Study: Middle Eastern Countries Would Save Money by Ditching Fossil Fuels in Power Mix
More renewables and transmission lines would save MENA countries money. (Credit: Total)
Abandoning fossil fuels for electricity generation by 2030 would save money for countries in the Middle East and North Africa (MENA), according to new research into renewable energy in the area.
A feasibility study of 100 percent renewable electricity systems across MENA found that relinquishing fossil fuels in favor of generation based mainly on solar and wind could help cut costs by between 55 percent and 69 percent compared to a business-as-usual scenario. The study, published last month in Energy Strategy Reviews, is believed to be the first to look at how renewable energy generation might meet hourly loads across MENA.
The study looks at several scenarios, including establishing fully renewable electricity grids independently in most MENA countries, or having the whole area interconnected by high voltage DC transmission links.
A third scenario looks at the effect of adding loads from seawater desalination and the industrial gas sector onto a MENA-wide interconnected electricity system.
The researchers estimated the levelized cost of energy (LCOE) arising from fully renewable electricity systems would vary between €40.30 and €52.80 ($43.53 and $57.04) per megawatt-hour, depending on the scenario. The estimated business-as-usual LCOE is €118.60 per megawatt-hour, and that’s without including the cost of greenhouse gas emissions.
Unsurprisingly, the most expensive scenario was the one without interconnections between countries. Evening out supply and demand with a MENA-wide transmission network would cut LCOE from €52.80 down to €48.30 ($52.16) per megawatt-hour, the study found.
Importantly, though, the research also showed that coupling the desalination and industrial gas sectors to renewable energy generation could cut LCOE even further, reducing it by 17 percent compared to simply having an interconnected grid.
The integration would be achieved using power-to-gas technology, with 90 percent of electrical energy generation coming from onshore wind and large-scale PV.
“Power-to-gas technology not only functions as a seasonal storage by storing surplus electricity produced mainly from wind power and partially from solar PV but provides also the required gas for the non-energetic industrial gas sector,” said the study.
Middle East solar energy prices continue to fall
The research poses interesting questions for MENA policymakers. While the lowest LCOE can be achieved by interlinking nations and integrating their industrial operations, going down this route could be challenging in practice given the fragile geopolitics of the region.
It would also require by far the highest level of capital investment: almost €1.9 trillion ($2 trillion), compared to €908 billion ($981 billion) for a MENA-wide electrical grid and €962 billion ($1 trillion) for each country to have its own renewable energy supply.
Based on International Monetary Fund data, this investment would equate to 60 percent, 29 percent and 31 percent of total MENA gross domestic product (GDP) in 2019, respectively.
However, said lead author Arman Aghahosseini, of Lappeenranta-Lahti University of Technology in Finland, given an average energy infrastructure lifetime of around 30 years the annual capital expenditure required under any scenario would likely be only 1 percent or 2 percent of GDP.
This “seems to be very well affordable,” said Aghahosseini. “Of course, we agree that tackling the geopolitical issues is not so easy and implementing such a project [with full integration] requires significant cooperation and solidarity between the countries.”
The study’s LCOE figures do not seem far-fetched in view of pricing seen in recent MENA solar auctions.
Four countries in the area were already seeing solar bids of less than $25 per megawatt-hour last year before Dubai attracted a $17-per-megawatt-hour bid for the next phase of its Mohammed bin Rashid Al Maktoum Solar Park.
And in January, Qatar claimed to have gone even lower, without disclosing figures. Despite this, some observers remain cautious about accepting studies that claim to show how regions can achieve full decarbonization of the electricity system.
Noting that many places, including a growing number of U.S. states, now have 100 percent renewable targets for the electricity sector, Menlo Energy Economics president Fereidoon Sioshansi said: “I think you start getting into problems at 50 percent.”
A study last year by Energy and Environmental Economics for Calpine Corporation in the U.S. had shown that balancing variable loads with intermittent renewable energy supplies became prohibitively challenging and expensive at penetrations beyond 85 percent, Sioshansi said.
“Moving towards 100 percent is a good idea, but getting to actual 100 percent doesn’t really make sense,” he said.
On the 3rd and 4th March of 2020, a workshop on Transboundary Water Cooperation in the MENA Region took place in Beirut, where the Nexus Regional Dialogue Programme (NDP)-MENA shared some of the experiences made with applying the WEF Nexus approach in the Niger Basin.
How can transboundary water cooperation in the Middle East and North Africa be strengthened to support the achievements of the Sustainable Development Goals (SDGs), and particularly Goal 6 (Clean Water and Sanitation) in the region?
The workshop was jointly organized by the United Nations Economic Commission for Europe (UNECE), the United Nations Economic and Social Commission for Western Asia (ESCWA) and the Global Water Partnership – Mediterranean (GWP-Med).
Throughout the two days, lively discussions were held on good and bad practices as well as lessons learnt from cooperation on transboundary surface and groundwater in the MENA region.
The link between climate change and transboundary water management
The workshop stressed the need to strategically develop approaches for exchanging data and information through methodological frameworks and case studies, involving all the riparian countries. One goal would be a common database featuring indicators on various factors such as guidelines, strategies for M&E or the enabling of the environment, as of this day data on some of these factors is rather incompatible. Tools that could accomplish and aid in this include statistical data and remote sensing or the application of GIS modelling. The exchange between the attendees also shed light on the linkages between transboundary water cooperation and climate change adaptation, such as the role of groundwater used for irrigation, the sustainability of applied pumping levels as well as the salinization of soils. Resources and tools of the Water Convention and the regional climate financing initiative led by the Union for the Mediterranean were mentioned as important tools, together with a set of tools and approaches for improving transboundary water cooperation in the MENA region, including good practices for water allocation and the Water-Energy-Food-Ecosystem Nexus framework. In addition, the role of the international water law in supporting transboundary cooperation was stressed.
The WEF Nexus approach and transboundary water management
The role of the Nexus approach in offering multiple benefits through the inter-sectoral approach it adopts, however the need for stronger supporting evidence through case studies was highlighted. Participants stressed the importance of considering cross interlinkages when planning Nexus interventions, for example in the use of renewable energy for water abstraction from wells, that can lead to an overexploitation of groundwater due to the abundance of energy for pumping or the creation of employment opportunities that counteract migration through the preservation of water resources and land.
In a session entitled: “Tools and approaches for improving transboundary water cooperation in the MENA region, Experience sharing of Nexus approaches application in transboundary basins from the region and beyond”, Dr. Nisreen Lahham, the Coordinator of the NDP- MENA was sharing the experience of the NDP in the Niger Bain on transboundary cooperation through the Nexus approach together with lessons learnt. (Presentation).
