Download Economic and Social Commission for Western Asia (ESCWA)

E
UNITED NATIONS
ECONOMIC AND SOCIAL
COUNCIL
Distr.
LIMITED
E/ESCWA/OES/2009/WG.1/WP.6
5 November 2009
ORIGINAL: ENGLISH
Economic and Social Commission for Western Asia (ESCWA)
Expert Group Meeting on Moving the Development Agenda Forward:
Opportunities and Potential Gains
Beirut, 5-6 November 2009
ENHANCING THE ROLE OF ENERGY SECTOR IN ACHIEVING
SUSTAINABLE DEVELOPMENT AND MITIGATION CLIMATE CHANGE
Mr. Mohamed Salah El Sobki
_______________________
Note: This document has been reproduced in the form in which it was received, without formal editing. The opinions expressed are
those of the author and do not necessarily reflect the views of ESCWA.
09-0466
CONTENTS
Page
1.
A COMPREHENSIVE OVERVIEW OF THE CURRENT ESCWA REGION
ENERGY PARADIGM AND ITS FUTURE POTENTIALS .........................................
1
ASSESSING THE POTENTIAL IMPACTS OF THE CURRENT GLOBAL
CRISIS ON THE ENERGY SECTOR “MAINLY CLIMATE CHANGE
AND FINANCIAL CRISIS” AND MEASURES NEEDED TO OVERCOME
SUCH IMPACTS ................................................................................................................
6
ASSESSING THE CURRENT ACHIEVED PROGRESS IN THE REGION
TOWARDS: “ENERGY FOR SUSTAINABLE DEVELOPMENT ISSUES AND
REGIONAL INTEGRATION PROJECTS .....................................................................
8
IDENTIFY POSSIBLE POLICIES, MEASURES AND PROGRAMMES
FOR PROMOTING “ENERGY FOR SUSTAINABLE DEVELOPMENT
OBJECTIVES AND INITIATING ACTIONS FOR CLIMATE CHANGE
MITIGATION .....................................................................................................................
10
A VISION ON THE ROLE OF THE ENERGY SECTOR IN ACHIEVING
POVERTY ALLEVIATION AND PROMOTING SME’S FOR JOB CREATION
AND THE POSSIBLE ROLES OF ESCWA IN SUPPORTING MEMBER
COUNTRIES IN SUCH AREAS .......................................................................................
18
THE PRIORITY AREAS OF ACTION FOR ESCWA TO SUPPORT THE
ENERGY SECTOR IN MEMBER COUNTRIES IN ACHIEVING SUSTAINABLE
DEVELOPMENT AND MITIGATING CLIMATE CHANGE .....................................
19
References........................................................................................................................................
21
2.
3.
4.
5.
6.
iii
1. A COMPREHENSIVE OVERVIEW OF THE CURRENT ESCWA REGION
ENERGY PARADIGM AND ITS FUTURE POTENTIALS
REGIONAL OUTLOOK FOR THE ESCWA REGION 2008-2009
Year 2008 has been a tumultuous one for world energy markets, with oil prices soaring through the
first half of 2008 and diving in its second half. The downturn in the world economy has had a significant
impact on energy demand, and the near-term future of energy markets is tied to the downturn’s uncertain
depth and persistence. In 2008, real gross domestic product (GDP) in the ESCWA region was an average of
6.1 per cent. It was 5.9 and 5.1 per cent in 2006 and 2007 respectively and is forecast to be 3.7 per cent in
2009.
The recovery of the world’s financial market is specially important for the energy supply outlook
because the capital intensive nature of most large energy projects makes access to financing a critical
necessity. The economic prospects of achieving countries also become uncertain over same period. The
economic prospects of developing countries also became uncertain over the same period, as reflected in the
rapid downward economic adjustment experienced in China and India. The external indebtedness of the
private sector in many emerging and developing countries appeared to be vulnerable to the sudden freeze of
international money and capital markets, despite the high level of accumulated foreign reserves held by those
countries. Moreover, the decreasing risk appetite of international investors is expected to reduce capital
flows to emerging and developing economies. Meanwhile crude oil prices were volatile in 2008: the price in
the Organization of the Petroleum Exporting Countries (OPEC) Reference Basket had surged to a record
high of US$ 140.73 per barrel on 3 July before plunging to the level of early 2005 The demand growth for
crude oil had decelerated even before the collapse of oil prices, but supply fears from the expectation of rapid
demand growth of emerging and developing economies, such as China and India, supported the price surge
in the first half of 2008. The financial crisis has been followed by a significant contraction of economic
activities and associated supply capacity adjustments, particularly in developed countries.[1]
The ESCWA region demonstrated resilient economic expansion towards the end of 2008 in the face of
rapidly changing external macroeconomic conditions. Average real gross domestic product (GDP) growth in
the ESCWA region in 2008 is estimated to be at 6.1 per cent, compared to 5.1 per cent in 2007 (see table 1).
Surging international commodity prices in the first half of 2008 had a positive effect on the region’s energy
and commodity-related sectors, including crude oil production, liquefied natural gas and petrochemicals. The
previous growth in national wealth, together with ongoing positive business and consumer sentiment,
sustained expenditure growth well into the year. The resulting domestic demand expansion contributed to
continuing rapid growth in the business services, communications, construction, finance, tourism and
transport sectors. However, historically high commodity prices resulted in higher prices in consumer goods
in most of the countries in the ESCWA region. The average consumer inflation rate is estimated at 12.0 per
cent in 2008, compared to 8.4 per cent in 2007. Despite the resulting erosion in purchasing power, consumer
expectation was relatively stable. However, wage levels have displayed an upward trend, particularly in the
member countries of Gulf Cooperation Council (GCC). For 2009, the ESCWA region was predicted to
experience weak economic growth at 3.7 per cent, but inflationary pressure was forecast to remain, with an
average consumer inflation rate of 8.5 per cent.
1.1.
