GRM 2010 GRM 2011

Abstract Details

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After the Fall: Challenges and Opportunities of the New Energy Prices Reality
Paper Proposal Text :

The collapse of world energy prices demands the development of a large range of innovative energy policies in the Gulf. Understanding the development, implementation, and implications of such policies is a critical area for research that has remained under-researched by institutions in the region. This paper aims to contribute and repair those shortcomings by defining the contours of a robust and comprehensive set of energy policies in the region. This paper will provide a regionally-specific study of policies that could help address the unique domestic limitations of GCC countries as well as the urgent need to address the limited awareness of populations in regards to energy consumption and waste. This paper will in particular highlight the possible adaptation of policy instruments that proved successful in Europe to the circumstances of GCC countries, in turn improving the adoption of new ideas and their commercialization.

The first focus of this paper would understandably be energy subsidies and energy price reforms. When reforming subsidies, GCC decision makers are currently more interested in simple across the board cuts than in developing strategic plans that would maximize social welfare and energy efficiency through appropriate market mechanism. However, subsidies can also be targeted so that they are both less costly and generate absolute gains. For example: when discussing the electricity market, an electricity market can be created with some subsidies but only focused on specific large consumers while taking measures to prevent growing energy poverty and fragile SMEs. Similarly, gas prices increases have important impacts on inflation and consumer prices that should be offset by targeted fiscal relief packages to soften the blow on the most vulnerable part of the population.

This paper also demonstrates that for pricing reform to be effective, a coordination between and among the GCC countries is essential to synchronize the mechanism for setting prices among the member states. Differences in definition, process, and basis for prices maintain barriers to economic efficiencies among GCC countries. The social impact of such reform could be mitigated if the reform takes place among all the GCC countries.

Finally this paper addresses the socio-economic aspects of energy prices reforms. Analyzing recent surveys carried out by Qatar University, this paper explains the population’s attitudes towards subsidy reforms and their economic and social priorities. It shows that while populations seems to be understanding as to the macroeconomic context driving the need for subsidy reforms, there is a significant gap in raising public awareness on energy consumption and improving the willingness of people to participate in promoting new energy technologies. These issues need to be addressed to convince citizens to participate in GCC wide initiatives towards sustainable development. This paper presents examples of social innovations that will help tackle this shortcoming and enhance the sustainability of everyday behaviors of GCC citizens. Reducing energy consumption and improving energy efficiency is essential if GCC countries hope to implement successfully their energy reforms. An increased awareness of populations on the benefits of renewable energy is also needed to allow GCC countries to participate in the global efforts on climate change mitigation but also to create domestic support to the development of an industry that could help in creating jobs for the GCC citizens.

A series of case studies will be used by this paper to demonstrate the benefits of optimizing diversification of the energy mix through renewables. These include both experience from the Gulf and exogenous to the region that could be replicated throughout the GCC. For example, the Shagaya project located in the northeast of Kuwait as well as the Prosol initiative implemented in Tunisia are successful programs that are discussed in the paper.