The presentation highlighted the achievements of the NDP-Niger in mainstreaming the Nexus approach within the Niger Basin authority (NBA) which are above others the consideration of the WEF Nexus approach in multilateral planning processes of the NBA’s Operational Plan (2016-2024). The methodology of how the NBA is selecting the activities based on a WEF Nexus dimension was illustrated during the session, which includes a scoring system that highlights the achievement of multiple objectives though a single intervention in a project as well as the avoidance of undesired impacts that conflict with water, food or energy security. Furthermore, a tool for assessing multi- purpose dams in a collective manner to maximize the benefits among all interests and stakeholders in an international setting was presented. As an example, the construction of the Fomi Dam in Niger was used, as it offers a case where the Nexus approach was used in negotiations and multilateral planning processes, with an impact on decision-making, to avoid conflict of interests between different countries on transboundary water management and ecosystem protection.
By the end of the presentation, participants discussed potentials for the MENA region by applying the Nexus approach in transboundary contexts, as seen in the successful example of the Niger basin. The main question was how to enhance the role of regional organizations, such as the Nile Basin Authority, in bringing stakeholders together to work on beneficial transboundary solutions for all riparian countries. Regional knowledge and practice exchange with other regional organizations such as the Niger Basin authority was considered along with improving stakeholders’ capacities for handling resource conflicts.
For further information, please contact Dr. Nisreen Lahham, Regional Coordinator of the NRD programme for the MENA Region.› back
Oman’s Ministry of Technology and Communications (MTC) has committed to a memorandum of cooperation (MoC) with BankDhofar at the Sas Center for the 4th Industrial Revolution (4IR), in order to manage a technology innovation lab at the center.
The MoC was reportedly signed by Dr Salim bin Sultan Al Ruzaiqi, CEO at MTC, and Abdul Hakeem Omar Al-Ojaili, CEO at BankDhofar.
The innovation lab has been established to help students and local Fintech startups, as they focus on developing innovative financial technology products and services.
“The Ministry has launched the SAS Center for the 4th Industrial Revolution to keep pace with the current developments in the ICT sector. Signing this MoC with BankDhofar reflects the significant role of the private sector in supporting this dynamic sector and the Omani youth initiatives in entrepreneurship.”
He added that through this cooperation, they aim to create an encouraging environment that can help develop useful Fintech solutions, which could become part of the 4th IR technologies.
He also said the project aims to encourage and support Oman’s private sector organizations to continue to empower the nation’s emerging technology fields.
“The innovative lab at Sas Centre for 4th Industrial Revolution serves our vision of contributing to such projects of national value, and it also contributes to the development of the Fintech field in general.”
“We are in the midst of the 4th Industrial Revolution where the banking sector has to seize the opportunity and take part, supporting the youth and encouraging them to become effective in a field which will positively contribute to the national economic growth in the future.”
MTC and BankDhofar will work cooperatively to establish, host, and manage the innovation lab. They will provide mentorship and training for Omani students, staff, local startups and Fintech firms.
In December 2019, Bank Muscat, the leading financial services provider in the Sultanate, revealed that the Central Bank of Oman had approved the institution’s request to establish a $100 million (appr. OMR38.5 million) nationwide, strategic Fintech investment program.
The investment program is reportedly part of Bank Muscat’s strategic growth initiative.Sponsored Links by DQ Promote
OPINION: The epic oil price slump, if prolonged, is bound to prove calamitous for the upstream sector of the financially strapped Middle Eastern and North African producers and those with high production costs.
The consequences will go beyond the energy sector for the more populous nations, where autocratic governments have long used oil windfalls to shield themselves from social unrest through generous handouts and subsidies.
World Bank warning
“As the world struggles with the fear of recession, the Middle East and North Africa could be the hardest hit by what is arguably a perfect storm: the coronavirus spreads to the region and oil prices collapse,” the World Bank says.
“If the decline in oil prices persists, it will erode the fragile macroeconomic and social stability of countries, especially in the Middle East and North Africa, that have been hit by the novel coronavirus.”
Only the wealthy Persian Gulf producers with small populations — such as Qatar, Kuwait and the United Arab Emirates — can be expected to weather a prolonged storm thanks to their enviable financial position.
Iran position precarious
The major losers will primarily be Iran as well as Iraq, Libya Algeria, Oman, and Saudi Arabia.
Iran, whose economy is being seriously squeezed by unprecedented US sanctions against its vital oil sector, will find itself struggling to pay for basic imports as the price collapse will further reduce income from the crude sales achieved through circumventing the stifling sanctions.
Iran’s exports have fallen to a fraction of the 2.5 million barrels per day that the Islamic Republic used to export before May 2018, when US President Donald Trump tore up the landmark 2015 nuclear agreement and imposed draconian punitive measures against the country.
The Iranian Central Bank has just put out an international distress call amid rising cases of the coronavirus outbreak by asking the International Monetary Fund (IMF) for $5 billion in emergency funds to cope with containment.
Iran is fast becoming the global epicentre of the endemic, with more than 500 dead and 11,000 afflicted.
Severe economic problems have led to widespread unrest in the past two years, with the clerical leadership employing heavy-handed tactics to quell dissent.
Iraq set to suffer
Neighbouring Iraq is in the grip of growing political unrest with protesters demanding jobs and end to endemic corruption.
Iraq, Opec’s second-biggest producer, has been without a functioning government for months, disrupting planning and delaying major upstream projects.
Rising tensions between the US and Iran — both of which are fighting for influence in Iraq — have added to the security and political woes.
Algeria, often seen as a hostile destination for international oil companies, will find it difficult to attract fresh investment in the face of the price collapse and social unrest.
Algeria’s Prime Minister Abdelaziz Djerad said the North African country is faced with an unprecedented “multi-dimensional crisis”, while also urging the public to make fewer demands of the government and reduce their presence on the streets.
Libya’s civil war, which has crippled the oil industry, is showing no signs of ending.
Oman has so far been spared social unrest but the future remains bleak since the Persian Gulf sultanate has the highest production costs among regional producers because the bulk of its oil production is ultra-heavy heavy, which needs robust commodity prices in order to compete with other blends.
The oil price rout, arising from the collapse earlier this month of Opec+ talks to persuade Russia to agree to new production curbs, is also a real threat to Saudi maverick ruler Crown Prince Mohammed bin Salman, who has pinned his success as the future king on delivering on an ambitious economic diversification scheme funded by oil money.
Erosion of sandy beaches will endanger wildlife, cause massive losses in coastal cities in the world. Mohammed El-Said, in his Egypt related article titled Egypt to lose 1000 km of sandy coasts due to erosion: Study is by any means not exaggerating the potential impact of climate change on Egypt. The country’s habitable space is very limited to 5 per cent. The rest of the land is uninhabitable desert. The population, therefore, concentrated around the narrow Nile Valley and Nile Delta, with some smaller numbers along the Mediterranean and the Red Sea coasts would want to preserve as much as possible of the seafront.