Brief review of energy resources, production and consumption characteristics
RESOURCES AND PRODUCTION
•
The region has huge Oil and Natural Gas resources in 2006, it counted for 56 per cent and 30 per
cent of the proven world reserves respectively, however four countries in the region have no or
very limited fossil resources;
•
Tremendous Solar resources are available in all countries and utilizable Hydro, Wind, Biomass
and Oil shale in some countries;
•
In 2006, the total primary energy production reached 34.1 m.b.o.e/day, where Oil and NG
counted for 66.5 per cent and 31.2 per cent respectively, while renewable energies including
hydro represented only about 2.3 per cent;
•
Installed electricity generation capacity of 113.43 GW, dominated by thermal power generation
(92.8 per cent).
ENERGY CONSUMPTION PATTERNS
•
The total consumed commercial energy in 2006 was about 403 m t.o.e with a growth rate of 5.6
per cent between 2002 and 2006;
•
The average per capita primary consumption in 2006 reached 2.1 t.o.e/capita/year, with wide
disparities in the levels of energy consumption within and between ESCWA countries;
•
In 2003, the Energy Intensity was 0.51 Kgoe/US$, and in 2007 the figure dropped to 0.24
Kgoe/US$, because of the GDP increase due to high Oil prices;
•
The use of Natural Gas is rapidly increasing in the region, with variable degrees. In 2006, it
contributed about 42 per cent of total energy consumption;
•
While, Transport, Residential and Industry Sectors are the major consumers of gas and petroleum
products, counting for 43 per cent, 18 per cent, 17 per cent of the total consumption respectively.
The major consumers of generated electricity are the residential and industrial sectors,
consuming 55.5 per cent and 26 per cent respectively.
ENERGY ACCESSIBILITY AND POVERTY
•
About 19 million people in the ESCWA countries (10 per cent), mostly in rural areas, have no
access to appropriate energy services especially electricity; a further of 30 million (15.6 per cent)
are severely undersupplied, both in rural and poor urban areas;
•
Poverty is a serious problem in several ESCWA countries and there is an urgent need for
increasing energy accessibility to the poor to mitigate energy and human poverty.
2
TABLE 1. REAL GDP GROWTH RATE AND CONSUMER INFLATION RATE, 2004-2009
(Annual percentage change)
Country or territory
Bahrain
Kuwait
Oman
Qatar
Saudi Arabia
United Arab Emirates
GCC countriesc/
Egyptd/
Iraq
Jordan
Lebanon
Palestine
The Sudan
Syrian Arab Republic
Yemen
More diversified economiesc/
Total ESCWA regionc/
2004
5.6
10.8
5.4
20.8
5.3
9.7
7.7
4.6
23
8.6
5
2
6.7
3.9
6.3
7.2
2005
7.9
11.4
6
6.1
5.9
10.5
7.3
6.8
-0.7
7.1
1.1
6.7
8.6
4.5
5.6
5
6.5
Real GDP growth
2006
2007a/
6.5
8.1
6.3
4.6
7.2
6.1
12.2
9.5
3.2
3.4
9.4
5.2
5.6
4.5
7.1
7.2
6.2
5
6.3
6
0
4
-8.8
-2.2
11.3
10
5.1
4.5
3.2
3.3
5.8
6.2
5.6
5.1
2008b/
6.3
6.1
6
10.5
5.3
6.7
6
6.5
8.9
5.3
5.5
1
6
4
3.4
6.3
6.1
2009c/
3.5
2.7
3.5
6
2.8
3.5
3.2
5.3
5.3
3.6
3.9
3.5
5.2
3.5
2.8
4.8
3.7
2004
2.3
1.3
1.1
6.8
0.3
5
1.8
11
27
3.4
4
3
4.6
12.5
11.1
5
2005
2.6
4.1
1.9
8.8
0.7
6.2
2.8
4.9
37
3.5
-2.6
3.5
8.5
7.4
11.8
9.8
5.3
Consumer inflation rate
2006
2007a/
2008b/
2.1
3.3
4.3
3.1
5.3
10.2
3.4
5.9
11.2
11.8
13.8
14
2.2
4.1
11
9.3
11.1
12.4
4.3
6.3
11.2
7.6
9.5
17.1
53.2
30.8
2
6.3
5.4
14.4
5.6
9.3
12
3.8
2.5
10.5
7.2
8
15
10
4.5
11.4
20.8
12.6
16.8
15.1
12
13.4
8.2
8.4
12
Source: World Economic Situations and Prospects 2009, unless otherwise stated.
a/ The estimated figures for Bahrain, Iraq, Oman, Qatar and Yemen, valid as of 15 November 2008.
b/ November 2008 estimations.
c/ November 2008 forecasts.
d/ Figures for country groups are weighted averages, where weights for each year are based on GDP in 2000 constant prices.
e/ For GDP growth rate of Egypt, the figures are for the country’s fiscal year that starts in July of the year and ends in June of the following year.
f/ GDP figures are from the Ministry of Trade and Economy. CPI data are from Central Agency for Statistics.
g/ Figures are from the Palestinian Central Bureau of Statistics.
