Watch The Guardian’s recording of Nemat Shafik’s presentation in Washington D.C. for an illuminating look at how energy subsidies are linked to both climate change and public debt.
Shafik estimates that cutting subsidies could reduce global carbon emissions by as much as 4.5 billion tons or 13 percent of the current output.
In the Middle East, Iran has cut subsidies without any major consequences, which has eased its financial burden. But for most leaders in the Gulf region and North Africa, energy subsidies are a hot political topic best avoided.
Citizens of Saudi Arabia, Qatar, the United Arab Emirates and elsewhere are so accustomed to receiving their energy for next to nothing, their leaders worry that cutting them could destabilize a fragile peace.
Yet subsidies distort the value of energy and few incentives exist to conserve it. This in turn leads to increased carbon emissions and forces governments to increase their fuel generation.
Jordan lifted subsidies last year but the Hashemite Kingdom’s residents did not respond well. More than 1,000 people descended upon Amman protesting increased fuel prices, according to Reuters.
Prime Minister Abdullah Ensour said on state television that the Kingdom faces insolvency and that price hikes are unavoidable.
Speaking at a press conference in Jordan earlier this year, Shafik said that the government put in place a cash transfer scheme that helped to ease the transition for 70 percent of the population.
“So the only people who actually pay the full price are the top 30 percent in Jordan. I think that is a good strategy,” Shafik said.
:: The Guardian