The world’s beaches represent an interface between land and water, and provide protection for coasts from marine storms and hurricanes, but a new study by the European Commission’s Joint Research Centre indicates that without mitigating the effects of climate change and adapting to it, half of the world’s beaches will be vulnerable to erosion by the end of the century.
Erosion of sandy beaches will endanger wildlife and may cause heavy losses in coastal cities that no longer have buffer zones to protect them from rising sea levels and severe storms. In addition, coastal erosion increases the cost of governmental measures to mitigate the effects of climate change.
In the study published last week in the journal Nature Climate Change, researchers expect erosion to destroy 36,097 km, or 13.6% of sandy coasts around the world, including the Egyptian coast, within 30 years. The situation is expected to worsen in the second half of the century as 9,561 km, equivalent to 25.7% of the world’s beaches are estimated to be eroded.
The study provides forecasts of the shoreline’s shape between the years 2050 and 2100. It links changes in the shoreline directly to climate change based on the concentration of greenhouse gases according to the Representative Concentration Pathway (RCP) approved by the Intergovernmental Panel on Climate Change (IPCC). Thus, the study aims to calculate shoreline changes globally based on the ratio of greenhouse gases in the atmosphere.
In the latest report of the IPCC in 2019, scientists studied the greenhouse gas concentration pathway and expect that, by 2100, if countries in the world do not comply with the terms of the Paris climate agreement, average global sea levels will rise between 61 centimeters to about one meter.
Researchers relied on climate data, models, 82 years’ worth of sea level monitoring, and 35 years of beach satellite imaging. They also simulated more than 100m storms and measured their global coastal erosion.
Based on the RCP of greenhouse gases, the study assumes two scenarios for melting ice surfaces. According to the first scenario, if the world continues to emit carbon at the current rate, sea levels will rise by about 80 cm, which means the coastline will decrease by 128.1 meters, and threatens to sink 131,745 km of beaches.
According to the most optimistic scenarios, sea levels will only rise by 50 cm by 2100, and the average coastline retreat will be 86.4 meters if governments adhere to international agreements to reduce emissions and reduce carbon dependence. According to the results of the study, up to 63% of the world’s low coastal areas will be threatened by flooding due to sea level rise and severe storms.
“Climate change will exacerbate the effects of coastal erosion processes, which threatens densely populated areas,” said Michalis Vousdoukas, a researcher at the European Commission’s Research Centre and lead author of the study.
He added that in the best scenarios, Egypt will lose between 35.1% to 50.5% of its sandy beaches due to erosion, which means the erosion of about 1,000 km of Egyptian sandy beaches. The percentage is likely to be even higher in countries like Saudi Arabia and Libya.
Hisham Elsafti, a coastal engineering consultant, and instructor in coastal engineering at Braunschweig Technical University in Germany, explained that according to the study’s expectations, the coasts of the Nile Delta will retreat by more than half a kilometer at the end of the century due to geological and hydromorphological factors.
But Jeffrey S. Kargel, a senior research scientist at the University of Arizona, believes that although the methodology of the study is good and its conclusions are valid, it did not take into account some detailed changes. These changes include the sediment supply and the increase in the production and transport of sand and silt due to the increased melting glaciers, increased surface runoff of corrosion and more sediment supply from expanded agricultural areas, increased sediment supply from dam construction, and reduced sediment transport due to dams in many parts of the world.
Kargel explained that the melting glaciers do not directly affect Egypt, but affect places like Greenland and Alaska. “Construction of dams is the most important for Egypt due to the construction of the High Dam in Aswan, and then there will be a giant reservoir for the huge dam in Ethiopia,” he said.
He added that “when the silt is blocked by reservoirs, this will be an obstacle to the construction of the delta areas, and thus the delta will drop and seawater will submerge its coast with its cities and villages, which will represent a major problem for Egypt.” But he believes that the Egyptian Delta, despite the problems it faces, is “lucky” because it is not subject to hurricanes.
A previous study by the American Geological Society, published in May 2017, indicated that Egypt is one of the countries most affected by climate change, and that between 20 to 40 km of the coast of the Nile River Delta will be flooded with seawater by the end of the century, due to Sea level rise.
Vousdoukas added that the UK expects to lose 27.7% of its sandy beaches, according to the best estimates, and 43.7% according to worst case scenarios. Australia is also expected to be the most affected, as about 15,000 km of its beaches are at risk, followed by Canada as one of the most affected countries, then Chile, Mexico, China, and the United States. It is also expected that more than 680 million Indian citizens living in the low-lying coastal region will be affected by the coastal erosion and climate change.
Glimmer of hope
“The study provides first-of-its-kind forecasts regarding sand beach erosion, taking into account human interventions as well as the effects of climate change and natural factors,” said Vousdoukas. The researcher explained that there is still a glimmer of hope as it can reduce greenhouse gas emissions to prevent 40% of the coastline retreat, but this requires an international commitment to the Paris Climate Agreement and related protocols, and requires some coastal protection measures to protect populated areas.
Elsafti, however, believes that Egypt should work on two main axes to avoid the negative effects of climate change and protect the beaches. The first is the effective contribution to calls to reduce greenhouse gas emissions, and asking major industrial countries responsible for the problem to contribute more effectively to solving the problem by increasing contributions in initiatives such as the Green Climate Fund, which is already participating in funding studies and work to protect Egyptian beaches.
“The second axis is a scientific axis, as Egypt must increase the funding of scientific studies that cross the disciplines required to find engineering solutions suitable for the Egyptian environment and prepare to change the planning of cities and coastal areas and their uses to adapt to the effects of climate change,” Elsafti said.
The value of a liberal arts education has become a pivotal discussion within the global higher education sector over the last decade. No longer confined to the hallowed halls of ivy-covered American colleges, this multidisciplinary approach, which focuses on developing creative thinking skills, has begun to transform the curricula of institutions worldwide.
To examine this further, the Times Higher Education MENA Universities Summit 2020, taking place at NYU Abu Dhabi on 10-12 March, will explore the benefits and challenges of broadening the liberal arts educational model across Middle Eastern and North African countries.
Fostering discussions on how to prepare students for a variety of career paths after graduation is high on the list of the summit’s objectives. Hoda Mostafa, director of the Center for Learning and Teaching at the American University in Cairo, will share useful practices to facilitate the leap between an interdisciplinary education and careers both in and out of academia.
Wasif Rizv, founding president of Habib University, Pakistan’s first liberal arts and science institution, will provide an instructional model from south-east Asia to demonstrate how a liberal arts education can develop talent to meet the demands of a global workforce.
Another key focus will be enhancing the research culture in countries where talent attraction has faced challenges. Rana Dajani, associate professor at Hashemite University, who established stem cell research ethics law in Jordan, will debate with other panellists which tools are needed to support the next generation of researchers in the MENA region.
Safwan Masri, the current vice-president for Global Centers and Global Development at Columbia University, who has written extensively on the role of Tunisia in the Arab Spring, will deliver the summit’s closing keynote, underlining the power of research and knowledge transfer in the region to ultimately promote a greater cultural understanding and bridge political boundaries.
The summit will include an exclusive THE rankings masterclass that will dissect the methodology behind the World University Rankings, giving an analysis of the MENA region’s successes and future opportunities. Additionally, delegates will enjoy a deep-dive into THE’s new University Impact Rankings, which are based on universities’ successes in working towards the United Nation’s Sustainable Development Goals.
John Gill, editor of THE, said: “We are at a crucial moment for the world on numerous fronts – from how to respond to global threats such as climate change, to how to navigate a path to greater understanding and collaboration. Higher education and research will play crucial roles in finding the answers.
“At this summit, we will discuss the role of liberal arts education, at a time of debate about how best to prepare students for the new economy, and how to support societies in transition. We will consider how a global perspective can transform the impact of education, and address the interplay between education and research in the MENA region. These topics touch on every aspect of what universities do, as institutions that educate, create new knowledge, and drive economic and social progress, so we are delighted to have such a diverse programme of speakers, and to be meeting at NYU Abu Dhabi, itself a great example of innovation.”
The Times Higher Education MENA Universities Summit 2020 will take place 10-12 March at NYU Abu Dhabi. Find out more.
Muscat: Enhancing skills and supporting job creation for locals is the new goal and vision 2020 for Knowledge Oman.
Speaking about the new plans, Tariq Hilal Al Barwanni, Knowledge Oman Founder said: “Supporting job creation by enhancing the necessary skills employers require from nationals to acquire is Knowledge Oman’s 2020 new goal and direction.”
This came as an announcement of the Sultanate’s multi-award winning knowledge-sharing platform’s strategic plan to make vision 2040 a reality. Knowledge Oman begins the new year with setting attainable goals, based on past achievements, which will support His Majesty Sultan Haitham bin Tarik in maintaining a prosperous and thriving country.
“Empowering the society with the necessary knowledge that is required to build a prosperous future is our key objective going forward. We will do this by aligning with vision 2040 and supporting His Majesty Sultan Haitham bin Tarik’s leadership,” he emphasised.
Since 2008, Knowledge Oman has managed within 12 years to solidify the vision of late His Majesty Sultan Qaboos bin Said bin Taimour of transforming Oman into a knowledge based society by impacting hundred of thousands of people with 74 initiatives in the form of projects, workshops, seminars that positively impacted students from college and universities, women, entrepreneurs and professionals from various industries.
Projects were supported by over 35 partners locally and internationally attracting over 80,000 registrations and 700 volunteers across the years.
Knowledge Oman received 4 awards that includes the Outstanding contribution to the cause of education from the World Human Resource Development (HRD) Congress.
Members of the platform consist of multinational group of both locals and expatriates living in the country with the passion of creating, sharing and exchanging knowledge.
“In planning our strategy for 2020, we are focusing on three key areas to support Oman towards a society which is rich in human, economic and natural resources that aligns with the 2040 vision. We are launching Knowledge Oman Talks, refining our Knowledge Oman Seminars and collaborating with like-minded partners to deliver initiatives that benefit the society” outlined Tariq.
Knowledge Oman Talks will manage and invite experienced professionals to schools, colleges, and universities to bridge the gap between academia & industry. Knowledge Oman Seminars will be enhanced to organise periodic events that discuss contemporary issues and offer suggestions for development to society. Moreover, Knowledge Oman will invite partners to collaborate on initiatives that benefit the society.
Knowledge Oman’s mission in the past was driven by the vision of late His Majesty Sultan Qaboos bin Said bin Taimour to create a knowledge-based society.
Optimistic about the year ahead and working under the leadership of His Majesty Sultan Haitham bin Tarik, Knowledge Oman will continue to build local and international partnerships and work towards providing people in Oman with the necessary knowledge and skills to meet the Oman Vision 2040.
Despite regional turmoil, there are two critical areas of focus to work on simultaneously.
Despite 2020 looking to be a year of volatility, the President and CEO of the Atlantic Council expressed his optimism at the “remarkable” human potential of the MENA region.
In statements ahead of the fourth annual Global Energy Forum in Abu Dhabi, Frederick Kempe noted that despite regional turmoil, there are two critical areas of focus to work on simultaneously.
“One of them is to reduce conflict, to wind down the tensions of the region. But at the same time, you have to unlock the remarkable human potential of the Middle East and the GCC,” he said.
He told the Emirates News Agency (WAM), his predictions for 2020, noting that it would be a volatile year, particularly in the energy industry.
“Geopolitical uncertainty will play a larger role on energy prices this year,” Kempe added.
Reflecting on 2019 events, he noted, “It’s remarkable that energy prices have remained so low through everything we’ve gone through – Iranian sanctions, Libyan turmoil, Iraqi uncertainty.”
However, he added, “despite all that and partly because of the glut of oil we’ve had on the market, and the US oil and gas production, we’ve kept prices remarkably stable for a long period of time.”
“I think the big question is can that hold out in 2020,” he continued.
“You see prices rise by four percent when you get into a crisis, suddenly it seems as we’re in a de-escalatory phase if prices drop by five percent, and I think that’s what we’re going to see.”
Commenting on recent US-Iran tensions, and their impact on clean energy transitions, Kempe said, “A lot of people are focusing on the wrong lessons from the last few days. No doubt, there’s been a lot of tension.
“No doubt there was, for a period of time, increased risk of violent conflict. On the other hand, both parties stood back from that,” he added.
“No one in the region wants an escalation of the current tensions,” he stressed, adding, “Everyone that participated in de-escalating came to that. I think that’s promising.”
“I think all parties see no gain in war. The US doesn’t see any gain, Iran doesn’t see any gain; certainly, the Arab and GCC countries don’t see any gain,” the Atlantic Council President emphasised.
When asked to comment on how GCC countries, like the UAE, can play a role in the 2020 energy agenda, Kempe said, “If you look at the GDP of this region, and if you took the size of the Middle East population and put it anywhere in the world, you would have three times the GDP.”
World Bank figures indicate the GDP figures for the Middle East and North Africa reached $3.611 trillion in 2018.
“So imagine how much low-hanging fruit there is here and how much opportunity there is,” he said.
According to the International Renewable Energy Agency, IRENA, figures, the adoption of renewable energy technologies created 11 million new jobs at the end of 2018.
