GRM 2010 GRM 2011

Abstract Details

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Transition towards a Sustainable Life Style under a Rentier Economic Paradigm: Case of the GCC States
Paper Proposal Text :
Thanks to large hydrocarbon deposits and relatively small populations, Gulf Cooperation Council (GCC) states (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE) have enjoyed decades of economic prosperity in the form of public subsidies, generous state employment and numerous other benefits granted by the state. Very low electricity and water rates, cheap gasoline prices incentivized overconsumption and waste in those countries such that they are among the highest per-capita energy consumers. Rentier economic system in GCC states where the political rights are traded-off with economic privileges can play a decisive role whether these countries transition to a more sustainable energy consumption and life style. We investigate whether rentier economic system can be reformed without a political change in GCC states to promote a transition to sustainable energy consumption and life style. We particularly focus on two potential approaches which may facilitate such a transition to occur: (1) gradually reduction of energy and water subsidies with a compensating economic support mechanism for the citizens, and (2) removal of market entry barriers to support growth of new technologies and services vital for the sustainable energy transition. We investigate feasibility of these two approaches in the GCC countries to measure potential of sustainable energy transition. Recent collapse of global oil prices have caused GCC states to run government budget deficits prompting these governments to phase out some costly subsidies. Saudi Arabia, UAE and Qatar have partially eliminated energy and water subsidies with varying degree while other member countries are also considering the removal of subsidies. Whether phasing out of subsidies in those countries have decreased energy consumption and stimulated energy conserving efforts needs to be seen. Furthermore, all the GCC countries are striving to attract non-oil foreign investment and create a vibrant market economy as a part of their diversification strategy away from oil since 2000s. Many industrial free zones and various regulations have been introduced in these countries to remove the economic barriers. Albeit some achievement, implicit entry barriers still exist in certain sectors of the economy.