External publications

Reforming fossil-fuel subsidy regimes in the Middle East and North African countries

Vidican, Georgeta
External Publications (2014)

in: Anna Pegels, Green industrial policy in emerging countries, London: Routledge, 148-178

ISBN: 978-0-415-87067-2
Information

For the Middle East and North African (MENA) countries, the transition to sus¬tainable energy is essential. Most countries in this region are importers of fossil fuels; at a time of increasing energy demand, this puts considerable pressure on national budgets and raises energy security concerns.

Yet the challenges for reform are mostly socio-economic and political. In the MENA region, with its neo-patrimonial govern¬ance systems and strong states of a rentier and clientelistic nature, the social contract is deeply rooted in the political apparatus and the alli¬ances between various stakeholders. The social contract pivots on the strategic redistribution of rents. Yet, there is growing evidence to show that fossil fuel subsidies in particular have been disproportionately benefiting middle- and upper-income popula¬tion groups and have also contributed to market distortions to the detriment of renewable energy, energy efficiency and green growth.

This chapter explores ways of managing the process of withdrawing rents from incumbent groups in the process of green transformation, offering a complementary perspective to the other case studies concerned with the process of rent creation and allocation. The MENA region provides a fascinating example of this process, due to the complexity of reform. The region accounts for 50 per cent of global pre-tax energy subsidies, representing over 8.5 per cent of regional GDP or 22 per cent of total government revenues. Following the Arab Spring uprisings, subsidies have been further increased, showing just how deeply entrenched they are in the political systems of the MENA countries.

As a result of these challenges, the track record of fossil-fuel reform has been very poor in the region. Hence, assessing how to manage the process of rent withdrawal and what state capabilities are needed to launch and sustain reform is highly pertinent.