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EGYPT’S GREEN POTENTIAL

PSC 783: Comparative Foreign Policy December 6, 2011

UN Group

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Executive Summary

This paper outlines the UN’s involvement in Egypt’s renewable energy sector. By evaluating Egypt’s National Competitiveness Strategy and the United Nations Environmental Program’s activities, current policies on wind and solar power production are examined. Barriers to renewable energy adoption are also explored. In conclusion, policy recommendations are offered based on research and evaluation of current initiatives.

Egypt’s Competitiveness Strategy

According to research, Egypt is in a competition with countries in the region and in the rest of the world. Egypt needs to reduce the gap between themselves and other countries in order to meet the basic needs of the population such as food, health, education, housing and decent secure jobs. They also need to race against time before water, energy, and food become national

security risks. Of the many challenges in Egypt, labor, water, energy and food seem to be the most pressing. Unemployment rates, for example, are among the highest in the region, reaching about 9.4% in 2009. According to statistics, over the next 10 years labor force will reach 34 million in 2020 with an annual addition of 790,000 in 2015-2020. Overall Egypt will need more than one million jobs per year. Therefore, implementing the competitiveness strategy could lead to higher productivity and therefore more jobs.

In addition, the availability of water is also another concern for Egypt. So far, Egypt is already facing “water poverty” and will soon face “water deficits." Egypt has already crossed the line into the UN’s official statistical definition of water poverty. Its water supply will no longer cover its people’s needs by 2017. Egypt will face serious water shortages by the year 2025, described by experts as possible droughts. Therefore, available water resources must be used

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more efficiently and new water resources must be found to meet the needs of the country. In terms of energy, Egypt seems to be depleting its primary resources at a rapid rate. As an example of this dilemma, Egypt became a net oil importer in 2008. Although it has largely replaced diminishing oil with increased natural gas production, Egypt is currently selling off its natural gas and calculating it as an income contribution to the GDP. However, it should be taken into consideration that Egypt is depleting a natural asset. The current accelerated extraction rates are much greater than other similar gas producers. Egypt could become a net importer within a decade.

Lastly, Egypt’s food security will also be threatened by water scarcity and climate change. Egypt currently has no difficulty feeding its people, but that situation could quickly reverse. Egypt’s food security may be threatened because of the inter-linkages between water scarcity, climate change, and global food prices.

The way to address the problems mentioned above would have to consider the adoption and implementation of the Egyptian Competitiveness Strategy (“ECS”). This strategy could be the most effective way for Egypt to create a bridge to a 21st century economy by reforming education and investing in people while taking the lead as a regional beacon of hope and source of new ideas, solutions, and technologies. This strategy could also attract the money from investors, international financiers, and donors.

The mission of the Egyptian Competitiveness Strategy is to create a globally competitive and productive workforce in an efficient labor market with a special focus on a modern

educational and training system that equips Egyptians with skills, critical thinking, and

technology knowledge to adapt to a constantly changing environment. Additionally it strives to build a model of growth based on a green transformation of the economy assuring a modern,

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efficient, competitive, and low-carbon economy that uses the unique availability of abundant renewable energy resources and builds on its strengths in tourism and logistics. Hence, it hopes to establish an outcome-driven innovation model that addresses the major societal challenges and strengthen Egypt’s leadership in key potential technologies, such as renewable energy, agri-business, and information and communication technology.

The Egyptian Competitiveness Strategy intends to focus on people, innovation, and sustainable green growth. These in turn will serve as basis for the development of initiatives in agriculture, tourism, ICT, industry and trade, renewable energy, construction and logistics.

United Nations Environmental Program

The United Nations Environmental Program (“UNEP”) has played a major role in the development of a Green Economy in Egypt and will continue to do so in the foreseeable future. Founded in 1972, UNEP is a program within the United Nations that coordinates environmental activities and aids countries in the implementation of sound environmental practices and policies. UNEP is headquartered in Nairobi, Kenya, and currently consists of six additional offices in various countries around the world.

UNEP has focused its efforts on an impressive array of environmental issues, including environmental governance, green economies, atmospheric issues, marine and terrestrial

ecosystems, and the development of green policies within participating governments. UNEP also has actively funded and implemented environmentally-related development projects within participating countries. UNEP also works on the formation and implementation of

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such issues as harmful chemicals, trans-boundary air issues, and the contamination of international water ways.