When asked to comment on how countries and international bodies can partner further to see effective climate action, Kempe revealed that through the Council’s Adrienne Arsht Centre for Resilience, the MidEast Centre, and the Rockefeller Foundation, a new initiative will see one billion individuals become resilient to climate change, tensions and crises.
More details on the announcement will be made as part of Abu Dhabi Sustainability Week 2020 next week.
The Atlantic Council Global Energy Forum is an international gathering of government, industry, and thought leaders to set the energy agenda for the year.
Taking place in the UAE capital from January 10-12, the 2020 iteration of the forum will focus on three key themes: the role of the oil and gas industry in the energy transition, financing the future of energy and interconnections in a new era of geopolitics.
The Middle East and North Africa (MENA) region significantly improved its T&T competitiveness since the last edition of the TTCI. With 12 of the 15 MENA economies covered by this year’s index increasing their score compared to 2017, the region was able to slightly outpace the global average in competitiveness growth. This is particularly important given that, in the aggregate, T&T accounts for a greater share of regional GDP than in any of the other four regions. MENA is also the only region where international visitor spending is greater than domestic visitor spending. Yet despite improved competitiveness and a strong reliance on T&T for overall economic growth, MENA continues to underperform the global TTCI score average.
MENA’s below-average competitiveness is primarily a result of low scores on indicators related to natural and cultural resources and international openness. The region’s historical and religious heritage and geographic features create the potential for significant natural and cultural tourism; yet, while some individual nations come close, no MENA country scores above the global average for natural resources and only Egypt and Iran score above for cultural resources. In fact, the entire region’s score in both of these areas has fallen in recent years. More needs to be done to expand habit protection and heritage sites. Moreover, digital demand for MENA’s natural, cultural and entertainment demand is fairly low, indicating potential gaps in marketing and traveller perceptions. One potential reason for this gap is continued safety and security concerns. Eleven MENA countries rank within the bottom 40 for terrorism incidents, with two among the worst 10 countries globally. Further, the region is plagued by geopolitical tensions, instability and conflict. Security concerns also play a role in why MENA members are some of the most restrictive when it comes to international openness, with only Qatar, Oman and Morocco making significant improvements. Consequently, travellers often face barriers when visiting the region, while the aviation and overall T&T sector is stifled by limiting bilateral air service and regional trade agreements.
More positively, stability, safety and security have started to recover throughout the region, slightly reducing travel fears and underlying one of the key reasons for the recent pickup in arrivals. Furthermore, it seems that there has been greater recognition of T&T’s importance, with broad regional improvements in T&T prioritization, including increased government funding and more effective marketing campaigns to bring back or attract new visitors. Greatly enhanced environmental sustainability also has the potential to pay dividends for natural assets (note that environmental sustainability comparison is influenced by the use of new data to measure marine sustainability). In addition, prices have become more competitive among countries within the region, amplifying MENA’s single biggest advantage relative to the global average. As one of the world’s main producers of fossil fuels, MENA includes some of the world’s lowest fuel prices, with some governments offering subsidies. Moreover, many of the region’s economies offer visitors greater purchasing power (especially Egypt, Algeria, Iran and Tunisia), which has been increased by lower exchange rates. Yet it is reductions in ticket taxes and airport charges as well as lower hotel prices that have primarily driven regional price competitiveness in recent years.
Infrastructure has also improved, with particularly impressive growth in the number of airlines and route capacity. Despite these gains, world-class infrastructure remains concentrated among the Arab states of the Persian Gulf. The Gulf countries have been able to use their natural resource wealth, central geographic location and relative security to develop world-class T&T infrastructure, defined by quality airports, ports, roads, tourist services and some of the world’s leading airlines. These efforts are in stark contrast to some other MENA nations that—due to a lack of investment and ongoing instability—have yet to develop competitive infrastructure, especially regarding air transport. Similarly, the region’s above-average score on the Enabling Environment subindex is due to the performance of the Gulf countries and Israel, which have developed economies, strong business environments, ICT readiness and some of the highest scores in safety and security. Finally, most regional economies also score near the bottom when it comes to female participation in the labour market, depriving the T&T industry of a greater labour and skills pool.
The Middle East subregion is by far the more competitive of the two subregions, outscoring North Africa on nine pillars. Thanks to the Arab states of the Persian Gulf and Israel, the subregion is wealthier and more developed than the North Africa subregion. Consequently, it is no surprise that the Middle East scores above the global and regional averages on indicators related to enabling environment and infrastructure, with particularly high ranks on ICT readiness and business environment. Nevertheless, the subregion does trail the world and North Africa on T&T prioritization and policy and natural and cultural resources. In particular, many Middle East nations score relatively low on the International Openness and Natural Resources pillars, which represent the subregion’s greatest disadvantages relative to global competition. One of the Middle East’s highest-scoring pillars is Price Competitiveness, with some economies leveraging their fossil fuel abundance to offer lower fuel prices. Since the 2017 edition of the report, the subregion has improved across all pillars of T&T policy and enabling conditions, safety and security, ICT readiness and much of infrastructure, but declined or stagnated on other pillars.
This year, eight out of the subregion’s 11 members improved their TTCI score since 2017. Oman demonstrated the greatest improvement, moving up eight places to 58th. MENA’s safest (3rd) country recorded the subregion’s fastest improvement for its human resources and labour markets (103rd to 65th), and is among the most improved when it comes to international openness (116th to 97th), environmental sustainability (109th to 57th) and overall infrastructure (60th to 52nd). Yet some of the improvement in environmental sustainability is exaggerated due to new marine sustainability metrics. In contrast, the UAE had the Middle East’s largest decline, falling from 29th to 33rd, including the biggest percentage decline in score on the Safety and Security pillar (falling from 2nd to 7th) and Ground and Port Infrastructure (19th to 31st) and the subregion’s only decline on Environmental Sustainability (40th to 41st). Nevertheless, the country remains in the lead in the Middle East and is MENA’s top TTCI scorer, leading on ICT readiness (4th), air transport (4th) and tourist service (22nd) infrastructure. The Middle East’s—and MENA’s—largest T&T economy is Saudi Arabia (69th), which scores above the subregion’s average on most pillars, but near the bottom on international openness (137th). Plagued by ongoing conflict and a lingering humanitarian crisis, Yemen (140th), ranks at the bottom of the global index.