3
2009c/
4
7.5
7
10.5
8.7
8.8
8.6
9.7
5
7.9
6.5
6
11
6
14.4
9.5
9.8
Figure 1. ESCWA oil production in thousand barrel per day
ESCWA Oil production
12000
Thousand barrel daily
10000
8000
6000
4000
2000
0
1998
1999
2000
Iraq
Syria
2001
2002
Kuwait
United Arab Emirates
2003
2004
Oman
Yemen
2005
2006
Qatar
Egypt
2007
2008
Saudi Arabia
Sudan
Figure 2. ESCWA Natural gas production in billion cubic meters
ESCWA Gas production
90
80
Billion cubic meters
70
60
50
40
30
20
10
0
1998
1999
Kuwait
2000
Oman
2001
Qatar
2002
2003
Saudi Arabia
4
2004
Syria
2005
2006
United Arab Emirates
2007
2008
Egypt
Figure 3. ESCWA oil consumption in thousand barrel per day
ESCWA oil consumption
Thousand barrels daily
4000
3500
3000
2500
2000
1500
1000
500
0
1998
1999
2000
2001
Egypt
2002
Kuwait
2003
Qatar
2004
2005
2006
United Arab Emirates
2007
2008
Saudi Arabia
Figure 4. ESCWA Natural gas consumption in billion cubic meters
ESCWA Gas consumption
250
Billion cubic meters
200
150
100
50
0
1998
1999
Egypt
1.2
2000
2001
Kuwait
2002
2003
Qatar
2004
2005
2006
United Arab Emirates
2007
2008
Saudi Arabia
The challenges facing the energy sector in achieving its role to support sustainable development
in the region








Energy efficiency awareness;
Energy sector restructuring towards competitive market;
Introducing Energy efficiency law for appliances and buildings;
Support renewable energy through introducing feed in tariff;
Reducing production cost and increasing reliability;
Capacity building in the field of energy efficiency and renewable;
Reinforce current interconnection network to gain the most benefit of it;
Tariff reflecting cost of service.
5
2. ASSESSING THE POTENTIAL IMPACTS OF THE CURRENT GLOBAL CRISIS ON THE
ENERGY SECTOR “MAINLY CLIMATE CHANGE AND FINANCIAL CRISIS” AND
MEASURES NEEDED TO OVERCOME SUCH IMPACTS
IMPACT OF THE INTERNATIONAL FINANCIAL CRISIS ON ESCWA MEMBER COUNTRIES
The current international financial crisis has its roots in the subprime crisis in the United States. The
excessive growth of subprime lending occurred because financial institutions offered non-standard
mortgages to individuals with dubious credit profiles. The crisis has been described as a “credit crunch” and
a “credit squeeze”, two terms that differ only to the extent of the curtailment in credit supply. Regardless of
whether the current crisis is best described as a “credit crunch” or “credit squeeze”, one of the key
characteristics of the present crisis is that there has been a tangible decline in the terms and availability of
credit for consumers and businesses, which has in turn adversely affected consumption and investment
spending, thus putting the economies of the United States and other countries around the world in recession.
Another characteristic of the crisis has been in financial markets, as financial institutions have been unable to
determine the true (or fair) value of assets that are no longer traded in sufficient volumes. This crisis is far
more complex than earlier crises because financial innovation has (through securitization) allowed the
creation of complex financial instruments, whose risk profiles are difficult to determine and which are
therefore difficult to price. Another characteristic of the crisis is the speed with which it spread from the
United States to other countries. A major difference between this crisis and the crises of the mid-1970s and
early 1980s, which were mainly macroeconomic crises, is that earlier crises were dominated by concerns
about inflation, whereas the most important concern in the current crisis is the risk of deflation. The difficult
question facing policymakers and observers alike is when and how the crisis will end. What we also know is
that the financial markets and economies of emerging countries, including ESCWA member countries, have
been affected by the financial crisis, and that the situation is still in flux and that the impact of developments
are still unfolding, primarily on the negative side. The objective of this paper is to examine and evaluate the
effects of the crisis on ESCWA member countries, specifically the effects on financial markets, financial
institutions and economies. This is because institutions, markets and economies are so strongly interlinked
that one cannot explain the effect of the crisis on any of them in isolation of the others.
THE ORIGIN AND CONSEQUENCES OF THE CRISIS
The current international financial crisis is the outgrowth of the subprime crisis in the United States
which began in 2006. The crisis has become international because banks, financial institutions and
Governments in other countries had direct or indirect exposure to subprime losses and because of the
resulting liquidity shortage. The United Kingdom has partly nationalized its banking system. A package of
US$ 850 billion in capital injection has been put in place, including US$ 340 billion of fresh lending for
interbank market and US$ 425 billion guarantee of bank debt. Germany has approved a US$ 635 billion
rescue plan for cash strapped banks that would include guarantees to jump start the interbank market,
liquidity support and offer up to US$ 95 billion for the recapitalization of distressed banks. The European
Union has declared a common umbrella for its banking system alongside measures on the national level by
its various Governments. The Fed reacted to the crisis by reducing the federal funds rate and the discount
rate, while engaging in a troubled asset relief programme, which is a US$ 700 billion emergency
stabilization package for illiquid structured products and bad loans. A portion of this amount was used to buy
stakes in banks directly and boost their capital.
The actions of the Fed, Bank of England and the European Central Bank were initially different but
convergence materialized as the crisis evolved. In general, the reaction to the crisis involves the following
elements:
(a) macroeconomic stimulus through monetary and fiscal policy to support the real economy;
6
(b) large-scale liquidity injections by central banks to minimize panic selling and to keep the liquidity
problems from exacerbating the solvency problems;
(c) repairing the financial system by attracting capital injections into weak institutions and by
increasing transparency and disclosure to prevent contraction of balance sheets in financial institutions.
Major industrial economies are expected to shrink in 2009 as the crisis spills over to the real sector of the
economy. Even if the pace of economic contraction is expected to ease in the second half of 2009, growth is
likely to remain below trend. However, recovery is expected in 2010. For example, forecasts prepared by
HSBC Global Research indicate that the world economy (measured by real GDP) will shrink by -0.1 per cent
in 2009, then grow by 2.6 per cent in 2010. Most of the negative growth in 2009 will be experienced by
developed countries (-1.1 per cent), including the United States (-0.9 per cent), the Euro zone (-1.4 per cent),
Germany (-1.5 per cent), United Kingdom (-2.5 per cent) and Japan (-1.4 per cent). The depression, which
some observers had feared, has not occurred; however, uncertainty remains very high as further
developments materialize. Even though more recent forecasts paint a more gloomy picture, the qualitative
conclusion is the same: conditions will be less bad in 2010 than in 2009.
