Advancing renewable energy in resource-rich economies of the MENA

Rahmatallah Poudineh, Anupama Sen and Bassam Fattouh

Renewable Energy, 2018, vol. 123, issue C, 135-149

Abstract: As much of the world pushes ahead with the deployment of renewable energy, resource-rich MENA economies are lagging behind. This paper contends that while the main obstacles to deployment of renewables are grid infrastructure inadequacy, insufficient institutional capacity, and risks and uncertainties, the investment incentives lie on a policy instrument spectrum with two polar solutions: (i) the incentive is provided entirely through the market (removing all forms of fossil fuel subsidies and internalising the cost of externalities); or (ii) the incentive is provided through a full government subsidy programme (in addition to the existing fossil fuel subsidies). However, there is a trade-off between the two dimensions of the fiscal burden and political acceptance across the policy instrument spectrum, which implies that the two polar solutions themselves are not easily and fully implementable in these countries. We propose a new dynamic combinatorial approach (partial subsidy programme and partial fossil fuel price adjustment) that gradually moves towards market-based incentive provision over the medium to long-term where energy subsidies are eventually phased out. The approach balances fiscal sustainability with political stability, enabling the gradual scaling up and development of markets for renewables.

Keywords: Renewable incentives; Removing fossil fuel subsidies; Renewable subsidies; Combinatorial approach; Renewable barriers; MENA resource-rich countries (search for similar items in EconPapers)
JEL-codes: Q28 Q40 Q48 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:renene:v:123:y:2018:i:c:p:135-149

DOI: 10.1016/j.renene.2018.02.015

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