North Africa scores lower than the Middle East, but demonstrates far greater improvement in overall competitiveness. The subregion outscores the Middle East on five pillars and bests the global average on four. North Africa is the most price competitive subregion in the world, with three out of its four members among the 12 least-expensive economies covered in the report. North Africa’s greatest advantage relative to the Middle East is its natural and cultural resources—although it still underperforms the world on both the Natural Resources and Cultural and Business Travel pillars. The subregion also bests the MENA average in prioritization of T&T and environmental sustainability, areas where it has improved since 2017. On the other hand, North Africa has underdeveloped infrastructure and T&T enabling environment, contrasting some of the high performers in the Middle East subregion. In particular, North Africa trails when it comes to tourist service infrastructure and ICT readiness. The subregion’s strong rate of improvement is due to enhanced safety and security, overall T&T policy and enabling conditions and air transport and ground infrastructure.
All four members of the North Africa subregion increased their TTCI scores over 2017. Egypt (65th) is the subregion’s top scorer and its largest T&T economy. The country is also MENA’s most improved scorer. Egypt is price competitive (3rd) and has MENA’s highest score for cultural resources (22nd). Its improvement comes from increases on 11 pillar scores. These include the world’s second-best enhancement of safety and security (130th to 112th), albeit from a low starting base. Morocco (66th) demonstrates North Africa’s slowest improvement in TTCI performance. The country is a close second to Egypt when it comes to overall competitiveness, boasting the MENA region’s top TTCI scores on natural resources (63rd) and North Africa’s best enabling environment (71st) and infrastructure (69th). However, TTCI performance improvement is tempered by declining safety and security (20th to 28th), which remains well above the subregion’s average, and a deteriorating combination of natural and cultural (41st to 54th) resources. North Africa’s lowest scoring member is Algeria (116th), which nonetheless did move up two ranks globally. The country ranks low on business environment (118th), T&T prioritization (132nd), tourist services infrastructure (136th), environmental sustainability (133rd), natural resources (126th) and international openness (139th). On the other hand, Algeria is one of the most price-competitive countries in the world (8th).
Whereas Qatar was taken by surprise on June 5th, 2017, the international community was impressed by Qatar’s composed and firm stance in the face of the blockade and continued provocations of the blockading countries. Maturity of the Qatari diplomacy has since gripped global attention, courted international approbation, and most importantly, captured hearts and minds of Qataris into solidarity. A growing reverence for Qatar’s foreign policy and its key figures is unmistakable both domestically and abroad.
A less celebrated side of Qatar’s international role is that of sustainable development. Hundreds of resolutions and decisions are adopted yearly by the General Assembly, the Security Council and the Economic and Social Council of the UN, enacting and promoting sustainable development goals. Overall, the tie-ins between international cooperation and sustainable development are growing more reciprocal and symbiotic.
This is evinced by the Millennium Declaration, the Johannesburg Declaration and the thousands of bi/multilateral treaties that have followed on from the UN Conference on Environment and Development in 1992. Since then, sustainability and sustainable development have become the watchwords for international bodies, most prominently the European Commission, the World Bank Group, the G-20 and obviously the UN, so much so they established dedicated offshoot organizations. Continuing to reaffirm commitment to the international community, Qatar has lived up to the (arguably) very ambitious agenda of sustainable development set in 2015.
Largely via Qatar Investment Authority (QIA) and Qatar Fund for Development (QFFD), Qatar has assumed the mantle of financiering, especially for the past several years. Qatar generously funds not-for-profit, philanthropic deeds in development assistance as well as investments in sustainable development.
In one year, 2018, QFFD disbursed more than $500m to hundreds of humanitarian and developmental projects in 70 countries across the world; funding natural disaster relief and recovery in the Caribbean, roadbuilding in the Horn of Africa, microfinancing SMEs in the Muslim World, and rehabilitating healthcare facilities in Arab countries, to name a few.
QIA, on the other hand, ensures sustainable economic prosperity of Qataris for generations to come by investing in sustainable and profitable ventures worldwide. The $10bn pledged for US infrastructure enhancement and the £5bn for British infrastructure are examples of Qatari investments in international sustainable development.
We are yet to see all of these Qatari accomplishments and financial means complemented and popularised byways of active participation and close engagement with international bodies to further promulgate Qatar’s established role in global sustainable development. Young, well-educated Qataris are now more than ever capable of taking part in the sophisticated, pluralistic discourse on climate change, environmental protection, circular economy, wealth equality and social justice; hot sustainability topics that are increasingly gaining steam in international dialogue. In promoting sustainability and sustainable development, Qatari youth have HH Sheikha Moza bint Nasser as the role model to follow, especially with the recent designation of Her Highness as UN Sustainable Development Goals Advocate.
Domestically, international agreements have been coordinated with Qatari laws and regulations. This harmonisation process is best exemplified by the synchronization of the UN 2030 Agenda for Sustainable Development, Qatar National Vision (QNV) 2030 and the resultant quinquennial National Development Strategies. Qatar facilitated the UN Voluntary National Review of the country’s 2030 Agenda for Sustainable Development to acquire international credibility of implementation. Many nations are still lagging in setting and/or implementing sustainable development goals.
Following the onslaught of the blockading countries against Qatar, strong local faculties in sustainable development would call attention to ways the blockade hinders international cooperation intended to foster sustainable development; and they are many.
The mere act of obstructing transportation to/from Qatar by stifling international transit corridors is condemnable as it violates the General Assembly’s Resolution 69/213 propositioned by the Secretary-General’s High-level Advisory Group on Sustainable Transport.
Qatar is building educational, governmental and diplomatic capabilities to navigate organizational and intergovernmental synergies of sustainable development. And as sustainable development organizations grow more influential in shaping major international accords, frameworks, standards and policies, Qatari representation is essential to preserve our state’s interest.
Luckily, collective intelligence in Qatar has recognised that reinforcing alliances and partnerships through concerned UN agencies, and other organizations such as IFC and OECD can very much help perpetuate Qatar’s stability amidst the perils of the region.
Whether we are bracing for more seismic shifts in our regional geopolitics, more chasms, or for that matter, expecting rapprochements, sustainable development remains key to continued Qatari prosperity.
Dr Soud Khalifa Al-Thani is Sustainability Director at ASTAD.
Abundance is the New Sustainability Photo by Jeremy Bishop on Unsplash
For a while now, I’ve been struggling with the word ‘sustainability’. Don’t get me wrong: I think it is a worthy goal and it is encouraging to see how pretty much every major Fortune 500 company now has a sustainability strategy in place. But to me, sustainability as a goal seems like such a low bar to achieve: ‘the avoidance of the depletion of natural resources in order to maintain an ecological balance.’ It seems especially unambitious given the scale of the urgent challenges we face as a planet: how we as humans have wiped out 60% of the animal populations since 1970 according to the recent sobering report by the WWF; about how we are rapidly approaching the ‘tipping point’ where climate change could spiral out of control, leaving us with a runaway vicious cycle of global devastation. (By the way, I think we should start referring to ‘climate change’ as the ‘climate apocalypse’ to give the issue its proper sense of crisis, but that’s a whole separate article).