What is not clear is whether or not there is an association between the crisis and the decline in oil
prices, which is particularly important for countries in the Middle East. One explanation is based on the
proposition that the price of oil has become like any financial price because it is determined primarily in the
futures market where traders are not interested in the physical commodity. Volatility of the price of oil in the
recent period cannot be explained in terms of real factors, such as growth in India and China, but rather in
terms of the sentiment of traders in the futures market. What happened, it seems, was massive liquidation of
long positions on futures contracts to realize profits and obtain the liquidity needed elsewhere. Another
factor is that the crisis has forced hedge funds to liquidate their leveraged positions in energy exchange
traded funds.
THE IMPACT OF THE CRISIS ON GROWTH PROSPECTS IN COUNTRIES
OF THE ESCWA REGION IN 2009 AND BEYOND
The oil income effect
The "income effect" of the decline in oil revenues would exercise a depressing effect on GDP growth
in ESCWA countries. Such impact would vary across countries of the region according to the degree of
dependence on oil revenues. The impact would be most felt in countries of the GCC, and to a lesser degree
on other ESCWA countries more dependent on worker's remittances (i.e. Syria, Lebanon, Egypt, and
Yemen).
Oil prices currently fluctuate within the range 40 – 60 US dollars per barrel. According to some
estimates, a more fair and stable price should revolve around 75 US $ per barrel through 2010.At any rate ,
such decline in oil revenues would result in major delays in planned mega projects financed by public
expenditure in Gulf countries, thus affecting GDP growth.
To break the current recessionary cycle, a number of initiatives and corrective measures need to be
taken without delay; notable among them are the following moves within the Macro Policy Space:
First, the role of the public sector need to be enhanced in order to assist in dealing with problems of
global recession in ESCWA region.
The role of the fiscal stimulus becomes crucial in this respect, and Keynesian type policies need to be
pursued in order to break the current recessionary cycle. Such types of policies would lead to a crowding –
in of private investment and reduce the level of aggregate uncertainty in the system;
7
Second, social spending on infrastructure, employment creation, education, and basic health care need
to be expanded in order to stimulate demand for goods and services and mitigate problems of increasing
unemployment and rising poverty
Third, there is room for more rationalization of investment policies by the private and corporate
sectors by shifting away from reliance on "speculative funds" and "speculative outlets", and focusing more
on the best use of "investible funds" designed to expand productive capacities and to expand sustainable
employment opportunities.
Fourth, More coordination and cooperation among ESCWA countries (oil and non- oil) is badly
needed to survive the crisis. New regional policies in trade and finance need to be designed to intensify inter
– Arab (and intra – ESCWA countries) exchanges to compensate for the loss of export markets and financial
investment outlets in Europe and USA.
Fifth, Monetary and fiscal policies, need to be closely coordinated among ESCWA countries, in order
to increase their efficiency at the country level to counter the negative impacts of the crisis and stop the
slippage from recession to a generalized and lengthy depression,
3. ASSESSING THE CURRENT ACHIEVED PROGRESS IN THE REGION TOWARDS:
“ENERGY FOR SUSTAINABLE DEVELOPMENT ISSUES AND REGIONAL
INTEGRATION PROJECTS
CURRENT STATUS OF INTERCONNECTION PROJECTS IN THE REGION
(ESCWA AND NORTH AFRICA REGION)
At present Jordan, Egypt, Syria and Libya are electrically interconnected. It is expected to operate the
Syrian-Lebanese interconnection by the second quarter of 2009.
The Syrian-Turkish interconnection has been put into operation by direct unit method (isolated
generation from Turkey to Syria) since 2006. The synchronization of this interconnection will be after the
approval of the UCTE.
The Iraqi-Syrian Interconnection is expected to be completed by the middle of 2010, and the TurkishIraqi interconnection is being put into operation by isolated region method (isolated load in Iraq) since
September 2003. The synchronization of this interconnection will be after the approval of UCTE.
Turkey
‫ ا‬Syria
Iraq
Mediterranean Sea
LIBYA
Jordan‫ا‬
Saudi Arabia
EGYPT
Sea
Red
500 kV
400 kV
Electrical Interconnection
Towards East
8
Agreements have already been signed between the interconnected countries as follows:
The General Trading Agreement in 1993.
The General Interconnection Agreement in 1996.
Based on the above mentioned agreements, Bilateral Interconnection agreements were signed between
every two adjacent interconnected countries.
Contracts for energy exchange on short-term basis were signed by Jordan-Egypt, Jordan-Syria, EgyptLibya, Egypt-Syria and Egypt-Lebanon.
Techno-Economic Feasibility study of interconnecting Egypt and the kingdom of Saudi Arabia
finished and the implementation phase will start after hiring the project consultant.
Crossing Aqaba Gulf in the South (CS)
Possibility to use small islands for the crossing
Techno economic feasibility study between Nile Basin countries (including Egypt and Sudan)
finalized . The interconnection between Egypt–Sudan and Ethiopia will be considered as a fast track phase,
the consultant is already hired for this part.
9
GCC INTERCONNECTION OUTLINE
Phase I of the 400-kV interconnection of the power systems of the Gulf Arab states — more
specifically, the interconnection of the power systems of Bahrain, Saudi Arabia, Qatar and Kuwait —
included back-to-back high-voltage direct-current (HVDC) 1200-MW installations between a 50-Hz, 400-kV
system and a 60-Hz, 380-kV system.
Phase II will include the internal interconnection of the southern systems (UAE and Oman) to form the
UAE national grid and the Oman northern grid. Phase III will include the interconnection of the northern and
southern systems, which will complete the 850-km (528-mile) 400-kV ac transmission line, scheduled to be
finished in 2010.
4. IDENTIFY POSSIBLE POLICIES, MEASURES AND PROGRAMMES FOR PROMOTING
“ENERGY FOR SUSTAINABLE DEVELOPMENT OBJECTIVES AND
INITIATING ACTIONS FOR CLIMATE CHANGE MITIGATION
Sustainability measures
Indicators of sustainability are different from traditional indicators of economic, social, and
environmental progress. Traditional indicators -- such as stockholder profits, asthma rates, and water quality
-- measure changes in one part of a community as if they were entirely independent of the other parts.
