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Expert urges removal of fuel subsidies to boost renewables

Last updated: Thursday, January 17, 2013 1:24 AM

– Countries in the Middle East need to urgently phase out fossil fuel subsidies if they intend to reach their renewable energy targets, Fatih Birol, chief economist at the International Energy Agency (IEA) said Wednesday on the sidelines of the World Future Energy Summit here.
The Middle East has some of the highest fuel subsidies in the world, he said.

“Worldwide, we have $500 billion fossil fuel subsidies and 50 per cent of that is in the Middle East,” he noted.

“It is extremely challenging to have such big subsidies and achieve renewable energy targets. If you want renewable industry to grow and on the other hand, you have fossil fuel subsidies, they are not complementary,” he added.

Abu Dhabi aims to generate seven percent of its electricity from renewable energy by 2020 (1500 MW), while Dubai targets five per cent by 2030 (1000 MW).

Saudi Arabia plans an ambitious target capacity of 17,000 MW from nuclear and 54,000 MW from renewable sources by 2032.

Domestic consumption of fuel is growing very strongly in this region, because of population growth, but also because of the artificially low oil prices, Birol said.

“This has two implications – for one, it becomes difficult for developing countries to get oil imports, and two, the region is losing a lot of revenues which it could have got from exports.”

“So countries in the region have to do two things, firstly, look at the alternatives to oil generation, especially solar and wind, which are crucial. And second, phase out the fossil fuel subsidies in order to bring the oil price down at least in line with international markets.”

“If this is not done, I think we may very well see very big challenges in the region,” he warned.

“It’s good for countries to have targets, but it’s important to put legs to targets so that they can run.”

If the region reduces subsidies and provides concrete financial and other support to the renewable energy sector, Birol forecast that the Middle East as a whole can produce 10 percent of electricity from renewables by 2035.
Arab gas reserves reached 53.9 trillion cubic meter, 27.5 percent of world reserves which is estimated at 196.2 trillion cubic metes while Latin America’s share was 3.6 of the global gas reserves, 7.1 trillion cubic meters.
Gas consumption in the Arab world is estimated at 297.7 billion cubic meters, 8.7 percent of world consumption. — SG/Agencies

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