OECD weighs in on how Egypt could accelerate its climate action: In its first survey on Egypt’s economy, the OECD provided some insight on how the country could step up its climate action game. The Paris-based organization recommended that Egypt should set specific climate targets, boost the role of the private sector in climate action, establish an independent regulator for the electricity sector, and draw climate financing for mitigation and adaptation efforts.

The environmental risk: While Egypt’s carbon footprint represents less than 1% of the global total, its emissions have been on the rise since 2010. The country is dominated by desert, with a meager 3.7% of its landmass suitable for agriculture, supported by the Nile River and Delta. Egypt’s annual renewable water per capita is expected to drop to 390 cbm by 2050 from 570 cbm in 2018 on the back of climate-induced extreme weather, well below the UN’s 700 cbm water scarcity threshold, the OECD warned, citing data from the government.

So, what does Egypt need to do to speed up its green transformation?

#1 Egypt’s climate targets need to be more spot-on: Egypt needs to set more specific emission reduction targets to be more efficient in combating climate change, the OECD said, noting that the country’s Nationally Determined Contributions (NDCs) (pdf) to climate action under the Paris Agreement don’t include an economy-wide emissions reduction target or net-zero target.

The details: Instead of setting economy-wide emissions targets, the country’s NDCs, which were last updated in 2023, list sectoral targets — such as reducing electricity sector emissions by 33%, oil and gas emissions by 65%, and transport sector emissions by 7%. The OECD, however, says that “more quantitative targets and specific actions are needed.”

#2 Scrapping energy subsidies: The OECD sees that phasing out the country’s broad-based energy subsidies to, eventually, reflect the global energy prices is a must, adding that fully phasing out subsidies both for electricity and natural gas would help address inefficiencies in electricity use in manufacturing, transport and logistics, which account for nearly 40% of domestic power demand.

Remember: Egypt had originally planned to eliminate energy subsidies by the end of the fiscal year 2018-2019, but has been prolonging the phase-out process ever since. The government hiked electricity prices for households and businesses at the start of 2024 by 16-26%.

ALSO- Low-income support is recommended over subsidizing electricity tariffs: “Shifting from subsidized tariffs based on consumption to direct income support for low-income households will enhance fairness and competition, enabling private suppliers to compete more effectively with state-owned distribution firms. This move will also empower consumers to make informed choices about their energy consumption,” the OECD said.

#3 The private sector’s role in climate action needs to be expanded, the OECD said, adding that integrating the latter with public policies, government investments and international support will optimize capital allocation to better achieve climate targets.

Regulations need to back the private sector involvement: The OECD also recommends implementing a regulatory framework that ensures competitive neutrality, which includes eliminating restrictive regulations on private sector activities and unwinding subsidies on fossil fuels and electricity tariffs. In addition, the establishment of independent watchdogs in high-emitting sectors — such as transport, construction and manufacturing — along with streamlining procedures for doing business could attract more green investments from the private sector.

#4 Independent regulator for the electricity sector? The OECD called for the establishment of an independent regulator for the electricity sector to prevent conflict of interest and level the playing field for the private sector via the separation of regulatory and operational roles and ending the state’s “quasi-monopoly” in electricity distribution.

#5 More green financing is needed: The country must mobilize more financing through green bonds, soft loans, multilateral funding schemes and long-term power-purchasing agreements with private investors. Bringing in international investors could lower the spread on debt finance by 8%, adding multilateral development banks could lower it by 10%, and combining the two under public-private partnerships could reduce it by 40%, the OECD said, citing an UNCTAD study.

Remember: Egypt sold USD 750 mn in its maiden green bond issuance in 2020, which was almost 5x oversubscribed, attracting some USD 3.7 bn worth of orders for the bonds.

#6 More renewables call for more transmission grids: Power grids and transmission networks have to be upscaled in both quality and quantity to accommodate the integration of renewable energy facilities, the OECD suggests, citing a study by the World Bank.

Remember: The government wants to generate 42% of its electricity from renewable energy sources by 2030 and 60% by 2040.

#7 Egypt should expand renewable energy projects to keep its NDCs on track: The energy sector’s gas flaring and methane venting, as well as energy used for extraction account for the bulk of the energy sector’s emissions. Natural gas and oil accounted for 92% of primary energy supply in 2021, with the World Bank projecting wind and solar projects to account for 8% and 5%, respectively, of the energy mix. However, Egypt will need to ramp up its wind and solar energy projects to occupy 43% and 15% of its energy mix if it wants to hit its NDCs targets, according to a World Bank study cited by the OECD.

#8 More needs to be done in the transport sector: The government needs to bring its vehicle emissions caps up to par with international standards given that the transport sector accounts for 24% of total emissions from fuel combustion, the OCED said.

#9 Go for the tried-and-true methods to greenify different sectors: Egypt could fast track its emission targets by “initially focusing on ‘low-hanging fruit’ in sectors where mitigation gains are fairly straightforward, using proven and existing methods,” that include decarbonizing the oil and gas sector via “electrification and integration of renewable energy; gas flaring reduction; abatement of CO2 venting and participation in international projects to develop carbon capture and storage; as well as digital solutions for demand-side management,” the OECD said, citing the World Bank.

As for heavy industries, like the manufacturing of cement, steel and fertilizers, low-emission filters and fuels, carbon capture technology and lower-energy production methods should be implemented, it added.

#10 Rationalizing resources: Better management of scarce resources could boost Egypt’s climate resilience, such as traditional water-saving methods, planting more climate-resilient crops and wetland restoration, the OECD said.

Your top green economy stories for the week:

• German waste and water management company Remondis could work on a project to safely treat and recycle waste from certain healthcare facilities in Canal Zone governorates and Upper Egypt. (Statement)
• Infinity + SIACFM to deploy EV charging stations: Renewable energy firm Infinity has partnered with SIAC Assets & Facilities Management (SIACFM) to install and manage EV chargers at SIACFM's sites. (Enterprise Climate)
• Arab Organization for Industrialization will set up four waste recycling plants worth a combined EUR 38.8 mn as part of the Kitchener Drain depollution project. (Statement)