Sustainability indicators reflect the reality that the three different segments are very tightly interconnected, as
shown in the figure below:
10
Figure 5. Communities are a web of interactions among the environment, the economy and society
As this figure illustrates, the natural resource base provides the materials for production on which jobs
and stockholder profits depend. Jobs affect the poverty rate and the poverty rate is related to crime. Air
quality, water quality and materials used for production have an effect on health. They may also have an
effect on stockholder profits: if a process requires clean water as an input, cleaning up poor quality water
prior to processing is an extra expense, which reduces profits. Likewise, health problems, whether due to
general air quality problems or exposure to toxic materials, have an effect on worker productivity and
contribute to the rising costs of health insurance.
Sustainability requires this type of integrated view of the world -- it requires multidimensional
indicators that show the links among a community's economy, environment, and society. For example, the
Gross Domestic Product (GDP), a well-publicized traditional indicator, measures the amount of money being
spent in a country. It is generally reported as a measure of the country's economic well-being: the more
money being spent, the higher the GDP and the better the overall economic well-being is assumed to be.
However, because GDP reflects only the amount of economic activity, regardless of the effect of that activity
on the community's social and environmental health, GDP can go up when overall community health goes
down. For example, when there is a ten-car pileup on the highway, the GDP goes up because of the money
spent on medical fees and repair costs. On the other hand, if ten people decide not to buy cars and instead
walk to work, their health and wealth may increase but the GDP goes down.
In contrast, a comparable sustainability indicator is the Index of Sustainable Economic Welfare. In
order to get a more complete picture of what is economic progress, the ISEW subtracts from the GDP
corrections for harmful bases or consequences of economic activity and adds to the GDP corrections for
significant activities such as unpaid domestic labor. For instance, the ISEW accounts for air pollution by
estimating the cost of damage per ton of five key air pollutants. It accounts for depletion of resources by
estimating the cost to replace a barrel of oil equivalent with the same amount of energy from a renewable
source. It estimates the cost of climate change due to greenhouse gas emissions per ton of emissions. The
cost of ozone depletion is also calculated per ton of ozone depleting substance produced. Additionally,
adjustments are made to reflect concern about unequal income distribution. The correction for unpaid
domestic labor is based on the average domestic pay rate. Some health expenses are considered as not
contributing to welfare, as well as some education expenses. (See Indicator Spotlight for more on the ISEW
as a sustainability indicator.)
Like the GDP, the ISEW bundles together in one index tremendous amounts of information, but the
key difference is that the information takes into account the links between environment, economy and
society.
11
Indicators of sustainable community are useful to different communities for different reasons. For a
healthy, vibrant community, indicators help monitor that health so that negative trends are caught and dealt
with before they become a problem. For communities with economic, social, or environmental problems,
indicators can point the way to a better future. For all communities, indicators can generate discussion
among people with different backgrounds and viewpoints, and, in the process, help create a shared vision of
what the community should be.
Traditional vs. sustainability indicators
Economic Indicators
Traditional Indicators
Sustainability Indicators
Emphasis of
Sustainability Indicators
Median income
Number of hours of paid employment at
the average wage required to support basic
needs
What wage can buy defines basic
needs in terms of sustainable
consumption
Unemployment rate
Diversity and vitality of local job base
Resilience of the job market
Number of companies
Number and variability in size of
companies
Ability of the job market to be
flexible in times of economic change
Per capita income relative to
the U.S. average
Number of jobs
Number and variability of industry types
Variability of skill levels required for jobs
Size of the economy as
measured by GNP and GDP
Wages paid in the local economy that are
spent in the local economy
Local financial resilience
Dollars spent in the local economy which
pay for local labor and local natural
resources
per cent of local economy based on
renewable local resources
Environmental Indicators
Traditional Indicators
Sustainability Indicators
Emphasis of
Sustainability Indicators
Ambient levels of
pollution in air and water
Use and generation of toxic materials (both in
production and by end user)
Measuring activities
causing pollution
Vehicle miles traveled
Tons of solid waste
generated
per cent of products produced which are durable,
repairable, or readily recyclable or compostable
Conservative and cyclical
use of materials
Cost of fuel
Total energy used from all sources
Use of resources at
sustainable rate
Ratio of renewable energy used at renewable rate
compared to nonrenewable energy
12
Social Indicators
Traditional Indicators
Sustainability Indicators
Emphasis of
Sustainability Indicators
SAT and other
standardized test scores
Number of students trained for jobs that are
available in the local economy
Matching job skills and training to
needs of the local economy
Number of students who go to college and
come back to the community
Number of registered
voters
Number of voters who vote in elections
Participation in democratic process
Number of voters who attend town meetings
Ability to participate in the democratic
process
The sustainable community indicator checklist consists of the following 14 questions:
1.
Does the indicator address the carrying capacity of the natural resources -- renewable and
nonrenewable, local and nonlocal -- that the community relies on?
2.
Does the indicator address the carrying capacity of the ecosystem services upon which the community
relies, whether local, global, or from distant sources?
3.
Does the indicator address the carrying capacity of esthetic qualities -- the beauty and life-affirming
qualities of nature -- that are important to the community?
4.
Does the indicator address the carrying capacity of the community's human capital -- the skills,
abilities, health and education of people in the community?
5.
Does the indicator address the carrying capacity of a community's social capital -- the connections
between people in a community: the relationships of friends, families, neighborhoods, social groups,
businesses, governments and their ability to cooperate, work together and interact in positive, meaningful
ways?
6.
Does the indicator address the carrying capacity of a community's built capital -- the human-made
materials (buildings, parks, playgrounds, infrastructure, and information) that are needed for quality of life
and the community's ability to maintain and enhance those materials with existing resources?
7.
Does the indicator provide a long-term view of the community?
8.
Does the indicator address the issue of economic, social or biological diversity in the community?
9.
