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EGYPT

Socio-economic footprint of the energy transition

Unless otherwise stated, material in this publication may be freely used, shared, copied, reproduced,

printed and/or stored, provided that appropriate acknowledgement is given of the author(s) as the

source and IRENA as the copyright holder. Material in this publication attributed to third parties may be

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may need to be secured before any use of such material.

ISBN: 978-92-9260-557-5

Citation: IRENA (2023), Socio-economic footprint of the energy transition: Egypt, International

Renewable Energy Agency, Abu Dhabi.

About IRENA

The International Renewable Energy Agency (IRENA) serves as the principal platform for international

co-operation, a centre of excellence, a repository of policy, technology, resource and financial knowledge,

and a driver of action on the ground to advance the transformation of the global energy system. An

intergovernmental organisation established in 2011, IRENA promotes the widespread adoption and

sustainable use of all forms of renewable energy, including bioenergy, geothermal, hydropower, ocean,

solar and wind energy, in the pursuit of sustainable development, energy access, energy security and

low-carbon economic growth and prosperity.

www.irena.org

Acknowledgements

This report was developed under the guidance of Rabia Ferroukhi (ex-Director – Knowledge Policy and

Finance Centre) and Michael Renner (Head- Policy and Socio-economics), and was authored by Bishal

Parajuli and Gondia Sokhna Seck (IRENA), Xavier Casals and Rania El-Guindy (consultant), Carlos Guadarrama

(ex-IRENA). The modelling results were provided by Alistair Smith, Ha Bui, Jamie Pirie and Jon Stenning

(E3ME, Cambridge Econometrics).

The report benefited from the reviews and inputs from internal and external experts: Angela Khanali Mutsotso,

Asami Miketa, Imen Gherboudj, Larissa Pinheiro Pupo Nogueira, Nadeem Goussous, Omar Marzouk and

Sibghat Ullah (IRENA), Aly Abdelfatah (Ministry of Electricity and Renewable Energy, Egypt), Mohamed El

Sisi (Ministry of Electricity and Renewable Energy – Egypt, and Egyptian Electricity Holding Company). The

report was copy-edited by Jonathan Gorvett.

IRENA would like to thank the Government of Denmark for supporting IRENA with the work that formed

the basis of this report.

For further information or to provide feedback: publications@irena.org

Disclaimer

This publication and the material herein are provided “as is”. All reasonable precautions have been taken by IRENA

to verify the reliability of the material in this publication. However, neither IRENA nor any of its officials, agents,

data or other third-party content providers provides a warranty of any kind, either expressed or implied, and they

accept no responsibility or liability for any consequence of use of the publication or material herein.

The information contained herein does not necessarily represent the views of all Members of IRENA. The mention

of specific companies or certain projects or products does not imply that they are endorsed or recommended

by IRENA in preference to others of a similar nature that are not mentioned. The designations employed and the

presentation of material herein do not imply the expression of any opinion on the part of IRENA concerning the

legal status of any region, country, territory, city or area or of its authorities, or concerning the delimitation of

frontiers or boundaries.