UNEP is divided into six divisions in an attempt to effectively address important environmental issues. UNEP’s structure includes six substantive divisions including The Division of Early Warning and Assessment (“DEWA”); The Division of Environmental Policy Implementation (“DEPI”); The Division of Technology; The Division of Industry and

Economics (“DTIE”); The Division of Regional Cooperation (“DRC”); and the Divisions of Environmental Law and Conventions (“DELC”) and Communications and Public Information (“DCPI”). Activities implemented by these various divisions include the publication of numerous reports, atlases, and newsletters, as well as reports and documents providing key decision makers with information, analysis, and suggestions regarding environmental policy. UNEP has

historically focused on activities addressing such important issues as climate change, disaster and conflict, environmental governance, harmful substances, ecosystem management, and resource efficiency. Examples of successful projects resulting from the above listed activities include The Solar Loan Program, which aided 100,000 people in developing solar power in India; The Marshland Project, which aided in the survival of Iraq’s historic marshlands; and various other projects that are currently ongoing, such as research regarding the shrinking of glaciers, and research and promotion of the increased use of electric vehicles to reduce carbon emissions.

UNEP and Egypt

Pursuant to UNEP’s Africa and Middle East regional initiative, UNEP is partnering with Egypt on the implementation of a project on Green Economy and Social and Environmental Entrepreneurship Development (the “SEED Initiative”) which will be implemented with the

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support of the European Union. UNEP will provide support on macro-economic assessment of green investment promotion opportunities in high potential sectors, resulting in economic growth and development, job creation, a reduction in unemployment, and overall environmental

improvement. UNEP is partnering with the Egyptian Environmental Affairs Agency (“EEAA”) and the Egyptian National Competitiveness Council (“ENCC”). These collaborative efforts will contribute to the green transformation envisioned by the Egyptian Competitiveness Strategy of 2020 and the National Sustainable Development Strategy of Egypt.

The Green Economy and the Seed Initiative are a response to a series of needs identified by African ministers at the 3rd African Ministerial Conference on Finance, Economic Planning and Environment. UNEP, with generous funding from the European Union has implemented these two regional initiatives in Egypt and six other pilot countries. The success of these programs may determine not only the future green economies of Egypt and the other pilot countries, which include South Africa, Kenya, Ghana, Rwanda, and Burkina Faso, but the future of Green economies across Africa as a whole.

Project activities of the Green Economy and SEED initiative include:

• Macro-economic assessments of opportunities to promote green investment in high potential sectors

• Green Economy Scoping Studies and Green Sector Studies that assess the potential for investing in green sectors

• The definition of priority areas for policy reforms, and identification of linkages with existing strategies, policies and programs in these pilot countries

• National and regional training that targets experts and stakeholders in the public and private sectors

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• National and regional platforms for dialogue and consultation on key elements of strategies to promote green economy and social and environmental entrepreneurship

• Launch of the African SEED Awards for social and environmental entrepreneurship and support for business and skills development

• Creation of a network of social and environmental entrepreneurs across Africa to promote learning and stimulate replication of ideas

• Identification of regulatory, policy, financing and institutional barriers to foster green investments and social and environmental entrepreneurship in Africa

Expected outcomes from the above mentioned Green Economy and SEED Initiative activities include:

• Assessment of opportunities and challenges regarding green economy transitions within a macro-economic context

• The identification of key policy reforms and enabling factors to stimulate and support green investments

• The stimulation of social and environmental entrepreneurship through identifying, rewarding and providing business development support to innovative social and environmental entrepreneurs

• The development of national strategies on green economy and social and environmental entrepreneurship development

UNEP hopes to achieve these expected outcomes by the conclusion of this project, which began in June of 2010 and will end in September of 2012. This limited time frame will determine

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the future of UN and EU green initiatives in Egypt, and therefore, successful implementation of UNEP’s Green Economy and SEED Initiative is of extreme importance for the future

development of Egypt.

In analyzing the UNEP Green Economy and SEED initiative, we must determine whether these plans, developed and implemented within UNEP selected pilot countries, will address or at least begin to address the previously mentioned issues Egypt is and will be dealing with in the foreseeable future, including but not limited to: the widening gap between Egypt and

neighboring countries; the danger of not being able to meet the population’s basic needs; serious unemployment issues; water scarcity; the depletion of its energy sources; and the potential future risks to food security due to the combination of the above mentioned factors. In examining the activities and expected outcomes we first must ascertain if the UNEP’s goals are in line with the actual needs of the Egyptian people.

Wind Power

Pursuant to suggestion and analysis from the Deputy Chairman of the Egyptian New and Renewable Energy Authority, Fathy Ameen Mohammad, Egypt has excellent potential regarding wind power as a source of green energy. Particularly within the Suez Gulf, where wind speed exceeds 10 meters per second. Egyptian wind power could demonstrate a viable source of energy and an attractive magnet for European investors.