Does the question address the issue of equity or fairness -- either between current community residents
(intra-generational equity) or between current and future residents (inter-generational equity)?
10.
Is the indicator understandable to and useable by its intended audience?
11.
Does the indicator measure a link between economy and environment?
12.
Does the indicator measure a link between environment and society?
13.
Does the indicator measure a link between society and economy?
14. Does the indicator measure sustainability that is at the expense of another community or at the expense
of global sustainability?
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Path towards a sustainable Energy System
One major future challenge is to find a path towards a sustainable energy system. The most important
factors in sustainable energy development are the prospects for economic growth and investment, improved
energy accessibility for the poor, security of supply and the local, regional or global emissions resulting from
energy production and use. On the way towards a sustainable energy system a great number of different
measures in nearly every sector of our society need to be realized, which needs of course clear and strong
political basic conditions. Figure 6 shows a theoretical process for the realization of measures in the energy
sector.
Figure 6. Theoretical process for the realization of energy-related measures
The starting point is a detailed analysis of the general conditions and major trends. Regarding the
identified directions of the development the time horizon (short-, medium- and long-term) and the most
important parameters (e.g. demographic, energetic, economic or ecological parameters) have to be
considered.
The investigation and evaluation of possible measures should be done as objectively as possible and
therefore especially universities and other independent research facilities should be integrated in this process
in the sense of a political consultancy. The underlying parameters for the assessment could be of different
nature like feasibility or economical effects and should show important effects of the discussed scenarios.
Possible barriers and how to overcome them should also be investigated in this stage of the process [2].
Based on the evaluation of possible measures clear political targets should be stated and also a way
how to reach the targets in terms of implementation (transparent communication to the people).
The realization and check of achievement of objectives is the last important step, in order to evaluate
the success of the measures implemented. This theoretical process of course needs to be adapted to the
country-specific situation concerning e.g. the political system or cultural questions.
Possible general and sectoral Measures
In order to meet the challenge of realizing a sustainable energy system all possibilities have to be
considered. Nevertheless a few principles have to be regarded. Measures have to be divided into short-,
medium- and long-term perspectives and strategies and the economic principle has to be the most important
basis for decisions.
We have to define clear political guidelines especially regarding the topics energy and environment.
The problem is that political targets often point in different directions, meaning that approaching one target
(e.g. reduction of energy-import dependency) hinders achievement of another target (e.g. use of often more
expensive domestic reserves which results in higher costs of energy supply).
The current situation in the EU is an example for this area of conflict. On one hand the EU wants to
reduce the energy import dependency as postulated in the corresponding green book5 and resulted in a
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second directive for forcing renewable energies. On the other hand directives for environment protection
have been published of which one deals especially with the quality of the European rivers.
The implementation of the directives in national law creates difficulty because due to the postulated
protection and improvement of the quality of the rivers electricity production from hydropower is highly
affected. Up to now only estimates exist but the values show that there could be a reduction of electricity
from hydropower in the order of 5 to 10 per cent in Austria. These directives thus are of considerable
importance for Austria, where the share of hydroelectricity is about 70 per cent. Additionally the EU
launched a EU-wide emission trading8, regardless of whether the Kyoto-protocol becomes operative or not.
Very important for energy innovations is the political framework. The aim is to achieve the political targets
through coordinated legislative measures. Those measures pertain to different parts of the energy supply
chain and a few sectoral measures are shown by way of example.
Energy Supply
On the energy supply side a wide variety of technically and economically reasonable measures are
possible and should be realized. In this sense not only electricity generation but also supply of heat and
cooling energy based on of renewable energies should be pursued. Where economically and technically
possible the efficiency of existing energy conversion devices should be increased by using the best available
technique. This includes for instance revitalization and refurbishment of small-scale hydroelectric power
plants, which represent a substantial option of making renewable energy useful. The utilization of the nonused resources of waterpower by means of revitalization and refurbishment of existing water power plants
extensively avoids a detrimental intervention in the ecology and the water resources of lakes and rivers.
In electricity generation and heat production forced use of renewable energy sources (e.g. biomass cofiring in existing large-scale power plants or substitution of fossil fuels with renewable energy sources) is
recommended. Additionally cogeneration (combined heat and electricity production) should be applied
wherever possible.
The local authorities and administration should be supported with regard to the establishment of
municipal energy concepts. Such concepts are suitable as objective planning basics for a long-term
development of the local energy consumption. The measures cover the reduction of energy input by means of
thermal upgrading of buildings, modified heating installations, improved energy management and user
behavior as well as measures in the traffic sector including area development intervention.
With the increased application of local district heating from biomass heat plants, the emissions of the
area heat supply can be reduced. By increasing the quota of biomass in energy supply, the regional forestry
division is called on to intensify and expand the fuel logistics to an efficient service performance instrument.
The creation of an offer for a voluntary inspection of the energy generation plants in the stages of
rough analysis and proposals for immediate and medium-term measures leads to a higher awareness for
measures with reference to energy economizing and in this way supports the operative plant optimization.
Households and small-scale Customers
In the households and small-scale consumer sector, an improved situation is to be expected regarding
thermal quality of the building enclosures and also with an increase of the efficiency of various power
consuming equipment and appliances. However, the desire for comfort and the reduction of the household
size is increasing. If a significant change in awareness towards energy saving fails to be achieved, the
requirement for energy (both in the heating/cooling sector as well as for electric power) will continue to
grow at an increased rate.
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Measures in this sector cover e.g. thermal situation of houses especially in cold regions but also in
warm regions (avoids cooling) with respect to insulation and windows, more efficient electric devices, better
information of the public, forced use of renewable energies (e.g. thermal solar collectors for hot water supply
and heating or heat pumps), efficient lighting and improvements in heating control.
Public Sector
Especially in the public sector “good practice” projects should be forced as a showcase for the public.
Measures should of course be technically purposeful and economically appropriate compared to alternative
solutions. Renewable energy sources are to be applied for the air-conditioning of rooms as well as for the
supply of room heat and warm water. For a high plant capacity utilization throughout the year, corresponding
measures for the realization of co-generation are to be taken.