All images in this report were generated using Midjourney AI - ©WeDoDesign.fr

Contents

Figures 04

Tables 05

Boxes 05

Abbreviations 06

Executive summary 07

Introduction 14

Contextualising Egypt's energy sector and the need

for energy transition 20

2.1 The current energy mix 21

2.2 Egypt’s energy transition: Challenges and initiatives 23

Socio-economic impact of the energy transition 28

3.1 Economic impact, as measured by GDP 29

3.2 Employment 34

3.3 Welfare 39

Summary and way forward 48

References 51

Appendix 1: Carbon pricing, international collaboration,

subsidies and progressive fiscal regimes 56

Appendix 2: Energy policy in Egypt 57

/61

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Socio-economicfootprintoftheenergytransitionEGYPT©IRENA2023Unlessotherwisestated,materialinthispublicationmaybefreelyused,shared,copied,reproduced,printedand/orstored,providedthatappropriateacknowledgementisgivenoftheauthor(s)asthesourceandIRENAasthecopyrightholder.Materialinthispublicationattributedtothirdpartiesmaybesubjecttoseparatetermsofuseandrestrictions,andappropriatepermissionsfromthesethirdpartiesmayneedtobesecuredbeforeanyuseofsuchmaterial.ISBN:978-92-9260-557-5Citation:IRENA(2023),Socio-economicfootprintoftheenergytransition:Egypt,InternationalRenewableEnergyAgency,AbuDhabi.AboutIRENATheInternationalRenewableEnergyAgency(IRENA)servesastheprincipalplatformforinternationalco-operation,acentreofexcellence,arepositoryofpolicy,technology,resourceandfinancialknowledge,andadriverofactiononthegroundtoadvancethetransformationoftheglobalenergysystem.Anintergovernmentalorganisationestablishedin2011,IRENApromotesthewidespreadadoptionandsustainableuseofallformsofrenewableenergy,includingbioenergy,geothermal,hydropower,ocean,solarandwindenergy,inthepursuitofsustainabledevelopment,energyaccess,energysecurityandlow-carboneconomicgrowthandprosperity.www.irena.orgAcknowledgementsThisreportwasdevelopedundertheguidanceofRabiaFerroukhi(ex-Director–KnowledgePolicyandFinanceCentre)andMichaelRenner(Head-PolicyandSocio-economics),andwasauthoredbyBishalParajuliandGondiaSokhnaSeck(IRENA),XavierCasalsandRaniaEl-Guindy(consultant),CarlosGuadarrama(ex-IRENA).ThemodellingresultswereprovidedbyAlistairSmith,HaBui,JamiePirieandJonStenning(E3ME,CambridgeEconometrics).Thereportbenefitedfromthereviewsandinputsfrominternalandexternalexperts:AngelaKhanaliMutsotso,AsamiMiketa,ImenGherboudj,LarissaPinheiroPupoNogueira,NadeemGoussous,OmarMarzoukandSibghatUllah(IRENA),AlyAbdelfatah(MinistryofElectricityandRenewableEnergy,Egypt),MohamedElSisi(MinistryofElectricityandRenewableEnergy–Egypt,andEgyptianElectricityHoldingCompany).Thereportwascopy-editedbyJonathanGorvett.IRENAwouldliketothanktheGovernmentofDenmarkforsupportingIRENAwiththeworkthatformedthebasisofthisreport.Forfurtherinformationortoprovidefeedback:publications@irena.orgDisclaimerThispublicationandthematerialhereinareprovided“asis”.AllreasonableprecautionshavebeentakenbyIRENAtoverifythereliabilityofthematerialinthispublication.However,neitherIRENAnoranyofitsofficials,agents,dataorotherthird-partycontentprovidersprovidesawarrantyofanykind,eitherexpressedorimplied,andtheyacceptnoresponsibilityorliabilityforanyconsequenceofuseofthepublicationormaterialherein.TheinformationcontainedhereindoesnotnecessarilyrepresenttheviewsofallMembersofIRENA.ThementionofspecificcompaniesorcertainprojectsorproductsdoesnotimplythattheyareendorsedorrecommendedbyIRENAinpreferencetoothersofasimilarnaturethatarenotmentioned.ThedesignationsemployedandthepresentationofmaterialhereindonotimplytheexpressionofanyopiniononthepartofIRENAconcerningthelegalstatusofanyregion,country,territory,cityorareaorofitsauthorities,orconcerningthedelimitationoffrontiersorboundaries.AllimagesinthisreportweregeneratedusingMidjourneyAI-©WeDoDesign.fr2ContentsFigures04Tables05Boxes05Abbreviations06Executivesummary0701Introduction14ContextualisingEgypt'senergysectorandtheneed02forenergytransition202.1Thecurrentenergymix212.2Egypt’senergytransition:Challengesandinitiatives2303Socio-economicimpactoftheenergytransition283.1Economicimpact,asmeasuredbyGDP293.2Employment343.3Welfare3904Summaryandwayforward48References51Appendix1:Carbonpricing,internationalcollaboration,subsidiesandprogressivefiscalregimes56Appendix2:EnergypolicyinEgypt5703FiguresFIGURES1:EgyptianGDP:Differencebetweenthe1.5°CScenarioandthePES,2021‑2050(%)09FIGURES2:EmploymentinEgypt,2021-2050:Differencebetweenthe1.5°CScenarioandthePESbydriver(%)10FIGURES3:Energysectorjobsunderthe1.5°CScenarioandPES,bysub-sector,2019‑205011FIGURES4:RenewableenergyjobsinthePESand1.5°CScenario,2019,2030and205011FIGURES5:Welfareindexinthe1.5°CScenario(left)anddifferenceinwelfarebetween1.5°CScenarioandPESin2050(right)12FIGURE1:Socio-economicassessmentframework16FIGURE2:Reducingemissionsby2050throughsixtechnologicalavenues17FIGURE3:Egypt:Totalenergysupply,2010‑202022FIGURE4:Egypt:Installedrenewablegenerationcapacity,2000‑202223FIGURE5:Householdconsumption,capitalinvestments,governmentspendingandbalanceoftradeinEgypt,1980‑202130FIGURE6:EgyptianGDP:Differencebetweenthe1.5°CScenarioandthePES,2021‑2050(%)31FIGURE7:Unemploymentrate,2012‑2022(%oflabourforce,15yearsoldandover)34FIGURE8:EmploymentinEgypt,2021-2050:Differencebetweenthe1.5°CScenarioandthePESbydriver(%)36FIGURE9:Energysectorjobsunderthe1.5°CScenarioandPES,bysub-sector,2019‑205038FIGURE10:RenewableenergyjobsinthePESand1.5°CScenario,2019,2030and205039FIGURE11:StructureofIRENA’senergytransitionwelfareindex40FIGURE12:Welfareindexinthe1.5°CScenario(left)anddifferenceinwelfarebetween1.5°CScenarioandPES(right),205041FIGURE13:Mortalityrateattributedtohouseholdandambientairpollution,EgyptanditsNorthAfricanneighbours,2016(age-standardised,per100000population)42FIGURE14:TotalandpercapitaGHGemissionsinNorthAfrica,201944FIGURE15:Domesticmaterialconsumptionpercapita,2000‑201945FIGURE16:Renewableenergyregulations5804TablesTABLE1:GDP,labourforceandpopulationgrowthprojectionsunderthePES18TABLE2:ListofpoliciestoenablethedevelopmentofrenewablesinEgypt27TABLE3:Energymixobjectivesfor203557BoxesBOX1:WorldEnergyTransitionOutlook:1.5°Cpathway17BOX2:IRENA’sclimatepolicybaskets19BOX3:DriversofGDPgrowth31BOX4:Womenintheenergysector35BOX5:Driversofemploymentgrowth36BOX6:BiomassinEgypt5805AbbreviationsAfCFTAAfricanContinentalFreeTradeAreakWhkilowatthourBECCSbioenergywithcarboncaptureandMENAMiddleEastandNorthAfricastorageMoEREMinistryofElectricityandRenewableEnergyBEECbuildingenergyefficiencycodeBOObuild-own-operateMOICMinistryofInternationalCo‑operationBOOTbuild-own-operate-transferCAGRcompoundannualgrowthrateMoPMinistryofPlanningCAITClimateAnalysisIndicatorToolMoUmemorandumofunderstandingCCScarboncaptureandstorageMRVmonitoring,reportingandverificationCO2carbondioxideMtCO2eqmilliontonnesofcarbondioxideequivalentCSPconcentratedsolarpowerDMCdomesticmaterialconsumptionMWmegawattEDGAREmissionsDatabaseforGlobalNCCCNationalCouncilforClimateChangeAtmosphericResearchNCCSNationalClimateChangeStrategyEEHCEgyptianElectricityHoldingNDCNationallyDeterminedContributionCompanyNREANewandRenewableEnergyAuthorityEFFextendedfundfacilityNSRPNationalStructuralReformEGPEgyptianpoundProgrammeEgyptERAEgyptianElectricityUtilityandO&MoperationandmaintenanceConsumerProtectionRegulatoryAgencyOECDOrganisationofEconomicCo‑operationandDevelopmentEVelectricvehiclePJpetajoulesFDIforeigndirectinvestmentPM2.5particulatematter2.5FiTfeed-in-tariffPPPpurchasingpowerparityGDPgrossdomesticproductP2Xpower-to-XGERDGrandEthiopianRenaissanceDamPVphotovoltaicGHGgreenhousegasR&DresearchanddevelopmentGNIgrossnationalincomeSDGSustainableDevelopmentGoalGoEGovernmentofEgyptTARESTechnicalSupportProgrammeforRestructuringtheEnergySectorinGtCO2eqgigatonnesofcarbondioxideEgyptequivalentGWgigawattTcftrillioncubicfeetGWhgigawatthourtCO2eq/captonnesofcarbondioxideequivalentpercapitaIPCCIntergovernmentalPanelonClimateChangeTFECtotalfinalenergyconsumptionIPPindependentpowerproducerTPEStotalprimaryenergysupplyIRENAInternationalRenewableEnergyUNIDOUnitedNationsIndustrialAgencyDevelopmentOrganisationkm2squarekilometreUSDUnitedStatesdollarUnlessotherwisestated,theexchangeratefromUSdollars(USD)toEgyptianpounds(EGP)usedthroughoutthisreportisthatgivenbythe15March2023UNoperationalratesofexchange,i.e.USD1.00=EGP30.86.06ExecutivesummaryEgyptishometoapopulationofaround110millionpeople,withayoungandproductivemedianageof23.9yearsin2021(UNDESA,2022).Atpurchasingpowerparity(PPP),ithadagrossdomesticproduct(GDP)ofUSD1.33trillion1in2021,makingEgyptthethird-largesteconomyonthecontinent.UnderthecurrentWorldBankclassification,itisconsideredalower-middleincomecountry(WorldBank,n.d.).Despiteenjoyinggradualeconomicgrowth,Egyptfaceschallengesincludingdemographicpressuresonnaturalresources,employmentandsocialinfrastructure.Egypt’spopulationgrowthrateandpovertyrate,with32.5%ofthepopulationlivingunderthenationalpovertylinein2018(WorldBank,n.d.),placessignificantfiscalandinfrastructureburdensonthecountry’ssocialservices.Fiscalspaceremainslimitedduetothelargeinterestburdenandlowrevenuemobilisation.Governmentspendingonenergysubsidiesremainshigh,leadingtocontinuedlimitedfiscalspaceforsocialspending.AccordingtotheWorldBank,allocationstothehealthandeducationsectorsremainlimited,representingaround1.5%and2.4%ofGDPinthe2021-2022financialyear.AlthoughEgyptstrengthenedsocialprotection,expandedexistingprogramsandintroducedkeypovertymitigationmeasuresduringtheearlystagesoftheCOVID-19pandemic,increasinginflationarypressurescallforfurtherintensificationofeffortstoreducepovertyandimprovewelfare.Improvingtheefficiencyofpublicspending,optimisingrevenuemobilisationtoadvancehumancapital,andpursuingstructuralreformstounleashthepotentialoftheprivatesectorindiversifiedactivitiesarenecessarytocreatejobsandimprovelivingstandards.Thecountry’spopulationisheavilyconcentratedinasmallareaalongtheRiverNileandinitsdelta.Thisishavingasignificantimpactonhumansettlementandtheeconomy.Egypt’seconomyanditsmajorsettlementsrelyheavilyonnaturalresourcesandparticularlyontheRiverNile.Thisisusedforvariouspurposes,includingpotablewater,agriculture,industry,fishfarming,powergeneration,inlandrivernavigation,mining,oilandgasexploration,machinerycoolingandelectricitygeneration.ThisrelianceontherivermakesEgyptparticularlyvulnerabletorisingtemperaturesanddecreasedprecipitationinthehigherNileBasinsandtheeasternMediterraneancoastalzone.Overthepast30years,temperaturesinEgypthaveincreasedbyanaverageof0.53°Cperdecade(UNICEF,2022).Asaresult,thecountryisparticularlyvulnerabletotheeffectsofclimatechange,whichcouldexacerbateexistinginequalitiesinhumandevelopmentandgeographicaldistribution.Thethreatofheatwaves,desertificationandlossofbiodiversityallposediverserisks,includingriskstofoodandwatersecurity.1In2017USdollars.07AirpollutionandwastemanagementarealsomajorenvironmentalchallengesinEgypt.Airpollutionhasasignificantnegativeimpactonpublichealth,whilewasteproductionisincreasingduetopopulationgrowth,changesinconsumptionpatterns,changesinwastecharacteristicsandinadequatetechnologyforwastedisposal.TheseenvironmentalissueswillhaveasignificantimpactonEgypt’seconomy,particularlyonitsagriculturalsector.In2021,thissectoraccountedfor15%ofGDP,providedjobsfor25%oftheworkforceandprovidedfood,textilesandotherproducts(MOIC,2021).Duetotheexpectedincreaseintemperatureandpossibledeclinesinrainfall,demandforwaterforagriculturalpurposeswilllikelyincrease,exacerbatingthewaterscarcityproblem.Egyptpossessessubstantialenergyresources,includingbothconventionalfossilfuelsandrenewableenergy,withtheformercrucialtothecountry’ssocio-economicdevelopment.Historicallyanetexporterofoilandgas,Egyptbecameanetimporterinthe2010sduetorisingenergyuseanddepletingenergyresources.Asaresult,theenergysectorhasfacednewchallengesandbarriers,suchasintermittentpoweroutages,whiletheeconomyhasfacedanincreasingfiscaldeficitduetohighsubsidiesonenergyprices–subsidiesthatthegovernmenthasbeenreducing.EgyptisoneofAfrica’slargestenergymarkets.Thisisduetothesizeofitspopulationandthecountry’shistoricallyhighlevelsofaccesstomodernfuelsandelectricity.ThismakesEgyptstandoutfromitssouthernneighbours(IRENA,n.d.).Globally,theenergysectoristhelargestcontributortoemissions,andthisisalsothecaseinEgypt.Thetotalenergysupply(TES)increasedbyanaverageof1.5%peryearbetween2010and2020(UNSD,n.d.),andEgyptisstilllargelydependentonoilandgas(54.0%and33.7%oftheTESin2020,respectively).Indeed,naturalgassawanincreaseinusageof42%overthe2010-2020period,withtheinstallationofnewelectricitygeneratingcapacity.ThishikehasmadeEgyptAfrica’slargestgasmarket,accountingforoverathirdofthenaturalgasdemandoftheentireAfricancontinent(ClimateActiontracker,2022).Meanwhile,theshareofrenewablesislow,yetithasbeenincreasingoverthelastdecade,seeingarisefrom6.5%to7.1%between2010and2020.Renewablesaremainlydominatedbybioenergyintheformoftraditionalbiomass,whichaccountsforaroundtwo-thirdsoftotalrenewableenergysupplyandisstillusedbymanyruralhouseholds.Giventhepressingneedtoacceleratetheglobalenergytransition,thisdecadehasseenEgyptstepupitseffortstotransitionitsownenergysystem.ThecountryhasbeenattheforefrontofrenewableenergydeploymentinAfrica,particularlythroughitslargehydroresources,tiedtotheRiverNile.Tomeetitsgrowingenergyneedsandcontributetojobcreation,Egypthassoughttodevelopseveralotherformsofmodernrenewableenergy,includingthroughsolarandwindprojects,sincethestartofthecentury.TheseincludetheZafaranawindfarmandambitiousplanssuchastheGreenCorridorInitiativeforEgypt’srenewableenergy,amemorandumofunderstanding(MoU)signedin2022tobuilda10GWonshorewindproject.Asof2020,thecountryhadthecontinent’ssecondlargestinstalledcapacityofsolarenergy,afterSouthAfrica.EgyptalsohadAfrica’sthirdlargestwindpowergenerationcapacity,accountingformorethanafifthofthecontinent’stotal(IRENA,n.d.).08ExecutivesummaryIRENA’smacro-econometricmodellinganalysisofEgyptshowsthattheenergytransitioncanboostthecountry’seconomy.Overthe2021‑2050period,underthe1.5°CScenarioGDPis5.5%higher,onaverage,thanunderthePES–adifferencedrivenmainlybytrade(FigureS1).Thispositiveimpactisdrivenbythechangeinnettradeinfuels,attributabletoEgypt’senergytransition,energyintensityanddependenceonenergyimports.AlthoughEgyptiscurrentlyanetoilimporteranddespiteitbeingamajorgasexporter,itisatriskofbecominganetgasimportersinceitsnaturalresourceswilllikelynotbeabletokeepupwithdomesticenergydemand.Indeed,movingEgypt’senergystrategyawayfromfossilfuelstowardsrenewablesisexpectedtohaveasubstantialpositiveimpact,addingUSD63billion2tothecountry’sGDPin2050alone.Incumulativeterms,lowerfuelimportsareexpectedtoimprovethebalanceoftradebyaroundUSD1.3trillionoverthe2021‑2050period.Thisrepresentsaround5.2%ofthecumulativeGDPunderthe1.5°CScenariooverthesameperiod.FigureS1:EgyptianGDP:Differencebetweenthe1.5°CScenarioandthePES,2021‑2050(%)GDP,percentagedierence12between1.5°CScenarioandPES(%)10862031-20402041-205042Investment&expenditure-publicInduced:lump-sumpayments0TradeInduced&indirect:other-2-4-62021-2030Investment-privateInduced:aggregatepricesChangeinGDPUnderthe1.5°CScenario,economy-wideemploymentis,onaverage,0.3%higherthaninthePESoverthe2021-2050period(FigureS2).Employmentpeaksintheyearsupto2030.From2030,thereisanoticeabledecreaseintheemploymentdifferencebetweenthescenarios,mainlydrivenbythelossininvestmentlinkedtofossilfuelsupply.Nevertheless,thisdecreaseisattenuatedprogressivelyinthefinalyears,creatingover27700additionaljobs(representingaround0.1%difference)in2050.Egyptisoneofthemainbeneficiariesofinternationalfinancialcollaborationflows,whilemakingarelativelysmallglobalfinancingcontribution.Increasinginternationaltransfersreducethetaxburdenonemploymentwagesandeffectivelyexpandthelaboursupplyduringtheinitialperiod.After2035,consumerexpenditurebecomesthedominantpositivefactor.ThistrendcloselyfollowsGDPresults,withanincreaseinconsumerexpenditurefromthelump-sumpaymentdriveroneofthedominantpositiveeffects.2In2019USdollars.09FigureS2:EmploymentinEgypt,2021-2050:Differencebetweenthe1.5°CScenarioandthePESbydriver(%)2.0Employment:Percentagedierence1.5between1.5°CScenarioandPES(%)1.00.50-0.5-1.0-1.52031-20402041-20502021-2030InducedandindirectInvestment-privateInvestment&expenditure-publicTradeChangeinemploymentTheenergytransitionisnetpositiveforjobcreationinEgypt’senergysector(FigureS3).Totalenergysectoremploymentcouldreacharound1.5millionunderthePESandover2.4millionunderthe1.5°CScenarioby2050.Joblossesinfossilfuelsaremorethanoffsetbygainsinrenewablesandotherenergytransition-relatedsectors(i.e.energyefficiency,hydrogen,andpowergridsandflexibility,etc.).By2050,the1.5°CScenarioseesrenewablesaccountformorethan42.2%ofallenergysectorjobs.Italsoaccountsforaround24%ofalljobsinelectricitygridsandflexibility(0.6millionjobs).Energyefficiencyisresponsibleforafurther0.4millionjobs(representing16.1%ofenergysectoremployment).Itshouldalsobenotedthatenergyefficiencydominatesin2030,representingaround49%ofenergysectorjobs,becauseofthefrontloadednatureofinvestmentinthesector.In2050,10.9%ofjobslikelyremaininthefossilfuelsector–amajordecreasefromthecurrent62.7%(FigureS3).10ExecutivesummaryFigureS3:Energysectorjobsunderthe1.5°CScenarioandPES,bysub-sector,2019‑20502.50Jobs(inmillions)2.001.50RenewablesEnergyeciency1.00PowergridsandenergyﬂexibilityNuclear0.50HydrogenFossilfuel02019PES1.5-SPES1.5-S20302050Note:1.5-S=1.5°CScenario;PES=PlannedEnergyScenario.The1.5°CScenarioseesamoresignificantincreasethanthePES,withmorethanfivetimesthenumberofrenewablejobsin2030andover1millionjobsinrenewableenergyby2050(FigureS4).BecauseofEgypt’sfossilfueldependency,theuptakeofrenewablesisrelativelyslow,however,comparedtotheglobalaverage,intheearlyyearsofthe2021‑2050period,withthetransitionoccurringmorerapidlyinlateryears.Solartechnologies(mainlyPV)areexpectedtostronglydominatejobsinrenewablesduringthetransitionoverall.Windwouldplayanimportantroleinfirstdecadeofthetransition(i.e.2021-2030),representingaround58%ofthetotalrenewablejobsin2030.FigureS4:RenewableenergyjobsinthePESand1.5°CScenario,2019,2030and205012001000Jobs(inthousands)800600400WindSolarwaterheater200Solar(PVandCSP)Hydro0GeothermalBioenergy2019PES1.5-SPES1.5-S20302050Note:CSP=concentratedsolarpower;PV=photovoltaic;1.5-S=1.5°CScenario;PES=PlannedEnergyScenario.11By2050,intermsofwelfare,the1.5°CScenariooutperformsthePESby12.2%,withthisdrivenmainlybythesocialandenvironmentaldimensions(rightpanelinFigureS5).Thisanalysishasalsohighlightedsomekeyareaswheregovernmentactioncouldboostlivingstandards,andthestudy’ssocial,economic,environmentalanddistributionaldimensionsshouldbeconsideredbypolicymakers(leftpanelinFigureS5).Increasesinsocialexpenditure,andincreasesinconsumptionandinvestmenttoimprovepresentandfuturewell-being,offerthegreatestpotentialforprogressintheeconomicandsocialdimension.Thereisanopportunityforimprovementinenvironmentalpolicyaswell,particularlyintheareaofGHGemissionsreduction.Improvingthedistributionaldimensionrequirespolicyactionaimedatexpandingthedistributionofwealthandprovidinggreaterbudgetaryflexibilityviahigherinternationalfinancialcollaborationflowsandcarbontaxes.FigureS5:Welfareindexinthe1.5°CScenario(left)anddifferenceinwelfarebetween1.5°CScenarioandPESin2050(right)Welfareindexbydimensionin2050Dierenceinwelfarebetween1.5˚CScenarioandPESin2050(in%)0.914%0.80.70.612%0.50.40.310%0.20.90.10.80.78%0.60.90.50.80.40.70.30.60.20.50.10.40.30.20.16%0.90.80.70.60.50.40.30.20.14%0.90.92%0.80.80.70.70%0.60.6-2%0.50.50.40.40.30.30.20.20.10.1EnvironmentalEconomicDistributionalSocialAccessNote:Intheleftpanelthefivepetalsareonascalefrom0to1andrepresenttheabsolutevaluesofthefivedimensionsofthewelfareindex.Thenumberinthecentreisalsoonascalefrom0to1andrepresentstheabsolutevalueoftheoverallwelfareIndex.12ExecutivesummaryForthesebenefitstoberealised,Egyptwillrequireacomprehensiveandholisticpolicyframeworkthatnotonlydrivesforwardthetransitionofenergysystems,butalsoprotectspeople,livelihoodsandjobs.HoldingthepresidencyofCOP27–the2022UnitedNationsclimatechangeconference–Egypthadtheopportunitytoplayaleadingroleinglobalclimatepolicyandaction.Addressingtheintersectionofclimateanddevelopmentrequiressignificantcommitments,institutions,regulationsandco‑ordination.Thecountryhasalreadytakenimportantstepsinthisregard,withitsclimatepolicyevolvingfromsimplyadheringtointernationalcommitmentstodevelopingalong-termstrategytobecomearegionalleaderinaddressingclimatechange.Supportivepoliciestailoredtothecountry’ssocio-economiccircumstancesandchallengesshouldgointandemwiththeenergytransition.GivenEgypt’svulnerabilitytoclimatechange,thesecurityofwater,energy,andfoodareintertwined.Inordertoaccomplishefficientandintegratedplanningandmanagementofresources,itiscrucialtoaddressthedifferentlinksbetweenthedifferentsectors.AnexusstrategymustbeusedtotackletheseconnectedproblemsiftheworldistomeettheSDGsandreduceclimatethreats.Overall,asuccessful,justandinclusiveenergytransitioninEgyptcanbringaboutabrighter,moreprosperousandhealthierfutureforallEgyptians.1301IntroductionEgyptislocatedinnortheastAfricaandcoversanareaofapproximately1millionsquarekilometres(km2).Atpurchasingpowerparity(PPP),ithadagrossdomesticproduct(GDP)ofUSD1.33trillion3in2021,makingEgyptthethird-largesteconomyonthecontinent.UndercurrentWorldBankclassification,itisconsideredalower-middleincomecountry(WorldBank,n.d.).Egyptishometoapopulationofaround110millionpeople,withayoungandproductivemedianageof23.9yearsin2021(UNDESA,2022).Despiteenjoyinggradualeconomicgrowthovertheyears,Egyptfaceschallenges,however,includingdemographicpressuresonnaturalresources,employmentandsocialinfrastructure.Thecountry’spopulationisalsoheavilyconcentratedinasmallareaalongtheRiverNileandinitsdelta.Asaresult,thecountryisparticularlyvulnerabletotheeffectsofclimatechange,whichcouldexacerbateexistinginequalitiesinhumandevelopmentandgeographicaldistribution.Thethreatofheatwaves,desertificationandlossofbiodiversityallposediverserisks,includingriskstofoodandwatersecurity.Globally,theenergysectoristhelargestcontributortoemissions,asisthecaseinEgypt.Giventhepressingneedtoacceleratetheglobalenergytransition,thisdecadehasseenEgyptstepupitseffortstotransitionitsownenergysystem.Thisisimportantbothinaddressingthechallengesthatthecountryfacesandincontributingtoglobaleffortstocombatclimatechange.EgyptisAfrica’sthird-largestgasexporterandhasanenergysectorthathastraditionallyoverwhelminglyreliedonfossilfuels.Thesehavecomebothfromitsownproductionandfromimports.EgyptisalsooneofAfrica’slargestenergymarkets.Thisisduetothesizeofitspopulation–withaveryhighpopulationdensityinthecapital,Cairo–andthecountry’shistoricallyhighlevelsofaccesstomodernfuelsandelectricity.ThismakesEgyptstandoutfromitssouthernneighbours(IRENA,n.d.).ThecountryhasalsobeenattheforefrontofrenewableenergydeploymentinAfrica,particularlythroughitslargehydroresources,tiedtotheRiverNile.Egypthasalsodeployedotherformsofmodernrenewableenergy,suchassolarandwind.Asof2020,thecountryhadthecontinent’ssecondlargestinstalledcapacityofsolarenergy,afterSouthAfrica.EgyptalsohadAfrica’sthirdlargestwindpowergenerationcapacity,accountingformorethanafifthofthecontinent’stotal(IRENA,n.d.).ThepotentialforEgypttofurtherincreaseitsuseofrenewableenergyisalsovast.Understandingthesocio-economicconsequencesoftransitionpathwaysatdifferentlevelsofambitionisafundamentalaspectofproperplanningandpolicymaking.TheInternationalRenewableEnergyAgency(IRENA)hasbeenconductingresearchintotheseintricateissuessince2016(IRENA,2016,2018a,2019a,2020,2021,2022a,2022b,2023a,2023b,2023c),analysingkeydriversandimpactstoinformenergytransitionplanningandimplementationonaglobal,regionalandnationalscale.Inthisresearch,IRENAhasemphasisedtheimportanceofaholisticglobalpolicyframework(Figure1)tomaketheenergytransitionsuccessfulandbeneficialforthegreatestnumberofpeople.Tospeedupthetransitionandensurethatitsbenefitsarewidelyshared–anditsdrawbacksarereduced–severalpolicycomponentscomplementandsupportoneanother,encompassingawidevarietyoftechnological,social,andeconomicchallenges.3In2017USdollars.15Figure1:Socio-economicassessmentframeworkPolicymeasuresEnergy-economy-Socio-economicGDPenvironmentfootprintEmploymentEnergytransitionmodelWelfareroadmapSocio-economicsystemoutlookThissocio-economicstudyhasbeenconductedusingtheE3ME4macroeconometricmodel.Thisintegratestheenergysystemandglobaleconomiesintoasinglequantitativeframework.ItanalysestheimpactoftheenergytransitiononvariablessuchasGDP,employmentandwelfaretoguideenergysystemplanningandpolicymakingforajustandinclusiveenergytransitionattheglobal,regional,andnationallevels.Policymakersneedtobeawareofhowsuchchoiceswillaffectpeople’swell-beingandoverallwelfare,andofthepotentialgapsandhurdlesthatcouldaffectprogress.Atthegloballevel,IRENAexploredtheseissuesinitsflagshipreport,Worldenergytransitionsoutlook:1.5°CScenarioPathway(IRENA,2021,2022a,2023a)(Box1).Inthis,twoenergyroadmapsareanalysed:1)ascenariobasedoncurrentplans,calledthePlannedEnergyScenario(PES);5and2)anambitiousenergytransitionscenario(1.5°CScenario)6thataimstoachievethe1.5°CgoalconsistentwiththeParisClimateAgreement.ThetimeframeoftheIRENAanalysisisupto2050anditconcludesthattransformingtheenergysectorcanyieldwidespreadbenefits.Theseadvantagesinclude:GDPgrowthaveraginganadditional0.5%overthePESthrough2030,andenergysectoremploymentreaching139million,worldwide–33millionmorethanunderthePES.Ofthose139millionjobs,38millionwouldbeinrenewableenergy.Globalwelfarewouldbearound20%higherunderthe1.5°CScenariothanunderthePES.Theseglobalimpactswillbeunevenlydistributedacrosscountriesandregions,however.Thisisbecausetheydependonlocalsocio-economicstructuresandtheirdegreeofrelianceonfossilfuelsandothercommodities,aswellasonthedepthandlengthoftherenewablessupplychain,amongotherfactors.4TheE3MEglobalmacro-econometricmodel(www.e3me.com)isusedfortheassessmentofsocio-economicimpacts.Energymixesandrelatedinvestment–basedontheWorldEnergyTransitionsOutlook2022(IRENA,2022a)–areusedasexogenousinputsforeachscenario,aswellasclimateandtransition-relatedpolicies.5Thisisthereferencecaseforthisstudy,providingaperspectiveonenergysystemdevelopmentsbasedongovernments’energyplans,aswellasotherplannedtargetsandpoliciesbefore2020,includingNationallyDeterminedContributions(NDCs)undertheParisAgreement.Thisreportconsiderspolicytargetsanddevelopmentsbefore2020.Policychangesandtargetsannouncedsincethenarenotconsideredinthemodellingexercise,butarementionedinthechaptersinordertoprovideinsightsintothelatestdevelopments.6Thisscenariodescribesanenergytransitionpathwayinwhichtheincreaseinglobalaveragetemperaturebytheendofthepresentcenturyislimitedto1.5°C,relativetopre-industriallevels.Itprioritisesreadily‑availabletechnologysolutions–includingallsourcesofrenewableenergy,electrificationmeasuresandenergyefficiency–thatcanbescaledupatthenecessarypaceforthe1.5°Cgoal.16IntroductionBOX1:WORLDENERGYTRANSITIONOUTLOOK:1.5°CPATHWAYTheWorldenergytransitionsoutlookoutlinesapathwayfortheworldtoachievethegoalsoftheParisAgreementandhaltthepaceofclimatechangebytransformingtheglobalenergylandscape.Thereportspresentoptionsforlimitingtheglobaltemperatureriseto1.5°Cdegreesandbringingcarbondioxide(CO2)emissionsclosertonetzerogloballybymid-century.Theyofferhigh-levelinsightsintotechnologychoices,investmentneeds,accompanyingpolicyneedsandthesocio-economicimplicationsofachievingasustainable,resilientandinclusiveenergyfuture.IRENAs1.5°CScenarioconsiderstoday’sproventechnologies,aswellasinnovativetechnologiesthatareunderdevelopment,butthatcouldplayasignificantroleby2050.Figure2showsthesixmaincomponentsofCO2emissionsabatementbasedonthemostrecenteditionoftheWorldenergytransitionsoutlook.Renewableenergyplaysakeyroleinthedecarbonisationeffort.Over90%ofthesolutionsin2050involverenewableenergythroughdirectsupply,electrification,energyefficiency,greenhydrogenandbioenergywithcarboncaptureandstorage(CCS).Fossil-basedCCSalsohasalimitedroletoplay,whilethecontributionmadebynuclearpowerremainsatthesamelevelsastoday.Thereportpresentsanalysisatagloballyaggregatedlevel.Figure2:Reducingemissionsby2050throughsixtechnologicalavenuesREbasedCO211%removals(BECCS)FFbasedCO225%Renewables8captureandstorage%Hydrogen12%34.2GtCO2Electriﬁcation19%25%Source:(IRENA,2023a).Note:CCS=carboncaptureandstorage;BECCS=bioenergywithcarboncaptureandstorage;FF=fossilfuels;GtCO2=gigatonnesofcarbondioxide;RE=renewableenergy.17Thisreportaimstodiscussthesocio-economicdifferencesEgyptexperiencesbetweenthePESandthe1.5°CScenario.Itusesthesameinputsandassumptionsasthe2022editionofIRENA’sWorldenergytransitionsoutlook.UnderthePES,Egypt’seconomyisexpectedtoexperiencestrongeconomicgrowth,asenvisionedinthebaselineassumptionoftheE3MEmodel.7Underthisbaselinetrend,thecountry’srealGDPincreasesbyanaverageofaround5.0%peryearbetween2021and2050.TheEgyptianpopulationisprojectedtogrowbyacompoundannualgrowthrate(CAGR)of1.1%overthe2021‑2050period,reachingover142.5millionin2050(Table1).Economy-wideemploymentisalsoexpectedtorise,byanaverageofaround1.4%peryear,overthesameperiod.Table1:GDP,labourforceandpopulationgrowthprojectionsunderthePESVariable2021-20302031-20402041-2050(CAGR%)(CAGR%)(CAGR%)RealGDP4.936.263.71Economy-wideemployment2.021.340.92Totalpopulation2.060.660.62Notes:CAGR=compoundannualgrowthrate;GDP=grossdomesticproduct.IRENA’sanalysisexploresthesocio-economicfootprintthatresultsfromthevariousassumptionsincorporatedunderparticularclimatepolicybaskets.Thesebasketsincludearangeofmeasurestosupportajustandinclusivetransition.Theseinclude:carbonpricing,internationalcollaboration,subsidies,progressivefiscalregimestoaddressdistributionalaspects(seeBox2andAppendix1formoredetails),investmentsinpublicinfrastructureandspendingonsocialinitiatives.Thebasketsalsoincludepoliciesthatencouragethedeployment,integrationandpromotionofenergytransitiontechnologies.7Baselineforecastsareconstructedusingacomprehensivesetofinternationaldatasources.ThemainsourceforpopulationdataistheUnitedNationsWorldPopulationProspects,whileforGDPforecasts,theInternationalEnergyAgencyWorldEnergyOutlookisused.ThesearesupplementedwithdatafromtheInternationalLabourOrganisation,theOrganisationforEconomicCo‑operationandDevelopmentStructuralAnalysisdatabase,theWorldBank,theAsianDevelopmentBank,theEuropeanCommission(EC)annualmacroeconomicdatabase,Eurostat,theECAnnualAgeingReportandEuropeanUnionreferencescenarioreports.E3MEisaglobal,macro-econometricmodelownedandmaintainedbyCambridgeAnalytica(www.e3me.com,accessed11October2023).18IntroductionBOX2:IRENA’SCLIMATEPOLICYBASKETSInitsmodelling,IRENA’ssocio-economicfootprintanalysisincludesaverydiversesetofpoliciesthataimtoenableandsupportasustainableenergytransition.Holisticplanningandsynergisticimplementationcanaddressthemultipleinteractionsbetweenthesocial,economicandenergysystemsmoresuccessfullythananapproachthatreliesonalimitednumberofinterventions.Itshouldbenotedthatwithadiverseclimatepolicybasket,thefinallevelofcarbonpricingneededtobringaboutanenergytransitionroadmapdependsontheeffectiveimplementationofaccompanyingpolicies.SinceIRENA’sanalysisincludesadiversepolicybasket,transitiongoalscanbeachievedwithsignificantlylowercarbonprices.IRENA’ssocio-economicanalysisassessesthefollowingpolicies:•Internationalco‑operation,supportingenablingsocialpoliciesinallcountriesandaddressingtheinternationaljusticeandequitydimensions.•Domesticprogressiveredistributivepolicies.•Carbonpricing,evolvingovertimewithcarbonpricesdifferentiatedbyeachcountry’sincomelevelandspecialtreatmentofsectorswithhighdirectimpactsonpeople(householdsandroadtransport).•Fossilfuelphaseoutmandatesinallsectors.•Phaseoutofallfossilfuelsubsidies.•Regulationsandmandatestodeploytransition-relatedtechnologiesandstrategies,includingrenewables,electricvehicles(EVs),hydrogenandsystemintegrationthroughelectrificationandpower-to-X(P2X).•Mandatesandprogrammesforenergyefficiencydeploymentinallsectors.•Policiestoadaptorganisationalstructurestotheneedsofrenewable-basedenergysystems(suchasinthepowersector).•Subsidiesfortransition-relatedtechnologies,includingforhouseholdsandroadtransport.•Directpublicinvestmentandspendingtosupportthetransition,withparticipationinalltransition-relatedinvestments,butwithspecialfocusonenablinginfrastructuredeployment(EVchargingstations,hydrogeninfrastructure,smartmeters,etc.),energyefficiencydeploymentandpolicyexpenditure.•Policiestoaligninternationalco‑operationwithtransitionrequirements:earmarkingoffundstotransition-relatedinvestments,increasingsocialspending.•Publicinvolvementinaddressingstrandedassets,bothdomesticallyandinternationally.•Policiestoaligngovernmentfiscalbalanceswithtransitionrequirements,addressingdomesticdistributionalissuesandaligningdeficitspendingwithtransitionrequirements.Thereportisstructuredasfollows:Chapter2analysesthecurrentenergysectorsituationandrelatedchallengesandinitiatives;Chapter3provideshistoricalmacroeconomicdevelopmentsandthefindingsofthemacroeconometricmodellingtoassessthesocio-economicimplicationsoftheenergytransitioninEgyptthroughto2050(GDP,employment,andwelfare);andChapter4providesasummaryofthefindingsandpolicyrecommendationsforensuringajustandinclusiveenergytransition.1902ContextualisingEgypt'senergysectorandtheneedforenergytransitionEgyptpossessessubstantialenergyresources,includingbothconventionalfossilfuelsandrenewableenergy,withtheformercrucialtothecountry’ssocio-economicdevelopment.Historicallyanetexporterofoilandgas,Egyptbecameanetimporterinthe2010sduetorisingenergyuseanddepletingenergyresources.Asaresult,theenergysectorhasfacednewchallengesandbarriers,suchasintermittentpoweroutages,whiletheeconomyhasfacedanincreasingfiscaldeficitduetohighsubsidiesonenergyprices–subsidiesthatthegovernmenthasbeenreducing.Thesechanges,however,havealsocoincidedwithsignificantnewdomesticgasdiscoveries.Thesebeganin2015withthediscoveryofthegiantZohrgasfieldbytheItalianoilandgascompanyEni.Nonetheless,rapidgrowthinnaturalgasconsumptionhascontinuedtomakethecountryanetgasimporter(IEA,n.d.).Attheendof2020,thecountry’sprovenhydrocarbonreservesconsistedof3.6billionbarrelsofoiland75.5trillioncubicfeet(Tcf)ofnaturalgas(USEIA,2022).ThroughtheSuezCanalandtheSuez-Mediterranean(SUMED)pipeline,Egyptalsoplaysacrucialroleinglobalenergymarkettransportation.Tomeetitsgrowingenergyneedsandcontributetojobcreation,Egypthasalsoembarkedonseveralrenewableenergyprojectssincethestartofthecentury.TheseincludetheZafaranawindfarmandambitiousplanssuchastheGreenCorridorInitiativeforEgypt’srenewableenergy,amemorandumofunderstanding(MoU)signedin2022tobuilda10GWonshorewindproject.Theseinitiativesaimtopreservethecountry’slimitedhydrocarbonwealth,diversifyitseconomy,bettermanageshocksfrominternationalenergypricevolatilityandmakeEgypt’spost-COVIDgrowthpathmoresustainable.Thefollowingsub-sectionsdescribethestatusofEgypt’senergysystem(section2.1)andthechallengeslinkedtotheenergysectoranditstransition(section2.2).2.1THECURRENTENERGYMIXAsshowninFigure3,duetotheeconomicslowdownduringtheCOVID-19pandemic,Egypt’stotalenergysupply(TES)decreasedby9.3%between2019and2020,to3702.2petajoules(PJ)(UNSD,n.d.).Overall,however,between2010and2020theTESincreasedbyanaverageof1.5%peryear.Naturalgascontinuestobethelargestsourceofenergy,accountingfor57.6%ofTESin2010and54.0%in2020.Oilissecondlargestsourceofenergy,witharound45.1%in2010and33.7%in2020.Egyptisthereforestilllargelydependentonoilandgas,withoil’sdeclinesaccountedforinpartbytheincreaseduseofgasforpowergeneration.Indeed,naturalgassawanincreaseinusageof42%overthe2010-2020period,withtheinstallationofnewelectricitygeneratingcapacity(naturalgasanddual-fuelplants).ThishikehasmadeEgyptAfrica’slargestgasmarket,accountingforoverathirdofthenaturalgasdemandoftheentireAfricancontinent(ClimateActiontracker,2022).Historically,coalaccountsforaverylowshareofTES,althoughitrecordedaslightincreasebetween2010and2020,from1.4%to1.6%.Meanwhile,theshareofrenewablesislow,yetithasbeenincreasingoverthelastdecade,seeingarisefrom6.5%to7.1%between2010and2020.Renewablesaremainlydominatedbybioenergyintheformoftraditionalbiomass,whichaccountsforaroundtwo-thirdsoftotalrenewableenergysupplyandisstillusedbymanyruralhouseholds.21Figure3:Egypt:Totalenergysupply,2010‑202045008%40007%PetaJoules35006%ShareofrenewablesinTES(%)30005%25004%20003%150010002%5001%00%20102011201220132014201520162017201820192020HeatOtherrenewables(hydropower,solarandwind)BiofuelsandwasteNaturalgasOilCoalShareofrenewablesSource:(UNSD,n.d.).Ontheconsumptionside,in2020,morethantwo-thirdsoftotalfinalenergyconsumption(TFEC)–oraround68.5%–camefromfossilfuels.Respectively,oilandnaturalgasaccountedforaround49.4%and16.5%ofthattotal.TFECstoodat2085.3PJthatyear,whichwasaround9%abovethe2010level(UNSD,n.d.).Renewableenergyaccountedforaround6.2%ofTFECin2020.Thelargestenergy-consumingsectorsinEgyptin2020weretransport(34%),industry(29%),andresidential(27%).Commerceandpublicservicesaccountedfor6.6%andtheprimarysectors(agriculture,forestry,andfishing)for2.9%(UNSD,n.d.).TheconsumptionofelectricityinTFECincreased24%duringthe2010‑2020period,to566.8PJ.Theshareofelectricityincreasedfrom24%ofthecountry’sTFECin2010toaround27%in2020,whichwasabovetheglobalaveragethatyearofaround23%(UNSD,n.d.).Renewableenergycapacityincreased82%between2010and2021.Thisfigurerisestoalmost437%,ifhydroisexcluded(Figure4).Overthe2010-2022period,Egyptincreaseditsrenewableenergyproductionbyaround83.9%,addingover1.1GWofwindpowerandaround1.7GWofsolarpowertoitsrenewableenergycapacitymix.Aftersomechronicpowershortages,Egyptachievedasurplusinelectricitybyaddingaround28.7GWofnewgeneratingcapacitywithinthe2015-2021period.Thissurpluswasmainlyduetoincreasedcapacityinnaturalgascombinedcycleanddual-fuelplants,whichaccountedfor89%ofthecapacityaddedduringthisperiod.Thesefossilfuelpowerplantsweredevelopedtorapidlyfilltheelectricitygapandstopthepoweroutagecrisesthatthecountryhadwitnessedinpreviousyears,whenrapiddemandgrowthhadoutpacedpeakgenerationcapacity.ItisalsoworthnotingthatdespitetheCOVID-19pandemicanditsnegativeeffectsonmosteconomicsectorsworldwide,Egyptsuccessfullyinstalled587MWofvariablerenewableenergy(510MWofwindand77MWofsolar)inthe2019-2022period.Overthesamethreeyears,fossilfuelcapacitiesincreasedby616MW.Thus,renewablescontributedsignificantlytoanincreaseintotalinstalledcapacities(+1.2GW)between2019and2021(IRENA,n.d.).22ContextualisingEgypt'senergysectorandtheneedforenergytransitionFigure4:Egypt:Installedrenewablegenerationcapacity,2000‑202276.1%Renewableenergygenerationcapacity(GW)62000200152002200341.6%20042005320062007220082009120102011020122013201420152016201720182019202020212022Hydropower(excludingpumpedstorage)WindenergySolarenergyBioenergyCAGRSource:(IRENA,n.d.).Duringthe2010-2021period,solarenergycapacitysawthefastestgrowthofanyenergyresource,expandingataCAGRof53.4%.Inaddition,between2018and2021,theelectricitygeneratedfromsolarsawanalmostnine‑foldincrease,from553.1gigawatthours(GWh)to4972.5GWh.Overthe2010‑2021period,windcapacitygrew10.4%(IRENA,n.d.),whilewindgenerationmorethanquadrupled,from1171.4GWhto5269.4GWh(IRENA,n.d.).AsshowninFigure4,Egypt’stotalinstalledcapacityinrenewableshasalsobeenincreasing,with6322MWthetotalfor2022(IRENA,n.d.).Ofthat,2832MWwastobehydro,1643MWwindpower,1704MWsolarphotovoltaic(PV),20MWconcentratedsolarpower(CSP)and123MWbioenergy(IRENA,n.d.).Regardingcleancookingandelectricityaccess,itisworthnotingthatin2020,100%ofthepopulationhadaccesstoelectricity,cleancookingfuelsandtechnologies(WorldBank,n.d.).2.2EGYPT’SENERGYTRANSITION:CHALLENGESANDINITIATIVESIn2016,Egyptbeganamajoreconomicreformandstabilisationprogramme.Thisaimedataddressingsocialandeconomicissues,includingsocialinjustice,risingunemploymentandpoverty,inflationandthelimitedflexibilityavailabletothegovernmentinitsspendingchoices(Abou-Alietal.,2023).Sincethen,thecountry’smacroeconomicindicatorshaveimprovedmoderately,demonstratingresilienceduringtheCOVID-19pandemic.ThereformsandstrongpolicydecisionshaveincreasedconsumerspendinginEgypt.Theyhavealsoenhancedthecountry’seconomicperformanceandwelfarebystrengtheningthesocialsafetynetforlow-incomehouseholds.Thecountryhasalsoachievedacontinuousdeclineintheunemploymentrate.Despitetheseachievements,however,therearestillsomechallengesthatrequireimmediateattention.Thesefallintothreecategories:economic,energysector-specificandenvironmentalchallenges.Indeed,asoneofthecountriesmostexposedtoclimatechange,Egyptfacessignificantriskstoitseconomic,social,andenvironmentalsustainability.23ChallengesEgypt’seconomyanditsmajorsettlementsrelyheavilyonnaturalresourcesandparticularlyontheRiverNile.Thisisusedforvariouspurposes,includingpotablewater,agriculture,industry,fishfarming,powergeneration,inlandrivernavigation,mining,oilandgasexploration,machinerycooling,andelectricitygeneration.ThisrelianceontherivermakesEgyptparticularlyvulnerabletoclimatechange,whichincludesrisingtemperaturesanddecreasedprecipitationinthehigherNileBasinsandtheeasternMediterraneancoastalzone.Overthepast30years,temperaturesinEgypthaveincreasedbyanaverageof0.53°Cperdecade(UNICEF,2022).Thisishavingasignificantimpactonhumansettlementandtheeconomy.Egypt’swatersecurityisalsohighlyvulnerabletoanydevelopmentsinupstreamcountries,includingthepotentialimpactofclimatechangeontheseneighbours.Withanestimated97%ofEgypt’sfreshwaterresourcescomingfromtheRiverNile(El-Rawyetal.,2021),limitationsplacedontheresourcesavailablebytheconstructionandpotentialimproperfillingofvariousprojectsupstreamintheNileRiverbasinmakeEgypt’swatersecurityamajorconcern.Atthesametime,theaverageannualavailabilityoffreshwaterpercapitainEgypthasbeensteadilydecreasing.In1959,thisavailabilitywasaround1893cubicmetres(m3),yetby2000,thefigurewas900m3andby2012,700m3(Aziz,2020).Currently,theaveragerangesbetween550and560m3.Thislevelisnearlyhalftheinternationalthresholdforwaterpoverty,8indicatingthatEgyptisalreadyinaphaseofwaterscarcity(Al-Kady,2022).In2023,thelevelisexpectedtodropfurtherstill,to534m3(Aziz,2020),bringingthecountrydangerouslyclosetotheabsolutewaterscarcitylimit.Inresponsetothis,Egypthascreatedastrategicplantoestablishseawaterdesalinationplantstomeetthecountry’sdrinkingwaterneeds.Today,20%ofEgyptiansliveincoastalareas,whicharealsovisitedby11milliontouristseveryyear.Over40%ofindustrialactivitytakesplaceinthesecoastalzones(CBD,n.d.),withrisingsealevelsposingasignificantthreat.If,forexample,sealevelsrisebyhalfametre,30%ofAlexandria,thesecond-largestcityinEgypt,willbeinundated.Thiswillleadtotherelocationofnearly1.5millionpeople,195000joblosses,andlandandpropertylossesestimatedatUSD30trillion(Qantara,2022).AirpollutionandwastemanagementarealsomajorenvironmentalchallengesinEgypt.Airpollutionhasasignificantnegativeimpactonpublichealth,whilewasteproductionisincreasingduetopopulationgrowth,changesinconsumptionpatterns,changesinwastecharacteristics,andinadequatetechnologyforwastedisposal.TheseenvironmentalissueswillhaveasignificantimpactonEgypt’seconomy,particularlyonitsagriculturalsector.In2021,thissectoraccountedfor15%ofGDP,providedjobsfor25%oftheworkforceandprovidedfood,textilesandotherproducts(MOIC,2021).Duetotheexpectedincreaseintemperatureandpossibledeclinesinrainfall,demandforwaterforagriculturalpurposeswilllikelyincrease,exacerbatingthewaterscarcityproblem.Egypt’spopulationgrowthrateandpovertyrate,with32.5%ofthepopulationlivingunderthenationalpovertylinein2018(WorldBank,n.d.),placessignificantfiscalandinfrastructureburdensonthecountry’ssocialservices.Fiscalspaceremainslimitedduetothelargeinterestburdenandlowrevenuemobilisation.Withsuccessivefuelpriceandtariffincreases,governmentspendingonenergysubsidiesremainshigh,leadingtocontinuedlimitedfiscalspaceforsocialspending.AccordingtotheWorldBank,allocationstothehealthandeducationsectorsremainlimited,representingaround1.5%and2.4%ofGDPinthe2021-2022financialyear.AlthoughEgyptstrengthenedsocialprotection,expandedexistingprograms,andintroducedkeypovertymitigationmeasuresduringtheearlystagesoftheCOVID-19pandemic,increasinginflationarypressurescallforfurtherintensificationofeffortstoreducepovertyandimprovewelfare.8AccordingtotheUnitedNations,whenannualwatersuppliesdropbelow1000m3perperson,thepopulationfaceswaterscarcity,whileifthelevelfallsbelow500m3,theyface“absolutescarcity”.24ContextualisingEgypt'senergysectorandtheneedforenergytransitionInaddition,limitedproductivityandjobcreationhindertheintegrationofnewworkersintothejobmarket,leadingtoexcessiveunemploymentandthemarginalisationofwomenandyouth(Assaad,2022).Improvingtheefficiencyofpublicspending,optimisingrevenuemobilisationtoadvancehumancapital,andpursuingstructuralreformstounleashthepotentialoftheprivatesectorindiversifiedactivitiesarenecessarytocreatejobsandimprovelivingstandards.Regardingtheenergysector,thereareseveralchallengesdelayingitsdevelopment.Naturalgasandcrudeoilproductionandusecontinuetobethelargestmajorenergysupplyandgreenhousegas(GHG)emissionsourcesintheenergyindustryvaluechain.Egypt’sIntegratedSustainableEnergyStrategyISES2035setsloftygoalsfortheuseofrenewableenergyandtheimplementationofenergyefficiencymeasures,butin2020,naturalgasandoiltogetherstillaccountedforaround87.7%ofthecountry’stotalenergysupply(UNSD,n.d.).In2022,Egyptwillhaveasurplusof25.5GWofavailablepowergenerationcapacity,withthevastmajoritycomingfromthermalplants.Asaresultofthissurplusandtherelativelyshortremaininglifetimeofgas-basedpowergenerationcapacity,thereseemstobelittleroomandnoimmediatedemandfortheintegrationofrenewablesintothegenerationmix.Thisisespeciallysignificantbecausein2021,thenewthermal,combinedcyclepowerplants(18.4GW)thatwerecommissionedin2018accountedfor25%oftheactualgeneration.Inaddition,despitethesurplus,thecountrystillundergoespowercuts.Themajorchallengeistoupgradetheinfrastructure,withthecountryalreadyactivelyworkingoninvestmentintransmission,distributionandothermoderninfrastructurecrucialtothecountry.InitiativesHoldingthepresidencyofCOP27–the2022UnitedNationsclimatechangeconference–Egypthadtheopportunitytoplayaleadingroleinglobalclimatepolicyandaction.Addressingtheintersectionofclimateanddevelopmentrequiressignificantcommitments,institutions,regulationsandco‑ordination.Thecountryhasalreadytakenimportantstepsinthisregard,withitsclimatepolicyevolvingfromsimplyadheringtointernationalcommitmentstodevelopingalong-termstrategytobecomearegionalleaderinaddressingclimatechange.EgyptmadeasignificantcommitmenttoreducingemissionswiththesubmissionofitsfirstupdatedNationallyDeterminedContribution(NDC)inJune2022.TheNDCincludesquantitativetargetsforemissionsreduction.Theseincludemitigating33%ofelectricitysectoremissions,65%oftheemissionsfromtheassociatedgasessubsectoroftheoilandgasindustry,and7%fromtransportation,allby2030.TheupdatedNDCalsooutlinestheUSD50billionneededforadaptationthroughto2030–anamountaveragingaround1.6%ofannualGDP,dependingontheeconomicgrowthtrajectoryfromthecurrentGDPofaroundUSD400billion.TheestimatedcostofimplementingthesetargetsisUSD196billionformitigation,orbetween4%and6%ofGDPperyear–again,dependingonthegrowthtrajectoryoftheeconomy(Abou-Alietal.,2023).25Egypthasrestructureditsinstitutionalframeworkforclimateactionwithanationalclimatechangecommitteeheadedbytheprimeminister.In2020,thegovernmentmandatedallministriestoincreaseinvestmentsingreenprojectsandapplysustainabilitystandardsintheirnationalsustainabledevelopmentplanning.Policieshavebeenformulatedandimplementedbymanyministries,however,leadingtofragmentationandco‑ordinationdifficulties.TheNationalCouncilforClimateChange(NCCC)thereforeadoptedtheNationalClimateChangeStrategy(NCCS)2050inMay2022,withallconcernedministriesrequiredtodevelopactionplansinco‑ordinationwiththeNCCCtoaddressthefragmentationissue.Thesecross-sectorinitiativeswillbringapositiveimpactaslongasco‑ordinationandclarityofrolesareprovidedtoreduceinconsistencyinclimatechangepolicyformulationandimplementation.Egypthasalreadyimplementedsuccessfulreformsintheelectricitysector,includingthephasedremovalofenergysubsidies,improvedpowerplantanddemand-sideenergyefficiency,andanincreaseinrenewableenergy.TheseeffortshavelaidthegroundworkforachievingtheemissionreductiontargetsoutlinedintheupdatedNDC.TheNDCalsoemphasises,however,theneedforkeyadaptationactionsandtheimportanceofstrengtheningmonitoring,reporting,andverification(MRV)systems.InadditiontotheintroductionofVATandtheoptimisationofthepublicsectorwagebill,akeymeasurehasbeenareductioninenergysubsidies.In2013,spendingontheseaccountedfor22%ofpublicexpenditure,withfossilfuelsubsidiesamountingto7%ofEgypt’sGDP.Thiswasafiguregreaterthanthecombinedpublicexpenditureonhealthandeducation,whichtotalled5%(ESMAP,2017).Energysubsidieshavesincebeensubstantiallyreduced,fallingto1.3%inthefiscalyear2020‑2021(IMF,2021).Studies,however,showthatmeasuressuchasenergysubsidyreduction,whichaimtoimproveeconomichealthandgrowth,canhaveadverseimpactsonthepoor(Breisingeretal.,2019;Mostafa,2020).Yet,thepovertyrateusedbytheWorldBankasabenchmarkforlower-middleincomecountries9wasestimatedat22%in2018,upfrom13%inthemid-2010s.Egyptisamongaselectgroupofcountriesthathaveinitiatedsweepingeconomicandenergysubsidyreformsofthismagnitudeandforasustainedperiod(IMF,2013).Thosemeasureshaveenabledthegovernmenttostrengthensocialsafetynetsforthepoor,usingfiscalsavingstoimprovewelfareinthecountry.Egypt’srelativelybetterperformanceintermsofconsumption,schoolingandbasicpublicservicesexplainsitslowpovertyratescomparedtotheMiddleEastandNorthAfrica(MENA)regionaverage.EgyptVision2030,launchedinFebruary2016,reflectsthecountry’slong-termstrategicplantoachievesustainabledevelopmentprinciplesandobjectivesinallareas.TheVisionidentifiedaseriesoftargeteddevelopmentindicatorstobeachievedby2020and2030.Theseincludedseveralsignificanttargetsforrenewableenergydeployment(MoPMaAR,2016).Theplanoriginallyenvisagedthattheenergysector’sshareofGDPshouldreach20%in2020and25%in2030.Renewables’sharewastargetedat8%in2020and12%in2030,alongwith21%and32.5%sharesinpowergenerationin2020and2030,respectively(IRENA,2018b).Atthebeginningof2018,EgyptthenlauncheditsIntegratedSustainableEnergyStrategy(ISES)2035,whichnowsetsEgypt’stargetat42%ofrenewableinpowergenerationby2035(InformaMarkets,2022).Studiesarestillinprogresstoraisethissharebasedonareductionintechnologycostsandthedevelopmentofstorage.Toachievethistarget,Egypthasbeenplanningandalreadyimplementingseveralpoliciesaimedatincreasingrenewableenergyinvestments(Table2).9ThisisthepovertyheadcountratioofUSD3.65aday,andisthepercentageofthepopulationlivingonlessthanUSD3.65adayat2017purchasingpoweradjustedprices.ThecommonlyusedUSD1.00‑a‑daystandard(at1985PPP)waschosenfortheWorldDevelopmentReport1990becauseitwastypicalofthepovertylinesinlow-incomecountriesatthetime(WorldBank,1990).Asdifferencesinthecostoflivingacrosstheworldevolve,theinternationalpovertylinehasbeenupdatedtoreflectthesechanges.ThelastchangewasinSeptember2022,whentheWorldBankadoptedUSD2.15(2017PPP)asthecurrentextremepovertyline,whichrepresentsthemeanofthepovertylinesfoundin15ofthepoorestcountriesrankedbypercapitaconsumption.TheUSD3.65povertylineisderivedfromtypicalnationalpovertylinesincountriesclassifiedaslowermiddleincome,asinthecaseofEgypt.TheUSD6.85povertylineisderivedfromtypicalnationalpovertylinesincountriesclassifiedasuppermiddleincome(WorldBank,2023).26ContextualisingEgypt'senergysectorandtheneedforenergytransitionTable2:ListofpoliciestoenablethedevelopmentofrenewablesinEgyptPoliciestoachievetheListofinitiativesenergytransitionPushNationalRenewableEnergyStrategy2020adoptedin2008andupdatedin2012.Egyptiansolarplan.Sustainableenergyactionplanforthepowersector(2018).Buildingenergyefficiencycodes(BEECs)wereintroducedinEgyptbetween2005and2009.Theyimposemandatoryenergyperformancerequirementsforresidential,commercial,andpublicbuildingsinthreedifferentcodedocuments.DirectPullCabinetDecreeNo.1974/2014inSeptember2014policiesannouncingthefirstroundoffeed-in-tariffs(FiTs).CabinetDecreeNo.2532/2016inSeptember2015announcingthesecondroundofFiTs.PeriodicalDecreeNo.3/2017inAugust2017adoptingthenetmeteringschemeforsolarPV.CabinetDecreeforelectricitypricesforbiomassunderFiTs.PeriodicalDecreeNo.2/2020restructuringthenetmeteringscheme.FiscalandfinancialInvestmentlawN.72/2017setsoutthelegalframeworkfortheestablishmentofrenewableenergyprojectsandprovidesincentivesforinvestmentsinthissector.Exemptionfromcustomdutiesforelectricalandelectronicequipment.ExemptionfromstamptaxandregistrationfeesonallincorporationcontractsforEVs.IntegratingpoliciesTheestablishmentofanenergyefficiencyunitintheMinistryofElectricityandRenewableEnergy.EgyptVision2030includestargetonrenewableenergy.ElectricitytariffreformprogrammelaunchedEgyptINDCin2014.publishedin2015.EnablingpoliciesRenewableEnergylaw2014.ElectricitylawNo.1974/2014,publishedJuly2015.Egyptvision2030andrenewableenergytargetslaunchedin2016.Updatedplanlaunchedin2018.PresidentialdecreeNo.116/2016inOctober2016allocating7600km2forrenewableenergy.EnablingandLawNo.102/1986establishingtheintegratingpoliciesNewandRenewableEnergyAuthority(NREA)in1986.Note:MoredetailsareprovidedinAnnex2.2703Socio-economicimpactoftheenergytransitionThissectionpresentsthekeyfindingsofIRENA’ssocio-economicanalysisofEgypt’senergytransition,outliningitspotentialimpactonaggregatedeconomicactivity(GDP),employmentandwelfare.Thesefindingsdelineatethedifferencebetweenthe1.5°CScenarioandthePES.3.1ECONOMICIMPACT,ASMEASUREDBYGDPBetween2002and2022,Egypt’sGDPgrewataCAGRof4.4%.Thiswasslowerthanthe5.0%averagerateforlower-middle-incomeeconomiesoverthisperiod(WorldBank,n.d.).Duringthesetwodecades,Egypt’shighestGDPgrowthrateswereinthe2006‑2008period,whentheeconomygrewatanannualpaceofaround7.1%–significantlyhigherthanthe5.5%averageofitslower-middle-incomecounterpartsatthattime(WorldBank,n.d.).Corporatetaxcuts,simplificationofthetaxregime,decreasedtariffsandamoreconducivebusinessenvironmentwereallidentifiedaspossiblesourcesofthatboom(WorldBank,2021a).GDPgrowthslowedintheearly2010s,however,withtheeconomyexpandingataround2.0%ayear,onaverage,between2010and2012.Growththenacceleratedin2019,to5.6%,butin2020,fellto3.6%asaresultoftheCOVID-19pandemic.Nonetheless,comparedto2020GDPgrowthratesof3.5%intheMENAregionand3.2%inlower-middleincomeeconomies,Egypt’s2020performancewasstillremarkable(WorldBank,n.d.).Indeed,throughoutthefirsttwoyearsoftheCOVID-19pandemic,EgyptwasoneoftheonlyeconomiesintheworldtoexperiencepositiveGDPgrowth,with2021seeingGDPexpand3.3%.Thiscontinuedgrowthwasthanksinlargeparttostrongconsumerspending.HouseholdconsumptioninEgypt,at89%ofGDPin2021(Figure5),ismuchhigherthantheMENAaverageof50%,reflectingalong-standingtrend(WorldBank,n.d.).In2020and2021,realhouseholdexpenditureincreasedby7.3%and7.1%,respectively,despitethewidespreadimpactofthepandemiconimportantsectorssuchastourism.LowerinflationrateswerealsoamajorcontributortotheEgyptianeconomy’spositiveevolution,withseveralotherfactorsalsocrucial.Theseincludedsalaryincreasesinthepublicsector,aboostinremittances,andgovernmentresponsestothepandemic(KPMG,2020;OBG,2022a).InJuly2020,thegovernmentlaunchedaseriesofinitiativestoincreaseconsumerspending,includingaUSD6.4billionstimuluspackagetosupporthealthcare,tourism,construction,aviationandtheexportsector,foreigndirectandindirectinvestment,remittances,andordinarycitizens.Thecountry’scentralbankalsodeclareda3%cutininterestrates,whilemanufacturersagreedtolowertheirpricesbyupto20%forrationcardusers.Someproductswerealsodiscountedbyasmuchas30%(OBG,2022a).AlthoughtheshareofgovernmentspendinginEgypt’sGDPhasbeendecreasinginrecentyears–inthe2011‑2021period,forexample,itfellfrom11.5%to7.9%(Figure5)–itsabsolutelevelhasincreased.Overthesame2011-2021period,forexample,itrosefromUSD31.7billiontoUSD47.7billion.10Thiswasinlinewithdifferentgovernmentinitiativestosupportconsumerspendinganduntappotentialinnovation,whilereducingenergysubsidies.10In2015USdollars.29Figure5:Householdconsumption,capitalinvestments,governmentspendingandbalancePercentageofGDPoftradeinEgypt,1980‑2021100806040200-20-40198019811982198319841985198619871988198919901991199219931994199519961997