One of the most foundational thinkers preaching a more optimistic worldview is Peter Diamandis, founder of the X-Prize Foundation and Singularity University whose book ‘Abundance: The Future Is Better Than You Think’ (co-authored with Peter Koettler) should be required reading for every CEO and CMO. In it, he argues that the arrival of new ‘exponential’ technologies such as clean energy, artificial intelligence, 3D printing, synthetic biology, nanotechnology and others will lead to a flourishing in human society where we can approach a state of ‘abundance’: where we can provide nine billion people on this planet with the same standard of living that currently, those in the most privileged societies enjoy. As he puts it in the book, “Humanity is now entering a period of radical transformation in which technology has the potential to significantly raise the basic standards of living for every man, woman, and child on the planet.”
I believe that ‘Abundance’ should be the new ‘Sustainability’: the collective goal that we set for ourselves as the ‘moonshot’ of our time. We have the tools and technologies to rebuild what we have broken: what is missing is our collective will to put aside the tribalism and partisan bickering that occupies our consciousness, and focus on the far bigger threat that is facing us : species-level extinction on an unimaginable scale (which by the way, this planet already has seen five of already). If a hostile alien force was to arrive tomorrow, humanity would band together in a hurry: the threat we are facing is far greater than anything Spielberg could envision on a cinema screen.
Here’s some good news. When it comes to energy, we have more than we could ever use: in 88 minutes, 470 exajoules of energy from the sun hits the Earth’s surface, as much energy as humanity consumes in a year. The price of solar is now falling well below the prices of fossil fuels, and we are rapidly ramping up production of solar panels and batteries to the point where they can start to be widely adopted across the world, creating an energy abundance that can fuel many of the other technologies needed to win this battle (much like the exponential increase in computing power and reduction in price predicted in Moore’s Law lead to the proliferation of cheaper and more powerful devices that we now carry around in our pockets).
Aside from energy, the other uber-challenge facing humanity is water: only 1% of the planet’s water is drinkable, and with much of that becoming tainted with everything from nitrates to antibiotics, the issue has been how to find enough to sustain our ever-growing needs. Recently, Diamandis’s X-Prize Foundation (which issues crowd-sourced challenges around some of humanities biggest problems) awarded their Water Abundance X-Prize (powered by the Tata Group and Australian Aid) to the Skysource / Skywater Alliance, based in Venice Beach, California, which received a grand prize of $1.5M for developing an easily deployable high-volume water generator that can be used in any climate, meeting the competition parameters of extracting a minimum of 2,000 liters of water per day from the atmosphere using 100 percent renewable energy, at a cost of no more than two cents per liter. It turns out there is more water in our atmosphere than in all our rivers combined. I believe breakthroughs like this could in the long term lead to ‘water generators’ being as common-place as solar panels, leading to a decentralized ‘water internet’ that greatly reduces the dependence on increasingly polluted centralized water systems.
I believe corporations have an essential role to play in this journey—because corporations and government are two of the only things that work in trillions; at the scale and speed that these problems need to be addressed. After McDonald’s announced its decision to move to cage-free eggs (the company buys more than 2 billion a year), over 200 companies followed suit. Uber has announced plans to make its entire fleet of cars in London all-electric by 2025 to address the problem of city pollution. Adidas is set to make over a billion dollars this year by selling its Parley for the Ocean sneakers made out of waste ocean plastic. Silicon Valley entities like Chamath Palihapitiya’s Social Capital is ‘a partnership of philanthropists, technologists, and capitalists utilizing venture capital as a force to create value and change on a global scale’ that is doing fascinating work in tackling problems in unique ways. As Diamandis himself has said ‘the world’s biggest problems are the world’s biggest business opportunities’. Companies are waking up to the massive business potential of tackling the world’s problems in ways that drive revenue. As Lesa Ukman, founder of Pro Social Valuation has said ‘We are moving past the era of corporate social responsibility to corporate social opportunity.’
I believe that corporations and government have to work in tandem: the government can raise the ‘floor’ (for instance, in the automobile sector via raising CAFE standards around fuel consumption) while corporations can raise the ‘ceiling’ (the success of Tesla has pushed every single major car manufacturer to accelerate the launch of their own electric cars). Whether it is at the federal, state or city level, government has a role to play in this movement – to regulate wisely, to provide a check and balance, but to also nurture and grow the private sector, by partnering with them in new and innovative ways. Unprecedented problems require unprecedented partnerships.
I also believe that the idea of ‘abundance’ should cover more than environmental issues – but also extend to the idea of people and social justice. Some of America’s biggest corporations including Apple, Pfizer, Microsoft, and Marriott are on the frontlines of the battle for LGBTQ issues. Starbucks announced that ‘every benefits-eligible U.S. partner working part- or full-time will receive 100% tuition coverage for a first-time bachelor’s degree through Arizona State University’s online program.’ Progressive companies like Greystone Bakery are proposing an idea that I think every single company in America should embrace: the idea of ‘Open Hiring’, which fills jobs without judging applicants or asking any questions, creating opportunities for those who have been kept out of the workforce (which includes women, men, people of color, people of all faiths and sexual orientations, immigrants and refugees, those living in poverty or who have spent time in prison, and anyone else who has faced barriers to employment.)
I propose that Chief Sustainability Officers should rename themselves ‘Chief Abundance Officers’—and that they should radically re-frame their definition of ROI to not only include environmental but social impact as well. We need a more holistic view of measuring the ‘good’ that a company does – and the positive impact that it has on a multitude of different factors ranging from brand value and brand equity, to advocacy and loyalty, to employee engagement, and recruitment and retention. The data is now clear on how hitherto ‘soft’ measures like diversity and gender representation now contribute to financial performance. Companies with the most amount of female board directors outperform those with the least by 66% on a return on invested capital. Companies with above-average total diversity have both 19% points higher innovation revenues and 9% points higher EBIT margins. And companies which provide their employees with opportunities for volunteering and fundraising have 57% less turnover (the average cost of replacing an employee is 1.2 times their annual salary).
According to Gallup, a staggering 87% of employees worldwide are not engaged at work; while those companies with highly engaged workforces outperform their peers by 147% in earnings per share. How do we engage these 87% and unlock this huge pool of talent? Well, when asked about career goals at work, whether it was Millennials, Gen X or Baby Boomers, the answer was the same: the desire to ‘help solve social and/or environmental challenges’. Entrepreneur and activist Justin Dillon in his brilliant book ‘A Selfish Plan to Change The World’ sums it up beautifully: ‘Half the world has a poverty of means. The other half has a poverty of meaning.’ Corporations are one of the few things that can solve both: creating products and services that meet the needs of the ‘bottom billion’ of this planet which help raise them out of poverty and into a world of opportunity; while also giving those who already have means but are hungry for meaning and purpose in their life the chance to work on these problems in a way that will unleash their potential and make them proud of the legacy they leave behind.
