises from a combination of fuel subsidies, reliance on fossil fuels for primary energy supply, and low electrification rates.
Energy systems in the Mena are broadly defined by the resource wealth of the region, the prevalence of energy subsidies and energy inefficiency impacting consumption and emissions, it said.
Ranked best performing region on energy security, the analysis reveals disparity of resource distribution, with three of the 17 countries importing more than 90pc of net energy needs.
Despite the high performance of net-exporting countries in the energy security dimension, their performance in the other dimensions of the energy triangle is low. Results are impacted by the prevalence of high fuel subsidies in the region that create inefficient use of resources along with high cost, and the dominance of fossil fuels in the energy mix that result in high CO2 emissions and reduce the use of low-carbon energy sources, the report said.
Mena countries dominate the top 10 ranking globally for economic contribution of fuel exports to GDP. For major net exporters such as Qatar, Libya, Bahrain, Saudi Arabia and Kuwait, the contribution of fuel exceeded 50pc of GDP in 2012. Conversely, the economic impact of the energy system on net importers like Morocco, Lebanon, Jordan and Tunisia is severe. The lowest performer, Jordan, for example, spends nearly 20pc of GDP to import 96pc of its energy needs.
Net importers such as Morocco and Tunisia are rolling out renewable energy capacity in a bid to reduce the economic impact of imports and mitigate against fluctuating fossil fuel pricing, it said.
About 41 per cent of energy supply in the top 10 countries comes from low carbon energy sources, compared to a global average of 28 per cent, the report said.
The performance of BRICS countries (Brazil, Russia, India, China and South Africa) is impacted by the prevalence of energy- and emission-intensive industries. Ranked 21st, Brazil is the top performer in this cluster, extracting 50pc more GDP per unit of energy use than the average of the other BRICS countries. China, the world’s largest energy consumer, has successfully increased access to energy for its population but continues to struggle with rising energy imports and pollution levels.
“Resource wealth or economic development alone do not guarantee high performance on the index,” explained Roberto Bocca, senior director, head of energy industries, World Economic Forum. “For an effective energy system countries need to focus on all three sides of the energy triangle - environmental sustainability, security of supply and affordability.”
The report finds that many developing countries still struggle to supply citizens with basic energy needs, providing electricity to less than 50pc of their total population. It also highlights the over-dependence of many energy systems, with 32pc of countries dependent on imports to meet more than half of their energy needs.
Energy trade can have positive impacts for both importing and exporting countries but can pose economic and energy security risks, in particular when coupled with dependence on few trading partners, it said.
“Our analysis concludes that there is no single way forward; each country must work with its own resources and constraints, making difficult choices and trade-offs,” said Arthur Hanna, managing director, energy industry, Accenture, and a member of the World Economic Forum’s Global Agenda Council on New Energy Architecture.
“The Index helps nations take stock of their energy transition challenges and address key barriers to success, such as market distorting subsidies, continued uncertainty around energy policy and funding for research and development of new energy sources and technologies.” - TradeArabia News Service