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In the above map, Egypt’s various wind potentials are color coded, and demarcated by class distinctions ranging from below class one (dark blue), to class seven (dark purple) with winds moving in speeds recorded as high as 11.9 meters per second. Several wind farms capitalizing on Egyptian wind potential have already been implemented in Egypt. The most successful of these is the Zafarana wind farm, located on the Suez Gulf. Zafarana is the largest of Egypt’s wind farms, and is located within the wind zone demonstrated above as having the highest potential. As such, Zafarana has been designated as the best overall wind farm in the world, demonstrating Egyptian wind power’s awesome potential. Producing approximately 850 million Kilowatts of energy annually, Zafarana has been so successful that an additional area of 156 Killometers north of Zafarana has been designated as a wind farm site. Already Japanese and Spanish companies have sought government certificates for wind farms, proving a high demand for Egyptian wind power.

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Zafarana Wind Farm

Additional wind farms inspired by Zafarana have also entered the planning stages. In Gabal El-Zayat, another high potential site on the Suez Gulf, 700 kilometers of land have been earmarked and designated for an additional 3000 wind farms. Proving yet again the economic viability of wind farms in Egypt, the Japanese government in 2010 issued a $432 million soft loan for the development of this cite.

What should be of greatest interest to the UNEP and the Egyptian government is that 30% of the Zafarana wind park was manufactured locally. The potential for the Egyptian

economy regarding the continued development of these wind parks, both regarding the reduction of national unemployment and the influx of investor capital is truly encouraging.

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Solar Power

Solar power consists of the other energy source that should be developed to its greatest capacity. Considering that the vast majority of the country is hot, arid, inhabitable desert, it is logical to consider that solar parks could have tremendous success. In the graph below we examine Egyptian solar energy potential. The color bands represent varying gradations of solar power potential with yellow southern most band representing Egypt’s highest potential (7.1 daily kilowatts of solar power per square meter of energy a day).

One hundred miles south of Cairo lies Egypt’s first solar power plant, Kuraymat, which awaits its launch and is in the final stages of commissioning. A second solar power plant is scheduled for development and production by 2017 in Kom Ombo. Solar power has been projected as being able to produce a third of all of Egypt’s energy needs.

Wind and solar power, working hand in hand, have the potential to solve Egypt’s energy problems. According to Egyptian government minister, Abou El-Ella, “Ninety percent of the

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land in Egypt is empty and is suitable for setting up wind farms.” Combined with the awesome solar potential of Egypt’s deserts, if properly designed and implemented, energy investors should begin flocking to Egypt in the near future, a possibility which has already been demonstrated by the Suez Gulf wind farm’s success.

Barriers to of Renewable Energy Adoption

Green Economy reports show that several factors affect green technology adoption. Some of them include political buy-in, public buy-in, and ease of implementation. The main issue of political buy-in is how informed policy-makers are on the benefits and costs of green technology. Public buy-in for green technology deals with the public knowledge of what green technology is and what are its benefits and costs. Ease of implementation for these technologies is an important factor, as the decision to adopt these technologies often relies on cost and the ability to install required infrastructure.

Currently, Egypt supports energy production through energy subsidies, or policies that influence the energy sector through lowering production costs, raising returns for energy

producers, or lowering the market price for consumers. UNEP believes subsidies that encourage fossil fuel production are detrimental to the environment, as these subsidies increase supply and demand, thereby increasing consumption and damage to the environment. Egypt’s subsidies account for over $10 billion a year, one of the highest rates for non-OECD countries. The International Energy Agency provides a helpful chart, furnished below, outlining the top subsidy- users amongst non-OECD countries:

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These subsidies make it difficult for emerging technology such as wind and solar power to compete with fossil fuel and natural gas production. Shifting subsidies to renewable energy production could help adoption of this technology, but subsidies need to be carefully monitored during reform in order to offset any changes in market equilibrium that might occur from price changes. Resistance to subsidy reform is a key problem for politicians and the communication of the benefits of renewable energy is essential for a successful subsidy reform.

An area that NREA has not explored but has been seen in Green Economy reports is a measurement of the true cost of renewable energy. The true cost of negative and positive externalities for coal and natural gas compared to renewable energy need to be reviewed for policy makers and the general public to know the true cost and benefits of wind and solar technology. Negative externalities in coal and natural gas include health risks, decreasing resources, and climate change. When measured against the true cost of renewable energy, including externalities, renewable energy is more cost-effective in the long term. Because one of

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the major arguments against renewable energy is the cost to implement this technology, policy makers need to know the true cost of renewable energy to society. When factored in with other externalities such as job growth, the benefits of wind technology in Egypt will become more apparent. Public knowledge of the cost and benefits of wind technology will provide public support for implementation.