What is awesome to behold is how quickly we as a species can take action: witness the speed with which the global attention to the problem of plastic – and the ensuing bans on plastic products – have taken hold. Regenerative agriculture has huge potential to not only reduce our dependence on chemically-driven industrial farming – but also pull carbon out of the air and into the soil. The Powerhouse movement out of Norway proposes we move beyond LEED certification into a world of buildings which are ‘net-positive’ – that give back more to their neighborhoods than they consume. The world’s collective decision to fix the hole in the ozone layer is paying off – albeit 30 years later. We are waking up to the potential of the blockchain and bitcoin to create a different technological and financial infrastructure on which to build new enterprises, in a way that democratizes opportunity for the many, not the few.
The difference is us. It’s going to take a radical shift in our own consumption habits: it takes roughly 1 million pounds of materials annually to support one American’s lifestyle, and less than 1 percent of everything we produce is still in use after six months. It’s going to take us putting aside the labels that separate us – Democrat or Republican, Red State or Blue State – and seeing our common humanity. It’s going to take those of us working in the corporate sector ripping up the rulebook of ‘business as usual’ and finding new ways to innovate, new ways to be leaders. It’s going to mean letting our values drive our value; acting with a sense of moral responsibility, not just financial. As Starbuck’s CEO Howard Schultz put it recently, ‘Not every business decision is an economic one.’ As we say in our book ‘Good is the New Cool’, ‘If we don’t deal with income inequality, no one will be able to afford our products. If we don’t deal with climate change, there’s not going to be anyone left to buy them.’ We have a once-in-a-lifetime opportunity to not only repair our fraying planet and leave it in better shape than we found it but to lay the foundations for future generations to live in an era of peace and prosperity that has been impossible to contemplate until now.
I am the founder and chief purpose officer of Conspiracy of Love, a purpose-driven think tank and idea incubator that helps Fortune 500 companies like Adidas, Sonos, Bacardi, Mars and Coty use culture and technology as a force for good. I spent 20 years as a consumer markete…
Excerpts of the first 3 points of a brilliant article posted on July 11, 2018 by Gail Tverberg are republished here for their undoubtful interest. It is about how today’s world economy is perceived from the USA as things are unfolding under Trump’s leadership. Meanwhile, the world’s weird self-organizing economy seen from the MENA would seem not to be exactly any different for reasons that we could ponder and eventually elaborate on sometime in the near future.
Today’s indications seem to suggest that an even more major recession than the Great Recession may strike in the not too distant future. Why should this be the case? Am I imagining problems where none exist?
The next ten sections provide an introduction to how the world’s self-organizing economy seems to operate. 1) The economy is one of many self-organized systems that grow. All are governed by the laws of physics. All use energy in their operation.
There are many other self-organizing systems that grow. One such system is the sun. Some forecasts indicate that it will keep expanding in size and brightness for about the next five billion years. Eventually, it is expected to collapse under its own weight.
Hurricanes are a type of self-organizing system that grows. Hurricanes grow over warm ocean waters. If they travel over land for a short time, they can sometimes shrink back a bit and grow again once they have an adequate source of heat-energy from warm water. Eventually, they collapse.
Plants and animals also represent self-organizing systems that grow. Some plants grow throughout their lifetimes; others stabilize in size after reaching maturity. Animals continue to require food (a form of energy) even after they stabilize at their mature size.
We can’t use the typical patterns of these other growing self-organized systems to conclude much about the future path of the world’s economic growth because individual patterns are quite different. However, we notice that cutting off the energy supply used by any of these systems (for example, moving a hurricane permanently over land or starving a human) will lead to the demise of that system.
We also know that lack of food is not the only reason why humans die. Based on this observation, it is a reasonable conclusion that having enough energy available is not a sufficient condition to guarantee that the world economy will continue to operate as in the past. For example, a blocked shipping channel, such as at the Strait of Hormuz, could pose a significant problem for the world economy. This would be analogous to a blocked artery in a human. 2) The use of energy products is hidden deeply within the economy. As a result, many people overlook their significance. They are also difficult for researchers to measure.
It is easy to see that gasoline provides the energy supply needed for our cars, and that electricity provides the power needed to clean our clothes. What is missing? The answer seems to be, “Everything that makes humans different from wild animals is something that was made possible by the use of supplemental energy in addition to the energy from food.”
All goods and services require the use of energy. While some of this energy use is easy to see, other portions are well hidden. Energy used in manufacturing and transport is most visible; energy used in services tends to be hidden.
Governments are major users of energy, both for their own programs and for directing energy use to others. Retirees get the benefit of goods and services made with energy products through pension checks issued by governments; researchers get the benefit of goods and services made with energy products through research grants they receive. Wars require energy.
Medical treatments are possible because of the availability of medicines and equipment made with energy products. Schools and books, as well as free time to study in schools (rather than working in the field), are possible because of energy consumption. Jobs of all kinds require the use of energy.
One thing we don’t often consider is that if energy supplies are growing sufficiently, they permit an expanding population. In fact, expanding population seems to be the single largest use of growth in energy consumption (Figure 1). Growing energy consumption also seems to be associated with prosperity.
Figure 1. World energy consumption growth for ten-year periods (ended at dates shown) divided between population growth (based on Angus Maddison estimates) and total energy consumption growth, based on the author’s review of BP Statistical Review of World Energy 2011 data and estimates from Energy Transitions: History, Requirements and Prospects by Vaclav Smil.
3) Prices of energy services need to be low relative to overall costs of the economy. Falling energy costs relative to overall GDP tend to encourage economic growth.
Most economists expect energy prices to represent a large share of GDP costs, if energy is truly important. The statement above says the opposite. There are at least two reasons why low energy prices, and energy prices that are truly falling when inflation and productivity changes are considered, are helpful.
First, tools (broadly defined) used to leverage the labor of human workers often require considerable energy to manufacture and operate. Examples of such tools include computers, machines used in manufacturing, vehicles, and roads for these vehicles to drive on. The lower the cost to purchase and operate these tools, relative to the benefit of the tools, the more likely employers are to purchase them. If energy costs tend to fall over time, it becomes progressively easier to add more tools to leverage the labor of employees. Thus, employees become increasingly productive over time, raising the economy’s output of goods and services. For a similar reason, rising energy costs, if not offset by efficiency gains, present a barrier to economic growth.
Second, if the cost of energy production is low, it is easy to tax energy producers and thereby capture some of the benefit of their energy for the rest of the economy. If there is truly a “net energy” benefit to the economy, this is one way it gets transferred to the rest of the economy.
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