What more could Egypt be doing to tackle carbon emissions? Air pollution costs Egypt an estimated EGP 47 bn a year, according to the World Bank. To tackle this, multiple government-led programs are targeting carbon emissions reduction, with development finance and private sector support. But some analysts and business owners say more measures are needed, and are recommending a more ambitious renewables strategy, financial incentives to boost renewables, capping emissions of our most polluting industries, and using cleaner carbon capture technology.
Egypt’s renewables strategy seems ambitious — but some experts want to aim higher: Egypt remains reliant on hydrocarbon-based fossil fuels. Renewables comprise an estimated 10% of the energy mix, and the government aims to increase this to 42% by 2035. In its Egypt Renewable Energy Outlook 2018 (pdf), the International Renewable Energy Agency (IRENA) says it’s technically and economically feasible for Egypt to aim for 53% of power generation from renewable sources by 2030.
Targets for renewables — and coal — are outdated, say some studies. The government set its 42% renewables target in 2016, and introduced heavyweight polluter coal to reduce imported gas reliance following 2011-2013 electricity shortages, the IRENA report notes. Under this scenario, coal is set to comprise 16% of the mix by 2035, while under Egypt’s 2030 Vision (pdf), it is due to comprise 29% by 2030. But today we have surplus electricity, with our generation capacity of 58 GW exceeding our peak demand of 30-32 GW. This degree of fossil fuel-reliance could see Egypt’s CO2 emissions exceed 300% of current emissions within 10 years, the Euro-Mediterranean Journal for Environmental Integration study notes.
IRENA’s recommendations: Cut coal, and update the energy strategy every two years. Introducing coal into the energy mix hinders emission reduction efforts, the IRENA report notes. Egypt should update its energy strategy every two years, given rapid developments in tech and cost effectiveness of renewables.
Accelerating the renewables transition requires more financial support: Renewables are very cost-competitive, and some measures are already in place to help businesses cut costs. Cairo Solar currently pays no tariffs on solar panels, and low tariffs on inverters, says Managing Director Hatem Tawfik. Custom duties for renewable energy production or generation equipment can be as low as 2%, energy and environment analyst and Solutions Fellow at the Center for Climate and Energy Solutions Mahmoud Abouelnaga tells Enterprise. And phasing out electricity subsidies will be key to attracting foreign investors, he adds.
But a raft of other incentives could encourage more activity: Subsidized financing for solar companies of all sizes would boost the sector, says Tawfik. He wants VAT for solar companies reduced to 5% (down from the standard 14%) as well as more financing — bank loans and grants like the Egypt PV fund and the EBRD’s GEFF mechanism — for clients installing solar equipment.
Other recommendations? Stop treating small and mid-size projects as high-risk: Larger renewables projects often benefit from low interest rate loans, while small and mid-size projects are still seen as high-risk, says Abouelnaga, “though solar and wind costs have decreased remarkably in the last decade.” Smaller projects should be able to collectively apply for low interest rate financing, he suggests. “If there’s a 200 MW project financing cut-off, the 200 MW could come from several smaller projects grouped together, rather than one large 200 MW project.”
And keep building electricity transmission capacity: Conversations with DFIs like the World Bank should focus on building transmission capacity, Abouelnaga believes. “It’s a key question: what are we going to do with all our generation capacity if we don’t have transmission capacity? That’s where investments need to be scaled.” Establishing transparent and cost-reflective transmission charges is needed, says Heike Harmgart, EBRD Managing Director for the Southern and Eastern Mediterranean. “The ministry is making big strides on this. I expect in 2021 and 2022 we’ll see many more private-to-private agreements. We signed one of the first with Taqa Arabia last year. I think more are coming,” Harmgart said.
Meanwhile, heavily polluting industries need emission caps, says Abouelnaga. “Industries needing stricter enforcement — like cement and steel — will only limit their emissions through environmental policy restrictions.” Energy, agriculture, manufacturing, and waste handling and management are Egypt’s biggest emissions culprits.
What could help? Industrial clusters: Creating industrial clusters away from cities could help reduce emissions, with facilities sharing infrastructure, Abouelnaga says. “Lower-priced land or energy subsidies could be incentives. If the clusters were close to energy power plants, they’d feed into each other.”
And if slashing emissions doesn’t work? Industry can support renewables through carbon credits: Industrial producers can reduce their carbon footprint by donating to mega-renewable projects like Zaafarana, Egypt Green Building Council board member and sustainability consultant Hoda Ibrahim tells Enterprise. “Zaafarana is registered on the IRX, and factories can pay to offset the amount of electricity they consume annually.”
Would emissions caps for transport be helpful? Probably not yet: Egypt is investing heavily in urban transport networks but could still do a lot more in the transport sector to reduce carbon emissions, says Harmgart. And EBRD-supported pilots on electro-mobility and transitioning to lower carbon public and private transport are important steps in this area, she adds. “But I’m not sure an emissions cap on transport is currently the most efficient way to reduce emissions in Egypt. In some areas, a lot of work would be needed.”
But pinning all our hopes on a renewables transition or heavy polluters curbing emissions is unrealistic, Abouelnaga says. “When it comes to hard-to-decarbonize sectors, there’s a limit to what you can alter. You can’t change the chemical process for producing cement. Even if factories use clean energy, in producing cement, they produce CO2.” Significantly shifting away from fossil fuels might not happen soon, he adds. “We’re building natural gas combined cycle power plants, with a lifespan of at least 30 years. In terms of investment, we don’t want to wind that down.”
Carbon capture could be a solution: Implementing carbon capture technology is straightforward, and CO2 captured could be used for other industrial processes, including enhanced oil recovery — pumping CO2 down an oil or gas well to increase pressure — or manufacturing beverages, says Abouelnaga. Industrial facilities can be retrofitted with carbon capture devices as a relatively cost-effective way to keep fossil fuels in the energy mix, with minimal CO2 emissions, he adds.
But the tech isn’t really on Egypt’s radar yet: The UAE, UK and Norway are all making strides in carbon capture technology, says Abouelnaga. “The tech is getting a lot of attention. But it doesn’t seem to be in Egypt’s strategy at all.” Carbon capture is still an expensive decarbonization solution in Egypt, notes Harmgart. “There are lots of cost-competitive technologies that have become mainstream and accessible, like solar and wind. Others, like green hydrogen and solar-powered desalination, have tremendous potential. But we need to be open about all decarbonization solutions.”