Policy Recommendations

UNEP could improve its renewable energy initiatives by the implementation of the following suggested activities:

• Re-asses/re-write current activities and objectives by specifically targeting partnerships with successful energy projects, such as the Zafarana wind farm

• Allocation of EU money to the promotion and marketing of currently existing Egyptian energy programs, targeting businesses and investors looking for energy investments

• Develop and implement a marketing campaign targeting the Egyptian people, in an attempt to educate them about the rapid changes in Egypt’s newly burgeoning green economy

• The development of fundraising and investment activities to promote energy based educational programs, ranging from PhD to working class certifications, located at Egyptian educational institutions in an attempt to move motivated workers, and unemployed potential workers, into jobs positions sure to be created by a new green economy

• Green transformation of sectors in order to help building up and secure long-term competitiveness

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• Alignment of stakeholders to achieve successful green transformation thus reinforcing and strengthening the capacity of the ENCC to bring together all stakeholders and help with implementation

• Evaluate energy subsidies and their impact on Egypt’s climate.

• Measure the true cost of renewable energy by accounting for externalities

Conclusion

In assessing the Egyptian Competitiveness Strategy and UNEP’s Green Economy and SEED Initiative, it is clear that both organizations are in line with the over-arching

environmental and social issues currently threatening the Egyptian people. UNEP could lend greater focus on specific activities targeting specific environmental projects that could be

developed and implemented with the three year period. Simply put, there are two areas of energy development that concern Egypt and account for the greatest resources available for a new Egyptian green economy, namely wind and solar power. The awesome potential of wind power towards energy development and the Egyptian economy has already been demonstrated by the Zafarana wind park, which has resulted in an influx of investors, and plans for more than 3,000 similar wind parks to be built in the near future. Egypt’s solar power, while yet to be

implemented, is in the final stages of commissioning and is projected to be a major source of renewable energy and an of enormous benefit to the green economy. In closing, instead of open ended activities, that remain un-evaluable and un-connected to demonstrable outcomes, UNEP should allocate time and resources to current Egyptian programs, such as those mentioned above.

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References

Jabush, Garvin. "Green Alpha's Next Economy." . Sierra Club, 2010. Web.

http://sierraclub.typepad.com/gaa/2011/02/egypt-and-the-next-economy.html.

"Reforming energy Subsidies." UNEP, n.d. Web. <http://www.unep.ch/etb/publications/Energy subsidies/EnergySubsidiesFinalReport.pdf>.

"Egypt’s Pathway to a Green Economy." UNEP, n.d. Web.

http://www.unep.org/greeneconomy/portals/88/documents/advisory_services/Egypt.pdf "United Nations Environment Programme environment for development." . UNEP, n.d. Web.

<http://www.unep.org/greeneconomy/GreenEconomyReport/tabid/29846/Default.asp&x gt;.

Egyptian Ministry of Planning, n.d. Web. <http://www.mop.gov.eg/english/english.html>. "Fostering a Green Economy Transformation and Social and Environmental Entrepreneurship in

Africa." . UNEP, n.d. Web.

The Egyptian Competitiveness Report. Egyptian National Competitiveness Council, n.d. Web. <Web Site: www.encc.org.eg>.

Mohammad, Fathy. Financing Wind Park Projects Experience from Egypt. Print.

Moving in the Spirit of the Millennium Declaration The DNA of Progress. Cairo: Moody Graphic Int., 2006. Print.

Masr, Bikya. "Egypt to Build Two 100 MW Solar Energy Plants." Green Prophet . Green Prophet, n. d. Web. <http://www.greenprophet.com/>.

Economic Development Support to the implementation of the Arab- Mediterranean Free Trade Agreement. EuropeAid, Web. <http://www.agadiragreement.org/Home.asp&xgt;. Council conclusions on Egypt. Brussels: EN, 2011. Web.

<http://www.consilium.europa.eu/press/press-releases/latest-press-releases>.

ILO, Green Jobs: Towards Decent Work in a Sustainable, Low-Carbon World, 2008 •

(http://www.ilo.org/wcmsp5/groups/public/@dgreports/@dcomm/documents/publication /wcms_0985 03.pdf)

UNEP, Towards a Green Economy: Pathways to Sustainable Development and Poverty Eradication, 2011

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