Energy accounting should be applied wherever possible because it provides a database for the
comparison of the energy consumption with average values. Proposals for energy savings can be derived
from this. Experience has shown that using this measure approximately 10 per cent to 20 per cent of the
energy otherwise required can be saved for the buildings in question even without investments.
Although there is no broad consensus about how to consider external costs, an approach towards
taking them into account should be done, because this would point out the real costs of the different fuel
options. The public sector should commit itself to use energy in such a way that a waste is avoided
particularly where renewable energy sources are concerned and especially in order to reduce the negative
environmental impact.
The already existing efforts in the sectors information, motivation, consultation and training for the
various consumer groups are to be continued and expanded.
The electric power consumption and the emissions should be reduced with the use of power-saving
equipment. New household appliances use up to 40 per cent less power compared with old equipment and
appliances. Therefore procurement directives for electrical equipment and plants/installations should be
introduced or expanded.
Barriers to the Implementation of Measures
Often even well-developed energy technologies suffer from non-technical barriers and do not make
their way into the market. For this reason, successful energy innovations need integrated and systemic
considerations. (See figure 7)
Figure 7. Barriers to energy innovations
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The EU realized the problems in this field and initiated an according project and also the U.S.
Department of Energy deals with this topic. The following selected barriers of each category are presented.
Of course not all barriers are relevant for every country, because of different stages of development of the
country.
Technological Barriers
Typically, most renewable energy sources are not storable (e.g. wind, solar), i.e. you cannot generate
the energy when needed, but only when the resource is available (e.g. when the wind blows). This causes
problems in terms of the network management, because there is relatively high uncertainty about the
availability of the generated energy, although the forecast methods are improving.
There are technical solutions not yet ready-to-market (e.g. electricity generation from biomass in
small-scale power plants) or suffer from poor efficiencies (e.g. photovoltaic).
A poor degree of standardization can cause incompatibilities within different systems.19
Also poor infrastructure like missing network or transport infrastructure could hinder the intense use of
renewable energy sources.
Economical Barriers
Energy markets are not always already fully established and therefore market barriers could hinder the
market entrance of new generation capacity.
If no external costs are considered, especially renewable energy sources are more expensive than
classical fossil fuels. In combination with high initial investments, poor amortization and higher risks
massive financial barriers occur for renewable energy sources.
Social Barriers
Changes in our energy system affect our whole society, which means more or less every human being.
Therefore one big challenge will be not only to invent new energy technologies, but also to bring this
technology to the people, so that they accept and use it. In this highly non-technical field many barriers can
be found, especially regarding behavior, institutions and organizations, environment and government/policy.
Contrary to standardized economic models managers do not always make optimal decisions in real
life. Especially lack of time and/or information lead to wrong decisions, which often prevent e.g. new energy
efficient products from being installed.
Buying decisions of human beings are inseparably associated with faith in the vendor. Absence can
result in a lack of information and following to a wrong (e.g. not the most efficient) buy. The acceptance of
the population concerning new energy-related projects is often very low, even if renewable energy using
facilities (e.g. wind power) are concerned. Prejudices often arise due to lack of information. On the part of
the builder the population should be more involved in the project from the very first.
Innovational Barriers
In the educational sector there is a lack of innovation-oriented research. This means that there has to
be a closer connection between research institutes and the economy, which would also overcome problems
concerning the knowledge transfer to applications in real life. In order to realise energy innovations financial
support is needed. Because of the innovative character of such projects they are inseparably associated with
relatively high risks and investors try to avoid these risks. The situation in Europe concerning risk capital is
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improving but compared to the United States still not so well developed (e.g. in Europe there is no high-tech
and innovation oriented stock exchange like NASDAQ in the USA).
As compared to Japan or USA, innovations in Europe are also often hindered by undue bureaucracy.
One indicator for innovations is the number of patents filed which, as compared to Japan and the USA,
shows a declining trend, also due to inappropriate basic conditions in the field of patenting.
Summary and Outlook
Our modern society faces major problems in terms of huge social differences, climate change and
unlimited fossil fuels. Therefore a shift towards a sustainable society and especially towards a sustainable
energy supply is indispensable.
Generally, global problems need global solutions, but we have to consider that we need - because of
the differences between our world regions and countries in terms of e.g. geography, culture, religion,
reserves, political system - a situative approach.
It is not to be expected that a radical new invention will be made in the next decades and therefore
various small steps lead towards a sustainable energy system. Although fossil fuel reserves are going to last
for at least five more decades (oil and gas but not coal), they are finite. We will therefore inevitably be
confronted with higher energy prices.
One important basic principle should not be neglected – the economic principle. With the available
financial resources we must try to get the highest output we can get. This means we should use the best
potentials first. The situation in the EU is a good example. Thanks to the relevant directive, a EUwide target
for electricity from renewable energy sources has been defined. Those target values have been adapted to the
level of each member state. What happens is that each member state tries to reach the target within its own
country. Compared to an EU-wide solution the best locations having the lowest electricity production costs
would be used and the costs for the same amount of electricity would be lower, thus economically more
reasonable. The resulting cost difference could be used to build additional power plants. Although the EU
aims at a single European electricity market, this vision is not reality now. For Europe it is one of the most
important challenges for the near future to really establish this market.
The time for action is now, because a change in the present energy system takes several decades
because of the huge investments needed. In Europe, for instance, we must install approximately 600 GW29
of new generation capacity, thus replacing 300 GW of existing capacity and 300 GW of new capacity due to
the still increase in energy consumption (app. 2 per cent/year electricity).
In order to meet our future challenges (especially energy security and emission goals) we have to keep
all energy options open (including nuclear and large hydro power). It will also be very important to embank
the energy demand grow rates, which will only be reached through a contribution of everybody.
