94 F. AL-SULAYMAN
Germany, Japan, and China, as well as neighbors such as Jordan, made
the early risky investments in renewables that helped drive down the
cost curve, granting them a privileged position in this emerging global
industry.
What explains the slow start? Where are the GCC states now in terms
of renewables deployment? And for the countries that have begun making
some progress, what explains the difference between them and the others?
This will be the focus of this chapter.
A good place to begin understanding the outlook of some of these
hydrocarbon-rich states is to look at their approaches to climate change
mitigation efforts and renewables development as important tools in that
battle. There is a growing literature—addressed in the next section—
looking at the behavior of these states in climate change forums; with
few exceptions the Gulf states played a historically obstructionist role.
If shifting the power and transport sectors away from oil dependence
and toward renewables became a solution, the thinking went, then states
would be implicitly accepting the premise that oil was the problem. And
if oil-rich states began down this road, it would signal the beginning of
the end.
In recent years, further down along the cost curve, the economic case
for renewables in the power sector has become too compelling to ignore.
States in the region have embarked on ambitious renewables development
plans, with the UAE taking the lead. In fact, a powerful argument could
be made that states in the region were just waiting for a better bargain,
and that the energy transformation is not a sprint, but a marathon.
Decreases in government revenues across the GCC states since the
oil price decline in 2014 have also exerted stronger pressures for fiscal
reforms, and a deeper understanding of the opportunity cost associated
with consuming a barrel of oil locally that could otherwise be sold abroad
at international market prices. The slashing of wasteful energy subsidies
is now also high on the list of priorities. In addition to the obvious
economic impetus to engage in price reforms, the low oil price environment has also provided a unique political opportunity to publicly justify
the reduction of subsidies, allowing governments to deflect some blame, if
and when prices do recover, on market forces now far beyond their reach.
There is indeed an argument to be made that such reforms could never
have been considered in a stronger fiscal environment. Several member
states led by the UAE took advantage of these opportunities, and have
lifted subsidies on power and fuel to varying degrees. This has opened
Germany, Japan, and China, as well as neighbors such as Jordan, made
the early risky investments in renewables that helped drive down the
cost curve, granting them a privileged position in this emerging global
industry.
What explains the slow start? Where are the GCC states now in terms
of renewables deployment? And for the countries that have begun making
some progress, what explains the difference between them and the others?
This will be the focus of this chapter.
A good place to begin understanding the outlook of some of these
hydrocarbon-rich states is to look at their approaches to climate change
mitigation efforts and renewables development as important tools in that
battle. There is a growing literature—addressed in the next section—
looking at the behavior of these states in climate change forums; with
few exceptions the Gulf states played a historically obstructionist role.
If shifting the power and transport sectors away from oil dependence
and toward renewables became a solution, the thinking went, then states
would be implicitly accepting the premise that oil was the problem. And
if oil-rich states began down this road, it would signal the beginning of
the end.
In recent years, further down along the cost curve, the economic case
for renewables in the power sector has become too compelling to ignore.
States in the region have embarked on ambitious renewables development
plans, with the UAE taking the lead. In fact, a powerful argument could
be made that states in the region were just waiting for a better bargain,
and that the energy transformation is not a sprint, but a marathon.
Decreases in government revenues across the GCC states since the
oil price decline in 2014 have also exerted stronger pressures for fiscal
reforms, and a deeper understanding of the opportunity cost associated
with consuming a barrel of oil locally that could otherwise be sold abroad
at international market prices. The slashing of wasteful energy subsidies
is now also high on the list of priorities. In addition to the obvious
economic impetus to engage in price reforms, the low oil price environment has also provided a unique political opportunity to publicly justify
the reduction of subsidies, allowing governments to deflect some blame, if
and when prices do recover, on market forces now far beyond their reach.
There is indeed an argument to be made that such reforms could never
have been considered in a stronger fiscal environment. Several member
states led by the UAE took advantage of these opportunities, and have
lifted subsidies on power and fuel to varying degrees. This has opened