5. A VISION ON THE ROLE OF THE ENERGY SECTOR IN ACHIEVING POVERTY
ALLEVIATION AND PROMOTING SME’S FOR JOB CREATION
AND THE POSSIBLE ROLES OF ESCWA IN SUPPORTING MEMBER
COUNTRIES IN SUCH AREAS
Poverty can never be reduced in an environment of declining economic growth and productivity hence
the need to identify elements of sustainability in the poverty reduction programmes. Countries including
ESCWA countries must own agendas to implement sustainable programmes while development partners are
expected to support and assist countries to develop programmes for the benefit of nations.
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Poverty is a devastating condition that affects an enormous percentage of the earth's population.
Sustainability cannot be achieved without eradicating poverty. However, the causes of poverty have their
roots in both the international and national domains resulting in diminished access to economic social,
political options by the poor. Therefore, efforts to empower poor communities to regain access to these
options and transform oppressive systems which sustain poverty will require a multi-sectoral, multidimensional approach.
While there is no single solution to eradicate poverty there are factors which sustain poverty on a
global scale - the unsustainable burden of debt, terms of trade that favour industrialized countries, and
production and consumption patterns that do not meet the basic needs of all people. Within countries, as
well, there are similar patterns of marginalization, oppression, inequity in the distribution of resources, and
limited democratic participation in national development strategies.
Attempts to alleviate poverty have proven that addressing the symptoms without addressing the causes
of poverty will not work. Poverty is increasing along with environmental degradation. Poverty eradication
and sustainability will be achieved through community based development strategies, transformation of
national and international policies that impede successful development efforts, and mechanisms for
communities and governments to share in policy formation. In addition, women, indigenous people, and
youth must be fully integrated into the development of policies at the community, national and international
levels.
The following is the proposed five area to enable all ESCWA countries to achieve sustainable
livelihoods by providing an integrating factor that allows policies to address issues of development,
sustainable resource management and poverty eradication simultaneously:
1.
To provide all persons urgently with the opportunity to earn a sustainable living.
2.
To implement policies and strategies that promote adequate levels of funding and focus on integrated
human development policies, including income generation, increased local control of resources, local
institution-strengthening and capacity-building and greater involvement of non-governmental organizations
and local levels of government as delivery mechanisms.
3.
To develop for all poverty-stricken areas, integrated strategies and programs of sound and sustainable
management of the environment, resource mobilization, poverty eradication and alleviation, employment and
income generation.
4.
To create a focus in national development plans and budgets on investment in human capital, with
special policies and programs directed at rural areas, the urban poor, women and children. and
5.
To identify and eliminate policies and strategies (business, trade) that promote inequalities and
perpetuate poverty.
6. THE PRIORITY AREAS OF ACTION FOR ESCWA TO SUPPORT THE ENERGY
SECTOR IN MEMBER COUNTRIES IN ACHIEVING SUSTAINABLE
DEVELOPMENT AND MITIGATING CLIMATE CHANGE







Increase Energy efficiency awareness;
Energy sector restructuring towards competitive market;
Introducing Energy efficiency law;
Support renewable energy through introducing feed in tariff;
Capacity building in the field of energy efficiency and renewable;
Reinforce current interconnection network to gain the most benefit of it;
Tariff reflecting cost of service.
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The ESCWA region is expected to achieve positive growth in 2009, in spite the world’s major
economies that are expected to enter the phase of recession. Nevertheless, the rate of growth is forecast to
decelerate to its lowest level in seven years. Inflationary pressures from domestic sources are expected to
remain, but monetary liquidity constraints are expected to bind economic activities. The challenge for
policymakers in the ESCWA region is to seek effective aggregate demand management through coordinated
fiscal and monetary policies. The options are limited due to institutional constraints and a suitable regional
foreign exchange rate regime in the regional context is a challenging target that will have to be resolved in
the ongoing discussions on GCC Monetary Union, which is scheduled to be implemented in 2010. The role
of fiscal policy will gain in importance in 2009 in order to sustain business confidence and consumer
expectations at a time when uncertainties persist in the world economy. A regional cooperation architecture
for food security would be effective as several countries in the ESCWA region have significant potential for
agricultural development. Although external economic conditions for 2009 are not bright, the realization of a
policy space for regional cooperation in economic issues can be utilized to further strengthen sustainable and
resilient economic growth in the ESCWA region.
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REFERENCES
1.
United Nations (2009). World Economic Situations and Prospects 2009. Available at:
http://www.un.org/esa/policy/wess/wesp.html.
2.
See http://www.wec-austria.at/de/files/download/bachhiesl0904.pdf.
3.
BP Statistical Review of World Energy June 2009.
4.
The Annual Energy Outlook 2009, prepared by the Energy Information Administration. DOE/EIA0383(2009), March 2009.
5.
Electric Power Annual 2007, January 2009 Energy Information Administration Office of Coal,
Nuclear, Electric and Alternate Fuels U.S. Department of Energy ,Washington DC 20585.
6.
Measures and barriers towards a sustainable energy system, Dr. Udo Bachhiesl, Graz University of
Technology Institute of Electricity Management and Energy Innovation Inffeldgasse 18, A-8010 Graz,
AUSTRIA, http://www.AEE.TUGraz.at.
7.
The Impact of the Crisis on Economic Growth in 2009 in ESCWA Countries, By Mahmoud AbdelFadil - Professor of Economics at Cairo University – Egypt A presentation to the Regional Meeting on the
Impact of the Financial Crisis on ESCWA Countries Damascus: (5-7 May 2009).
8.
Status of Energy Efficiency activities in ESCWA Region, Dr. Eng. Walid AL-Deghaili, Energy
Section Chief Sustainable Development and Productivity Division (SDPD) – ESCWA Global Energy
Efficiency (GEE21) – 4 June Palais des Nations, Geneva, Switzerland.
9.
UNDP & American Chamber of Commerce in Egypt; “Egypt’s Business Summit on Climate
Change”; October 28, 2009, Benoit Lebot ;UNDP Climate Change Advisor; [email protected].
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