199819992000200120022003200420052006200720082009201020112012201320142015201620172018201920202021HouseholdconsumptionCapitalinvestmentsGovernmentspendingTradebalanceSource:(WorldBank,n.d.).Note:Householdconsumption=householdconsumptionexpenditure(includingnon-profitinstitutionsservinghouseholds);governmentspending=generalgovernmentfinalconsumptionexpenditure;capitalinvestments=grossfixedcapitalformation;tradebalance=exportsofgoodsandservicesminusimportsofgoodsandservices.See(WorldBank,n.d.)formoreinformation.Egypt’slevelofcapitalinvestment11ismuchlowerthanthe27%averageseeninlower-middleincomecountriesandthe22%averagefortheMENAregion.ThisisbecauseofEgyptianmanufacturing’sfocusonlow-to-mediumtechnologyindustries.12Between2019and2021,Egypt’scapitalinvestmentsdecreasedfrom18%to12%ofGDP(Figure5),whichrepresentsareductionfromUSD76.2billiontoUSD55.7billion13(WorldBank,n.d.).Asthecountryacceleratesindustrialisationandchangestohigh-value-added,high-technologyindustry,increasingmanufacturinginvestmentisthereforeapriority.Egypthasmadesignificantprogressonindustrialdevelopmentthroughreforms14aimedatattractingforeigndirectinvestment(FDI)andenhancingproductivity.Inthefuture,tailoredpolicieswouldenhancethisattentiononhigh-technologyindustriesandhigher-value-addedmanufacturing.Thiswouldhelpcreatecapacityinlocal,highervalue-addedactivitiesandaddvaluetoexport-competitivesectorssuchastextiles,clothing,fuels,mineralsandbasicmetals(OBG,2022b).Onaverage,underthe1.5°CScenario,thecountry’sGDPis5.5%higherthanunderthePESoverthe2021‑2050period.Intheyear2050,GDPis4.6%higherunderthe1.5°CScenariothanunderthePES.11Capitalinvestments=grosscapitalformation.Thismeasuresinvestmentinfixedassets(plantandmachinery,transportequipment,softwareandmajorimprovementstoexistingbuildingsandstructures)plusnetchangesinthelevelofinventories(WorldBank,n.d.).Theresultisaproxyformodernisationoftheindustrialstructure(OECDetal.,2021).12TheOrganisationforEconomicCo‑operationandDevelopment(OECD)classifiesmanufacturingindustriesintofourcategoriesbasedonresearchanddevelopment(R&D)intensities(theratioofR&Dspendingtofirm’srevenue).Thefourcategoriesare:low,medium-low,medium-highandhigh-technologyindustries(OECD,2011).13In2015USdollars.14Egypt’sIndustryandTradeDevelopmentStrategy2016‑2020anditsInclusiveandSustainableIndustrialStrategy2020‑2024promotetradeandvaluechainintegration.The2017InvestmentLawandNationalSingleWindowprovideinternationalinvestorswithpreferentialtreatmentandeasecustomsprocessesonline.TheDigitalEgyptICT2030initiativealsoaimstocapitaliseonIndustry4.0.30Socio-economicimpactoftheenergytransitionIncumulativeterms,overthesameperiod,thecountrywouldbeaddingaroundUSD1.2trillion15totheGDPalreadyanticipatedunderthePES.Overtheentire2021-2050transition,thetradedriverplaysthemostimportantroleincreatingthedifferenceinGDP.Thisisfollowedbytheinvestmentdriverduringthefirsthalfofthetransition’sfirstdecade(2021‑2025)andfrom2030onwards.Inthe2025-2030period,theindirectandinducedeffectsdrivertakesthesecondmostimportantrole.ThedifferentcomponentsofthedriversarepresentedinBox3.In2017,Egyptbeganrevisingitsgovernanceandregulatorystructureinthefieldoftradepromotion.WiththecompleteimplementationoftheAfricanContinentalFreeTradeArea(AfCFTA),Egyptwilladd32newfreetradeareapartners(OECDetal.,2021),withtheAfCFTAultimatelycreatingamarketofmorethan1.2billionpeople.Egyptianexportswillbeabletoexpand,strengtheningrelationswithEurope,theMiddleEastandtherestoftheworld.ContinuouseffortswillberequiredtofacilitatetradeandenhancetheinfrastructureofcontinentalintegrationifthecountryistofullyreapthebenefitsoftheNationalStructuralReformProgramme(NSRP)(2021-24)andEgypt’sVision2030.BOX3:DRIVERSOFGDPGROWTHTogainabetterunderstandingofthestructuralelementsunderlyingthesocio-economicfootprint,IRENA’smacroeconomicanalysisdisaggregatesoutcomesaccordingtodriversandsectors.ThemainmacroeconomicdriversthathavekeyimpactsonGDPdifferenceinEgyptaretrade,investment,andindirectandinducedeffects(Figure6).Figure6:EgyptianGDP:Differencebetweenthe1.5°CScenarioandthePES,2021‑2050(%)12GDP,percentagedierence10between1.5°CScenarioandPES(%)86420-2-4-62031-20402041-20502021-2030Investment&expenditure-publicInduced:lump-sumpaymentsTradeInduced&indirect:otherInvestment-privateInduced:aggregatepricesChangeinGDPTradeisthemainfactordrivingapositiveGDPdifferencethroughoutthetransitionperiod,withitsimpactstrongerinthefirstdecade.Thispositiveimpactisdrivenbythechangeinnettradeinfuels,attributableto15In2019USdollars.31Egypt’senergytransition,energyintensityanddependenceonenergyimports.AlthoughEgyptiscurrentlyanetoilimporteranddespiteitbeingamajorgasexporter,itisatriskofbecominganetgasimportersinceitsnaturalresourceswilllikelynotbeabletokeepupwithdomesticenergydemand.Underthe1.5°CScenario,asEgyptmovesawayfromfossilfuelsandtowardsrenewables,thereductionintheenergyimportbillisexpectedtobringincreasinglysignificantpositivebenefits,amountingtoUSD63billion16in2050alone.Incumulativeterms,lowerfuelimportsareexpectedtoimprovethebalanceoftradebyaroundUSD1.3trillionoverthe2021‑2050period.Thisrepresentsaround5.2%ofthecumulativeGDPunderthe1.5°CScenariooverthesameperiod.Onaverage,theinvestmentdriveristhesecondstrongestinfluencingfactoroverthewholetransitionperiod.Ithastwocomponents:1)privateinvestment,2)publicinvestmentandexpenditure.Althoughtheinvestmentdriver’simpactispositiveduring2021‑2030,itbecomesnegativefrom2030,duetotheoppositeimpactofthesetwocomponentsonthedifferenceinGDPbetweenthescenarios.ThepublicinvestmentandexpendituredriverpositivelyimpactstheGDPdifferenceoverthewholetransitionperiod.Italsoleadsthenetpositiveimpactofthewholeinvestmentdriverbetween2021and2030.Itsimpactincreasesinthefirsthalfofthefirstdecadeofthetransitionperiod(2021-2025),beforedecreasingslightlyandthenstabilisingfrom2030onwards.Thisisprimarilyduetothefront-loadedinvestmentneedsoftheenergytransition,wheremostofthepublicinvestmentoccursintheearlyyears.Inaddition,Egyptbenefitsfromglobalclimatecollaborationlargelythroughtheinternationalequitypillar,duetothelocalpopulation’svulnerabilitytothepotentiallossoffossilfuelminingactivities.Underthe1.5°CScenario,thisresultsinanincreaseingovernmentsocialspendingofmorethanUSD4.3billionby2050(at2019prices)–morethanunderthePES.Thisincreaseincludesspendingonnon-defenceservicespredominantlyprovidedbythegovernment.Theseincludepublicadministration,healthcareandeducation,whichthereforemainlybenefitpublicandpersonalservices.Theimpactofprivateinvestmentisnegativethroughoutthetransitionperiod,beingthedominantnegativedriveroverthetransition.Thisnegativeinfluencealsooutweighsthepositiveimpactfromthepublicinvestmentandexpenditurecomponentfrom2027onwards.Oil&gasextractionisamajoreconomicactivityinthecountry,estimatedtocontributeaquarterofGDPin2019-2020.Thisactivityalsoattractssignificantdomesticandforeigninvestment,whileplayingacriticalroleinEgypt’sambitiontobeself-sufficientinenergy.17Aspartofthetransition,investmentinoilandgasisexpectedtofalldrasticallyandbereplacedbytransition-relatedinvestments.Thisreductioninoilandgasinvestmentunderthe1.5°CScenario,whichwouldyieldanegativeimpactontheGDPdifference,wouldoutweightheincreasingpositiveeffectfromprivatesectorinvestmentintransition-relatedtechnologies,suchasenergyefficiencyandotherend-uses,gridsandenergyflexibility,andrenewables.Figure6illustratesthecontributionofinducedandindirecteffects(aggregatepricing,lump-sumpaymentsandothers)ondrivingthedifferenceinGDP.ThisdriveralsoplaysastrongroleinimprovingGDPunderthe1.5°CScenariowhencomparedtothePES.Ontheonehand,thesub-category‘induced:aggregatedprices’andontheother,thesub-categories‘inducedandindirect:other’and‘induced:lump-sumpayments’,haveasignificantimpactonthedifferenceinGDPoverthewholetransitionperiodwhenconsideredseparately,withthelatter’spositiveinfluenceoutweighingtheformer’snegativerole.‘Induced:lump-sumpayments’playakey,positiveroleincreatingGDPdifference.Thisisduetochangesinfiscalbalancesinfluencedbycarbontaxreceipts,internationalclimateco‑operationreceiptsandpolicy-drivensocialinvestments.16In2019USdollar.17See,forexample:www.trade.gov/country-commercial-guides/egypt-oil-and-gas-equipment32Socio-economicimpactoftheenergytransitionLump-sumpaymentsareintroducedinthe1.5°CScenariotoaddressdomesticdistributionalissues.Egyptisoneofthecountriesthatcontributestheleasttoglobalenergytransitionfunds,whilebenefittingsignificantlyfromthesefunds’support.Underthe1.5°CScenario,anythingremainingfromthisinternationalclimateinvestmentflow–aftersocialspendingandtransition-relatedinvestments–isallocatedtowardslump-sumpaymentstohouseholds.By2050,thissub-categoryisoverUSD19.1billion18higherunderthe1.5°CScenariothanitisunderthePES.Thisdifferenceisafigureequivalentto1.3%ofGDP.Thissupportisalsomodelledwithafocusonlower-incomegroups,whichinduceseconomicactivitybyincreasinghouseholdconsumption.TheeffectofthisdriveronGDPdifferencepeaksintheyearsupto2030,decreasesslightlyintheseconddecadeofthetransition(2031-2040)andthenstabilises,ascarbontaxreceiptsfallinlinewithemissionsandthereisaslowdowninGDPgrowth.The‘inducedandindirect:other’sub-category,representingchangesinconsumerexpenditureotherthanthoseincludedinlump-sumpaymentsandpriceeffects,playsapositiveroleintheadditionalGDPgainoverthetransitionperiod.Thissub-categoryisoflargermagnitudeupuntil2030,whenitstartsdiminishingandbecomingmodest,mainlydrivenbyconsumerexpenditure.Between2021and2030,investmentstimulusandinternationalclimatecollaborationflowsthatprovidefinancialsupporttolow-incomehouseholdswillboosthouseholdspending.Therippleeffectsdecrease,however,andstabilisebytheendofthetransitionperiod,inlinewiththeevolutionofthe‘induced:lump-sumpayments’driver.Inaddition,thereisamarginalbutslightlynegativeimpactfromchangesinincometaxratesontheGDPdifferenceovertheentire2021‑2050period.Differencesinrevenueandspendingbetweenthe1.5°CScenarioandthePESthroughoutthetransitionperiodrequireincreasesinincometaxesunderthe1.5°CScenario.Lowcarbontaxrevenuescauseincometaxtorisetofundtransition-relatedinvestmentsandoilandgassectorvaluelossbefore2025.Intheinitialdecades,publictransitioninvestmentandsubsidiesexpands.Carbonpricingandinternationalclimatecollaborationraisemorerevenueunderthe1.5°CScenariothanunderthePES.Hence,incometaxreducesascarbontaxrisesandtheimpactofthisdriverinGDPdifferencebecomeslessnegative.The‘induced:aggregateprices’sub-categoryhasanegativeimpactonoverallEgyptianGDPdifference.Ithasastrongerinfluenceduringthefirstdecadeofthetransitionperiod(2021‑2030)beforedecreasinginstrengthuntilbecomingpositiveinthefinalyearsupto2050.Thisisaresultofthedomesticresponsetochangesincarbonpricing,technologycosts,powersectorcapacity,fossilfuelsubsidiesandinvestmentexpenditure.Underthe1.5°Cscenario,thenegativeimpactonGDPdifferenceofaggregatepricesisexacerbatedbyahighercarbontaxandthedeploymentofhigh-costrenewabletechnologies–mainlyintheyearsupto2035butalsothroughoutthetransitionperiod.Thisfeatureisdrivenbyrapidincreasesinthepriceofenergyuseandalimitedfallinglobalfossilfuelprices.Theshareofhydrocapacityishigherunderthe1.5°CscenariothaninthePESinEgypt.Hydrohashighlevelisedcostsofgeneration.Substitutionawayfromnaturalgastothistechnologyincreasescostsintheyearsupto2035.Nevertheless,theeffectoftheseenergypriceincreaseslessensnoticeablyfrom2035,duetosubstitutionawayfromfossilenergyaspartoftheenergytransition–therearethuslessemissionstobetaxed–alongwithreductionsindemandandlowerlong-termcapitalinvestmentrequirements.Therapiddeploymentofrenewables(mainlysolarPV)between2030and2050–althoughalsotakingplacethroughoutthetransitionperiodinthecountry–aswellasthesubstantialdecreaseinthepriceofsolarPVfeaturedunderthe1.5°CScenario,lowerselectricitycostsfrom2030onwards.18In2019USdollars.333.2EMPLOYMENTEconomy-wideemploymentInEgypt,employmenthasbeenshiftingawayfromtheagriculturalsector.Intheyear2000,forexample,thesectoraccountedfor30%oftotalemployment,yetby2021,thisfigurehadfallento19.2%.Meanwhile,employmentintheindustrialsectorincreasedfrom21%in2000to28%in2020.Alargeinformalemploymentcomponent,however,isnotbeingcapturedbythesefigures.Indeed,theproportionofinformalemploymentinnon-agriculturalsectorswasestimatedataround61%,withtheinformalsector’scontributiontothecountry’sGDPestimatedtovarybetween37%and68%,dependingonwhetherthecurrencydemandmethodortheelectricityconsumptionmethodisapplied(AfDB,2016).UnemploymenthasbeengraduallydecreasinginEgyptsincepeakingat13.2%in2013(Figure7).EvenduringtheheightoftheCOVID-19pandemic,thelabourmarketshowedresilience,withagradualdecreaseintheunemploymentratecontinuingfrom9.9%in2018to7.0%in2022(WorldBank,n.d.).ThiswasdespitethefactthatEgypt’spopulationhasbeengrowingmuchfasterthanatypicalmiddle-incomecountry–atrendthatwilllikelycontinueintotheforeseeablefuture.In2022,thecountry’sunemploymentratewaswellbelowthatoftheMENAregionaverageof9.6%,butwasstillhigherthantheworldaverageof5.8%andtheSub-SaharanAfricaaverageof6.7%.Figure7:Unemploymentrate,2012‑2022(%oflabourforce,15yearsoldandover)1412Unemploymentrate(%)108642020122013201420152016201720182019202020212022WorldSub-SaharanAfricaEgyptMENASource:(WorldBank,n.d.).Egypt’sstrategicvisionforsustainabledevelopmentaimstobringtheunemploymentratedownto5%bytheyear2030.Nevertheless,thelabourmarketremainsweak,anddiscrepancieshavebeenobservedbetweengendersandworkingagegroups.Asisthecaseinthemajorityofcountries,unemploymentamongwomen–at17.7%in2020–isgreaterthanmaleunemployment,whichstoodat6%thesameyear.Asimilargenderimbalancecouldalsobeseenwithinthemosteducatedsegmentofthepopulationin2020,asthepercentageofunemployedmaleuniversitydegreeandhigherdegreeholderswas32.4%thatyear,asagainst61%forfemales.34Socio-economicimpactoftheenergytransitionThecountryhasthereforeintroducedseveralpoliciesandempowermentmeasurestoimprovetheworkingconditionsandgeneralwelfareofwomen(UNDPandMoPED,2021).Box4discussesthestatusofwomenintheenergysectorinEgypt.BOX4:WOMENINTHEENERGYSECTORAccountingforonly17%ofthecountry’sofficialworkforce,womenarestillunder-representedintheEgyptianlabourforce.Womenworkmainlyinthepublicadministration,education,healthandagriculturalsectors(DTUDA,2020).Indeed,around46%oftheworkersinthepublicadministration,educationandhealthsectors(whichcollectivelyrepresent17%ofthecountry’stotalworkforce)arewomen,followedbywomen’semploymentof31%intheagriculturesector(whichrepresents23%ofthecountry’stotalworkforce).Agriculturealsooftenoffersinformalandhighlyvolatileemployment.Ontheotherhand,theofficialunemploymentrateforwomenwas17.7%in2020.At46.1%,unemploymentamongyoungEgyptianwomenwasalsohigherthantheMEANaverageof44.8%(WorldBank,n.d.).Thisunemploymentratedid,however,decreaseto38.8%in2021,becominglowerthantheMENAregionaverageforthatyearof42.1%.Womenparticipatinginthelabourmarketalsosufferfromunder-employmentrelativetotheirskills,andarepredominantlyemployees,ratherthanentrepreneurs.Theshareofwomeninseniorandmiddlemanagementpositionsin2019constitutedonly7.0%(WorldBank,n.d.).Thesituationintherenewableenergysectorisnotthatdifferentfromthegeneralsituationinthecountry,with20%oftheworkersinthesectorbeingwomen(NREA,2021).ThisrepresentationislowerthanIRENA’sglobalaverageestimates,inwhichwomenrepresent32%oftherenewableenergyworkforce,worldwide(IRENA,2019b).Despitebeingunderrepresented,however,womenintheEgyptianrenewableenergysectoraremoreofteninmanagerialpositionsthaninothersectors,withthepercentageofwomenmanagersreaching70%,whilewomeninlowskilledpositionsrepresentonly30%(RCREEEandMEDENER,2020).Underthe1.5°CScenario,economy-wideemploymentisanaverageof0.3%higherthaninthePESoverthe2021-2050period.Fromthefirstdecadeofthetransitionperiod,the1.5°CScenariocreatesanetgainofjobsoverthePES,economy-wide.Employmentpeaksintheyearsupto2030,reachinga1.4%differencein2026–afigureequivalenttomorethan432000additionaljobs.From2030to2040,thereisanoticeabledecreaseintheemploymentdifferencebetweenthescenarios,mainlydrivenbythelossininvestmentlinkedtothefossilfuelsupply.Thisdecreaseisattenuatedprogressivelybythepositiveimpactofindirectandinducedeffectsinthefinalyears.Theeconomy-widedifferencecreatesover27700additionaljobs(representingaround0.1%difference)in2050.Thistrendisdrivenbyindirectandinducedeffects,aswellasinvestment,althoughtradehasanegligibleimpact.Box5depictsthevariouscomponentsofthedrivers.35BOX5:DRIVERSOFEMPLOYMENTGROWTHAswithGDP,employmentchangesarealsodrivenbyseveraldifferentfactors.Theseincludetrade,investment,andindirectandinducedeffects.ThisboxprovidesabriefexplanationoftheimpactsshowninFigure8.Figure8:EmploymentinEgypt,2021-2050:Differencebetweenthe1.5°CScenarioandthePESbydriver(%)2.0Employment:Percentagedierence1.5between1.5°CScenarioandPES(%)1.00.50-0.5-1.0-1.52031-20402041-20502021-2030Investment-privateInvestment&expenditure-publicTradeInducedandindirectChangeinemploymentComparedtothePES,the1.5°CScenariocreatesgreatereconomy-wideemployment.Thisismainlydrivenbythe‘indirectandinducedeffects’sub-category,withtheseoccurringthroughoutthetransitionperiod.Theseeffects,combinedwithinvestment,impactemploymentacrosstheeconomyintheyearsleadingupto2050inparticular–althoughtheyalsoalmostcanceleachotherout.Thereareseveralsub-componentsofthe‘indirectandinducedeffects’driverthatresultinanetpositiveimpact.Intheyearsleadingupto2035,wageeffectshavethedominantpositiverole,beforebeingovertakenbyconsumerexpenditure.Regardingthewageeffect,Egyptisoneofthemainbeneficiariesofglobalenergytransitioninvestmentflows,whilemakingarelativelysmallglobalfinancingcontribution.Increasinginternationaltransfersreducethetaxburdenonemploymentwagesandeffectivelyexpandthelaboursupplyduringtheinitialperiod.Asaresult,thereisapositivewageeffect,withthedifferencebetweenthescenariospeakingintheyearsupto2030.Thiscomponentchangesdirectionafter2035,however,duetoamoreconstrainedfiscalbalance.Thisimpliesanincreaseinthetaxburdenonwages,asthereisadecreaseincarbontaxreceipts,whileatthesametime,thereisastabilisationoflump-sumpaymentsduetoaslowdowninGDPgrowth.After2035,asthewageeffectbecomesnegative,consumerexpenditurebecomesthedominantpositivefactorinthe‘indirectandinducedeffects’sub-category.ThistrendcloselyfollowsGDPresults,withanincreaseinconsumerexpenditurefromthelump-sumpaymentdriveroneofthedominantpositiveeffects,whilethenegativeinfluenceoftheaggregatepricelevelmuchsmaller.Towardstheendofseconddecade(2035-2040),however,theconsumerexpenditureeffectisalmostcompletelyoffsetbyastrongnegativeeffectmainlyattributabletothelossoffossilfuelsupplyinvestment,whichinturnleadstojoblosses.36Socio-economicimpactoftheenergytransitionYet,publicinvestmentintransition-relatedtechnologiesandsectorsandgreatersocialspending–bothsupportedbyinternationalclimatecollaborationflows–alsocreatesubstantiallymorenewemploymentacrossthecountryinthe1.5°CScenariothaninthePES.Thisalsooccursthroughoutthetransition.Thefirstdriveroftheseadditionaljobsisfront-loadedinvestmentincapital-intensiverenewablesandothertransition-relatedtechnologies.during2021-2030.Publicandpersonalservicesbenefitmostfromthiseffect,whichiscriticalinsupportingworkerswhoselivelihoodsareaffectedbythetransition.Duringthefirstdecade,theoverallnumberofjobscreatedbypublicinvestmentandexpenditureishigherthanthenumberofjoblossesinthesphereofprivateinvestment–lossesconcentratedinthefossilfuelsector.Atthesametime,privateinvestmentinrenewablesandothertransition-relatedtechnologies–suchasenergyefficiency,powergridsandflexibility,andinhydrogen–doesleadtoadditionalemploymentunderthe1.5°CScenario.Indeed,between2021and2030,jobcreationintheseareasaveragesaround0.12%higherunderthe1.5°CScenariothanunderthePES,apercentagerepresentingover2millionadditionaljobsduringthe2021‑2030period.However,theimpactoneconomy-wideemploymentfromprivatetransition-relatedinvestmentisnetnegative,duetothelossinfossilfuelsupplyinvestment.After2030,asthephase-outoffossilfuelsaccelerates,thisnegativeeffectbecomesstrongerandby2050,around0.7millionjobswillhavebeenlostbecauseofreducedinvestmentinfossilfuelsupply,andover0.1millionjobswillhavebeenlostbecauseofdecreasedfuelextractionactivities.Giventhatthesejobshaveasignificantimpact,policyinterventionisneededtore-trainworkersforalternativepositionsandpreventseveredisruptiontolivingstandards.Overtheperiod2021-2050,onaverage,tradehasaminornegativeimpactontheeconomy-wideemploymentdifferencebetweenthescenarios.Thisisdespitethefactthatwhilepriorto2040thisdriverismarginallynegative,after2040itshiftstomildlypositive.Thetradesub-category’simpactonemploymentdifferenceismainlydrivenbychangesinnon-energysectortradeandnettradeinfuels.Greaterdomesticeconomicactivityleadstoanincreaseindemandforimportedgoodsinagriculture,textiles,rubberandplastics,andnon-metallicminerals.Thisincreaseinimportsoffsetsanincreaseinmanufacturingsectorexports,asglobaldemandincreases.Thenetresultisonlyasmalldifferentialbetweenthetwo,negativeorpositive.EnergysectorjobsTheenergytransitionisnetpositiveforjobcreationinEgypt’senergysector,whereemploymentcouldreachover1millionin2030underthePESand1.5millionunderthe1.5°CScenario.Thiscomparestoaround0.4millioncurrently(Figure9).Joblossesinfossilfuelsaremorethanoffsetbygainsinrenewablesandotherenergytransition-relatedtechnologies,suchasenergyefficiency,hydrogen,andpowergridsandflexibility.By2030,thetotalnumberofrenewableenergyjobsincreasesmorethanfive-fold,from0.05millionunderthePEStoaround0.3millionunderthe1.5°CScenario,whileotherenergytransition-relatedsectorsseeanincreasefrom0.6millionto1.1million.Thiseffectstrengthensinsubsequentdecadesandby2050,totalenergysectoremploymentreachesaround1.5millionunderthePESandover2.4millionunderthe1.5°CScenario.By2050,the1.5°CScenarioalsoseesrenewablesaccountformorethan42.2%ofallenergysectorjobs.Italsoaccountsforaround24%ofalljobsinelectricitygridsandflexibility(0.6millionjobs).Energyefficiencyisresponsibleforafurther0.4millionjobs(representing16.1%ofenergysectoremployment).Itshouldalsobenotedthatenergyefficiencydominatesin2030,representingaround49%ofenergysectorjobs,becauseofthefrontloadednatureofinvestmentinthesector.Itisestimatedthat5.2%ofallenergysectorjobsareinhydrogenand1.6%areinvehicleinfrastructure.In2050,10.9%ofjobslikelyremaininthefossilfuelsector–amajordecreasefromthecurrent62.7%(Figure9).37Figure9:Energysectorjobsunderthe1.5°CScenarioandPES,bysub-sector,2019‑20502.50Jobs(inmillions)2.001.50RenewablesEnergyeciency1.00PowergridsandenergyﬂexibilityNuclear0.50HydrogenFossilfuel02019PES1.5-SPES1.5-S20302050Note:1.5-S=1.5°CScenario;PES=PlannedEnergyScenario.RenewablejobsAsalreadynoted,thenumberofjobsinrenewableenergyinEgyptisexpectedtoincreasethroughoutthetransition(Figure10).UnderthePES,renewablejobnumbersincreasefromthecurrentlevelofaround14200toover50000in2030andaround290000in2050.The1.5°CScenarioseesamoresignificantincreasethanthePES,withmorethanfivetimesthenumberofjobsin2030andover1.0millionjobsinrenewableenergyby2050.BecauseofEgypt’sfossilfueldependency,theuptakeofrenewablesisrelativelyslow,however,comparedtotheglobalaverage,intheearlyyearsofthe2021‑2050period,withthetransitionoccurringmorerapidlyinlateryears.Solartechnologies(mainlyPV)areexpectedtostronglydominatejobsinrenewablesduringthetransitionoverall.Underthe1.5°CScenario,in2030,solartechnologiescouldaccountfor26%ofthetotalnumberofjobs,oraround71000,withthisrisingto70%–around720000–in2050.Windrepresents58%ofthejobsin2030,butthisfallsto18%in2050,whenhydrocouldbeemployingaround80000peopleandbioenergyaround40000(Figure10).38Socio-economicimpactoftheenergytransitionFigure10:RenewableenergyjobsinthePESand1.5°CScenario,2019,2030and205012001000Jobs(inthousands)800600400WindSolarwaterheater200Solar(PVandCSP)Hydro0GeothermalBioenergy2019PES1.5-SPES1.5-S20302050Note:CSP=concentratedsolarpower;PV=photovoltaic;1.5-S=1.5°CScenario;PES=PlannedEnergyScenario.3.3WELFAREWhileGDPisthestandardmeasureofeconomicoutput,theconcernsofcitizensgosomewaybeyondit.GDPdoesnotincludeorvaluefactorsthatarenotpricedintothemarket,suchashumanhealth,fulfillingjobsandenvironmentalquality.Inaddition,whileclimatechangewilllikelyhavenegativeconsequencesforfutureGDP,itwillalsohaveasignificantimpactonsocieties,economiesandnaturethatnomeasureofGDPwillcapture.Inlightofthisandtoincorporatesomeoftheaspectsofsocialwell-beingimpactedbytheenergytransition,IRENAhasdevelopedandupgradedawelfareindex(IRENA,2016,2019a,2020,2021,2022a,2022b,2023b,2023c).Thisindicatorhasfivedimensionsrelatingtotheenergytransition:economic,distributional,social,environmentalandaccess.Eachdimensionisalsocomposedoftwoindicators(Figure11).39Figure11:StructureofIRENA’senergytransitionwelfareindexEnvironmentalSocialDimensionsDistributionalEconomicAccessCO2emissionsSocialBasicenergyWithinConsumptionexpenditureaccesscountry/regionandinvestmentIndicatorsMaterialsHealthimpactSuciencyAcrossNon-Emnevnitraon-consumption(pollution)countries/regionsemploymentIndexlSocdiaelxAccessIbnutDioistriInIndexdeWELFAREEcoInndoemxicINDEX-nalxFigure12showsthewelfareindexforthe1.5°CScenarioin2050andthenthedifferencebetweenthatscenarioandthePES.Bothrepresentationsalsoshowthecontributionmadebyeachofthefivedimensions.Underthe1.5°CScenario,by2050,thewelfareindexis12.2%higherthanunderthePES(rightpanelinFigure12).Thewelfareindexanditsdimensionalcontributionsunderthe1.5°CScenario(leftpanelinFigure12)providesaclearindicationofwherepolicyactionshouldbefocusedinordertoimprovewelfareinEgypt.Onascalefrom0to1,anoverallwelfareindexof0.48isachievedby2050underthe1.5°CScenario,indicatingsignificantroomforimprovementinwelfare.Therestofthesectionwilldelveintoeachofthedimensions.40Socio-economicimpactoftheenergytransitionFigure12:Welfareindexinthe1.5°CScenario(left)anddifferenceinwelfarebetween1.5°CScenarioandPES(right),2050Welfareindexbydimensionin20500.90.9Dierenceinwelfare0.80.8between1.5˚CScenario0.90.70.7andPESin2050(in%)0.80.60.614%0.70.50.50.60.40.412%0.50.30.30.40.20.210%0.30.10.10.28%0.16%0.90.80.70.60.50.40.30.20.14%0.90.92%0.80.80.70.70%0.60.6-2%0.50.50.40.40.30.30.20.20.10.1EnvironmentalEconomicDistributionalSocialAccessNote:Intheleftpanelthefivepetalsareonascalefrom0to1andrepresenttheabsolutevaluesofthefivedimensionsofthewelfareindex.Thenumberinthecentreisalsoonascalefrom0to1andrepresentstheabsolutevalueoftheoverallwelfareIndex.SocialdimensionThesocialdimensionofthewelfareindexconsistsoftwoindicators:socialexpenditurepercapitaandhealthcostsperpersonlinkedtoenergysystem-relatedairpollution.Generally,therapidgrowthofsocialexpenditurethroughouttheworldinthesecondhalfofthe20thcenturywaspropelledbyanincreaseinthepublicfinancingofhealthcareandeducation(Ortiz-OspinaandRoser,2016).InEgypt,betweenthefiscalyears2010/2011and2019/2020theeducationbudgetaveragedaround10.7%oftotalgovernmentspendingandapproximately3.2%ofGDP.Inthefiscalyear2019/2020,theapprovedbudgetforfunctionalgovernmentspendingonbothpre-universityandhighereducationwasapproximatelyEGP132billion(aroundUSD4.3billion).AlthoughthiswasasignificantincreaseontheroughlyEGP48billion(aroundUSD1.6billion)allocatedinfiscalyear2010/2011,educationspendingasashareoftotalgovernmentspendingfelloverthisperiod,from12%to8.4%,whileitsshareofGDPalsodeclined,from3.5%to2.1%(UNDPetal.,2021).ItshouldbenotedthatthesefiguresarebothlowerthaninternationalandMENAstandards.Overthesameperiod,theaverageshareofeducationintotalgovernmentspendingintheMENAregionwas14.3%,whileeducation’saverageshareofGDPwas11.3%(UNDPetal.,2021).41Whenitcomestohealth,Egypt’slifeexpectancyrosefrom69.7yearsto71.0yearsovertheperiod2010‑2020.Thiswas,however,belowtheinternationalaverageandtheaveragesofalltheneighbouringcountriesintheMENAregion,exceptforYemenandDjibouti(WorldBank,n.d.).Inaddition,infantmortalityratesfellfrom24.1deathsper1000livebirthsto16.2deathsbetween2010and2021.ThiswaslowerthanthemaximumtargetedbytheUnitedNationsSustainableDevelopmentGoal(SDG)of25deathsper1000births(WorldBank,n.d.).RegardingthehealthpillaroftheWorldEconomicForum2019GlobalCompetitivenessIndex,Egyptcame104thoutof141countries.Whenitcomestogovernmentexpenditureonhealth,itisworthnotingthatthisjumpedfromEGP20billion(aroundUSD3.6billion)inthefiscalyear2010/2011toEGP73billion(aroundUSD4.34billion)in2019/2020.Thelatterfigurewasaround4.8%oftotalgovernmentalspendingand1.4%ofGDP(UNDP,2020).Theimpactofclimatechange–throughheatwaves,duststormsandextremeweatherevents–willfurtheraffectpublichealth,withincreasedrespiratorydiseaseaparticularconcern.19Indeed,despitereforms,theintegrationofmorerenewableenergyintotheenergymixandimprovementsinairandwaterquality,Egyptstillsuffersfrompersistentproblemsofair,soilandwaterpollution.Theeffectofthesepollutantsonhealthwasestimatedat2.5%ofGDPin2017,withairpollutioncausedbyparticulatematter2.5(PM2.5)20inGreaterCairocausingnearly12569deathsthatyear(UNDPetal.,2021).AsFigure13shows,in2016,EgyptsawthehighestmortalityratesduetoairpollutioninNorthAfrica–exceedingtheMENAaverage.Yet,in2019,thecountry’spercapitacostofdamagetohealthwasUSD155,21belowtheNorthAfricaaverageofUSD177andsubstantiallylowerthantheMiddleEastaverageofUSD1168(CE,n.d.).Withouteffectiveaction,however,eventhisapparentlymoderatelevelmightrisealarmingly.Figure13:Mortalityrateattributedtohouseholdandambientairpollution,EgyptanditsNorthAfricanneighbours,2016(age-standardised,per100000population)120Mortalityrate(per100000population)100806040200LibyaTunisiaAlgeriaMoroccoEgyptAverageMENAregionSource:WorldBank,n.d.19See,forexample,https://climateknowledgeportal.worldbank.org/sites/default/files/2021-04/15723-WB_Egypt%20Country%20Profile-WEB-2_0.pdf(accessed13October2023).20PM2.5referstotinyparticlesordropletsintheairthatare2.5micronsorlessinwidth.21In2019USdollars.42Socio-economicimpactoftheenergytransitionInrecentyears,Egypthasmadegreateffortstoexpanditsskilledworkforcebyimplementingreformsintheeducationsectorinsupportofthecountry’sgrowthplan.TheWorldBankhasalsoapprovedaUSD500millionloanforEgyptaspartofitseffortstopromotesustainableandinclusivegrowthwithintheframeworkofVision2030.Egypt’seducationreformprojectwillthusbesupportedoverfiveyearstoimproveaccesstoqualitypre-schooleducation,modernisetheexamsystemsforstateschools,strengthenthecapacityofteachersandadministratorsandincreasetheroleoftechnologyinthesystem.Inaddition–andtoreducethegapbetweengraduates’skillsandjobmarketneeds–in2015,theGovernmentofEgypt(GoE)establishedanindependentministryforvocationaleducation.Previously,responsibilityforthisfieldhadbeenscatteredover35differentministriesand/orauthorities.Underthe1.5°CScenario,thelargestwelfareimprovementtakesplaceinthesocialdimension.Themainfactorcontributingtothisispublichealth,whichissignificantlyimprovedincomparisontothePES,owingtobetterairquality.Underthe1.5°CScenario,fossilfueluseisreducedinfavourofrenewableenergyandincreasedelectrificationofenduses,whichinturnsignificantlyreducesairpollution.UnderthePES,however,continuedrelianceonfossilfuelsisexpectedtohaveaworseninghealthimpact.Inaddition,inthe1.5°CScenario,Egyptbenefitsgreatlyfromglobalfinancialcollaborationflows,whichleadstoahigherlevelofgovernmentsocialspendingthanunderthePES.Inpercapitaterms,between2021and2050,thisspendingrisesfromUSD163.322toUSD227.8.Nonetheless,policymeasuresalonearenotenoughtoprovideimprovementinthesocialdimension.Themainfactorimpactingthisispublichealth,whichissignificantlyimprovedunderthe1.5°CScenarioincomparisontothePES,owingtobetterairquality.Anegligibleimprovementinthesocialexpenditureindicatordragsdowntheabsolutesocialdimension,whichreaches0.08under1.5°CScenarioby2050(leftpanelinFigure12),indicatingroomforimprovementinoverallwelfarebyfurtherimprovingthesocialexpenditureindicator.EnvironmentaldimensionThetwoindicatorsoftheenvironmentaldimensionare:1)GHGemissionsandvulnerabilitytoclimatechange,and2)thedepletionofnaturalresourcesthroughconsumptionofmaterials.Thelatterismeasuredindomesticmaterialconsumptionofmetalores,non-metallicmineralsandbiomassforfoodandfeed.Egypt’suseofenergyresourceshasbeenamajorcauseofenvironmentaldegradation(WorldBank,2021b).Thecountryisalsohighlyvulnerabletoclimatechange.RisingtemperaturesareexpectedtoseverelyaffectEgypt’scoastalwaters,waterresources,agricultureandfoodsecurity,aswellasitsenergysystem,whichitselfisill-preparedtocopewiththeeffectsofclimatechange(WorldBank,2021b).Egypt’sNileDeltaisconsideredoneoftheworld’sthree‘extreme’vulnerabilityhotspots(UNDP,2018),withupto15%ofthecountry’smostfertilearablelandalreadyaffectedbyincreasingsaltwaterintrusionfromthesea.SomestudiessuggestincreasedevaporationratesduetorisingtemperaturescoulddecreasewateravailabilityintheRiverNilebyupto70%(WorldBank,2021b).Withthecountry’sneedsforpotablewater,agriculture,industry,fishfarming,powergenerationandcoolingofmachineryallservedbytheNile,theprospectsarenothinglessthandramatic.Cities,too,willbeaffected.Itisestimatedthatariseinsealevelsofhalfameterwouldmeanthedemolitionof30%ofAlexandria–thesecondlargestcityinEgypt.Thiswouldcausetherelocationofnearly1.5millionpeople,thelossof195000jobsandlossoflandsandpropertythatcouldreachUSD30trillion(UNDPetal.,2021).TheWorldBanksuggestssealevelrisesalongthecountry’scoastswillaffectapproximately2.4millionpeoplebythe2080s(WorldBank,2021b).22In2019USD.43Figure14:TotalandpercapitaGHGemissionsinNorthAfrica,201940020GHGemissions(inMtCOeq/yr)35018GHGemissionspercapita(intCOeq/cap/yr)163001425012200101508610045020AlgeriaLibyaMorocco0EgyptTunisiaAverageGHGemissionpercapita(NorthAfricaregion)GHGemissionspercapitaSource:EmissionsDatabaseforGlobalAtmosphericResearch(EDGAR),(Crippaetal.,2021);ClimateAnalysisIndicatorTool(CAIT)database(ClimateWatch,2022).Notes:MtCO2eq/yr=milliontonnesofCO2equivalentperyear;tCO2eq/cap/yr=tonnesofCO2equivalentpercapitaperyear.AnnualGHGemissionsinEgypthavebeenincreasingovertheyears.Intheyear2000,thecountry’stotalGHGemissionsstoodat185.4milliontonnesofCO2equivalent(MtCO2eq),butby2019,asFigure14shows,thetotalwas352.0MtCO2eq.The2019figurerepresentedaround0.7%ofglobalGHGemissions(Crippaetal.,2021;ClimateWatch,2022).Indeed,EgyptisNorthAfrica’slargestGHGemitter,withitsemissionsrepresentingaroundhalfofGermany’s–andwithGermanytheworld’s10thlargestemitterin2019.ConsideringGHGemissionspercapitathatyear,AlgeriaandLibyaemittedsignificantlymorethanEgyptandtherestoftheNorthAfricacountries,however(Figure14).Egypt’sGHGemissionswere3.5tonnesofCO2percapita(tCO2/cap)in2019,whichwasalsosubstantiallylowerthanthatofdevelopedcountriessuchastheUnitedStates(17.5tCO2/cap),Germany(8.6tCO2/cap),oremergingeconomiessuchasRussia(13.2tCO2/cap)andBrazil(6.9tCO2/cap).Egypt’senergysectorrepresented74.1%ofthecountry’stotalGHGemissionsin2019(Crippaetal.,2021;ClimateWatch,2022).Thiswasslightlybelowtheworldaverageofaround75.6%andtheNorthAfricaaverageof79.5%.Comparedtotheworldaverage,thecountryhashighershareofindustrialemissions,at8.5%,withtheglobalaveragearound6.1%andtheNorthAfricaaverage7.6%.Regardingtheenvironmentdimension’ssecondindicator,Egypt’sdomesticmaterialconsumption(DMC)was8.9tCO2/capin2019(OECD,n.d.).Thiswaslowerthantheglobalaverageof12.33t/capandsignificantlylowerthaninadvancedeconomiessuchasGermanyandtheUnitedStates(Figure15).44Socio-economicimpactoftheenergytransitionFigure15:Domesticmaterialconsumptionpercapita,2000‑20193530Consumption(t/cap)25UnitedStates20GermanySouthAfrica15WorldEgypt102019502000200520102015Source:(OurWorldInData,n.d).ForEgypt,acomparisonbetweenthe1.5°CScenarioandthePESshowsthattheenvironmentaldimensionisthesecondlargestdriverofsignificantwelfareimprovement.TheCO2emissionsindicatorisentirelyresponsiblefortheseaddedimprovements,asthe1.5°CScenariomarkedlyreducesglobalcumulativeCO2emissions,whencomparedtothePES.Bycontrast,materialconsumptioninEgypt–theotherindicatoroftheenvironmentaldimension–islowunderboththePESandthe1.5°CScenario.Hence,theresultingindexforthisindicatordoesnotcontributesignificantlytoenvironmentalimprovementineitherscenario.DistributionaldimensionThedistributionaldimensionmeasuresincomeandwealthinequalitieswithinandacrossregionsandcountries.ThemostwidelyusedmetricforassessingsuchincomedisparitiesistheGiniindex,whichrangesfrom0(completeequality)to100(completeinequality).InEgypt,thisindexwentfrom28.3in2012to31.5in2017,showingincreasinginequality(WorldBank,n.d.).ThedistributionaldimensioninIRENA’sanalysisdiffersfromtheGiniindex,however,andisbasedonthequintileratio.23Thisistheratioofthehighestquintileofincome/wealthdistributiontothelowestquintileofincome/wealthdistribution.Suchananalysisshowsthatovertheperiod1995‑2021,incomeinequalityincreasedinEgypt,withthequintileratiorisingfrom5.4to6.6(WID,n.d.).This2021ratiowasstilllowerthaninSouthAfrica(18.1)ortheNorthAfricaregionalaverage(59.4),however.Duringthesameperiod,wealthinequalityinEgyptwasmuchmorepronouncedthanincomeinequality–ascanbeobservedacrosstheworld(Piketty,2013;WID,n.d.),standingat-85.6in2021.ThiswassubstantiallylowerthaninSouthAfrica,wherethewealthquintileratioofaround-27.6wasthehighestintheworld.TheEgyptianratiowasalsoslightlylowerthaninNigeria,whichscored-74.4,andlowerthantheNorthAfricaregionaverageofaround-79.9(WID,n.d.).2423Aquintilereferstoanyoffiveequalgroupsintowhichapopulationcanbedividedaccordingtothedistributionofvaluesofaparticularvariable.Thus,thelowest-incomequintilereferstothepoorest20%ofagivenpopulation,thesecondquintileencompassesthenext20%movinguptheincomeladder,andsoon.24Thehigherthewealthquintileratiois,thehigherthewealthinequality.45Ananalysisofthedistributionaldimensionshowsthatthereisapositive,ifmoderate,differencebetweenthe1.5°CScenarioandthePESinEgypt(rightpanelinFigure12).Increasedfiscalspace,madepossiblebyinternationalclimatecollaborationflowsunderthe1.5°CScenario,allowsforhigherpublicexpenditure–suchassubsidiestosupportthetransitionandpublictransition-relatedinvestment.Thisleadstoaslightlymoreequitabledistributionofincome.Underthe1.5°CScenario,by2050theabsolutedistributionaldimensionreaches0.72,whichisslightlyhigherthanthe0.70achievedunderthePES(leftpanelinFigure12).Thisindicatesprogress,although0.72isstillhigherthantheglobalindexof0.36achievedunderthe1.5°Cscenario–indicatingsignificantroomforfurtherimprovement.Indeed,althoughtheclimatepolicybasketunderthe1.5°CScenarioincludesactionsthataimtoimproveincomedistribution,moreeffortisrequiredtobringthecountry’sdistributionalinequalitydown.EconomicdimensionThetwoindicatorsoftheeconomicdimensionare:1)ameasurementofconsumptionandinvestmentpercapita;and2)ameasurementofnon-employment.Thesecondindicatoriscalculatedastheratiooftheshareoftheworking-agepopulation(thoseagedfrom15to64years)thatiswithinthe14-24agegroupandisneitheremployednorundereducation.25Egypt’shouseholdconsumptionandinvestmentmorethandoubledbetween2000and2019(WorldBank,n.d.).Despitethis,inpercapitaterms,thevalueofthecountry’sconsumptionandinvestmentin2019wasslightlylowerthantheNorthAfricanaverage–atUSD2885.426asopposedtoUSD2946.0.Egypt’slevelwasalsomorethantwotimeslowerthantheMiddleEastregionalaverageofUSD7120.8,althoughalmosttwotimeshigherthantheAfricanregionalaverageofUSD1585.5(CE,n.d.).TheunemploymentrateinEgyptwas7%in2022.ThiswaslowerthantheMENAaverageof9.6%andlowerthanMorocco(10.5%),Algeria(11.6%),Tunisia(16.1%)andLibya(20.7%).Non-employmentinEgypt,whichhasremainedatanaverageof40.9%overthepastdecade,comparessimilarlyandisslightlylowerthanNorthAfrica’saverageofaround42.6%(CE,n.d.;WorldBank,n.d.).Whilesocialandenvironmentaldimensionssignificantlyimproveunderthe1.5°CScenario,theeconomicdimensionofwelfareisalmostthesamebetweenthetwoscenarios.Underthe1.5°CScenario,theconsumptionandinvestmentindicatorisnotsubstantiallybetterthanunderthePESandevenslightlydeclinesin2050.Bythen,however,underthe1.5°CScenarioEgyptseesaslightimprovementinthenon-employmentindicator.27Overall,though,underthe1.5°CScenario,thedimensionseesnoimprovementoverthePES.25‘Non-employment’isusedinsteadofunemploymentoremploymentmetricsbecauseofitsmorecomprehensivegaugingofthesocialimplicationsofpaidwork,whichisthemaingoalofawelfareindex.26In2019USdollars.27Thestateofnothavingpaidwork,excludingyoungpeople(aged15to24years)gettinganeducation.Non-employmentishencecalculatedastheshareoftheworking-agepopulation(aged15to64years)thatisneitheremployednortooyoung(aged15-24)andgettinganeducation.Non-employmentisusedinsteadofunemploymentoremploymentmetricsbecauseofitsmorecomprehensivegaugingofthesocialimplicationsofpaidwork,whichisthemaingoalofawelfareindex.Indeed,whileunemploymentandemploymentareevaluatedassharesofthelabourforce,non-employmentisdefinedonthebasisoftheentireworking-agepopulation(notonlythepartofitbelongingtothelabourforce).Hence,beyondashort-termlackofpaidwork,thismeasurementalsocapturesalong-termlackofpaidwork(whichisexcludedfromthelabourforce)(IRENA,2021).46Socio-economicimpactoftheenergytransitionAccessdimensionTheaccessdimensionismeasuredbytwoindicators.Thefirstmeasurestheshareofthepopulationwithaccesstobasicenergyservices.Thesecondisanevolutionalongan‘energyladder’thatassessestheprogressofenergyusagetocoverenergyservicesandprovideenergysufficiency.Egyptreacheduniversalenergyaccessin2016(WorldBank,n.d.)andby2019,ithadadaily,percapitadailytotalfinalenergyconsumption(TFEC/cap)of17.7kilowatthours(kWh).Thiswasalmosthalftheglobalaverageof37.2kWhandbelowtheNorthAfricanaverageof18.6kWh(CE,n.d.).By2050,theaccessdimensionachievesitsmaximumvalueof1underboththePESand1.5°CScenario(leftpanelinFigure12).Itthereforeseesnoimprovementunderthe1.5°CScenariooverthePES,incontrasttothesocialandenvironmentaldimensions.Underbothscenarios,Egypt’senergyconsumptionreachessufficiencylevelby2024/2025.28Thisisassumedtobe20kWhpercapitaperday,inlinewiththeliterature(Millward-Hopkinsetal.,2020).29ThisalsoimpliesthatinEgypt,theenergyaccessedisnotonlybasic,butalsosufficient.28Thisindicatorhasbeendefinedastherequiredlevelofenergyconsumptionfordecentliving,butnomore.29Theauthorsestimatedthesufficiencylevelbetween11.6kWh/capita/dayand30.4kWh/capita/dayaccordingtothescenariosacrossall119countriesoftheGlobalTradeAnalysisProject,dependingonthescenariosconsidered.Seewww.gtap.agecon.purdue.edu/databases/regions.aspx?version=9.211,accessed14October2023.4704SummaryandwayforwardIRENA’smacro-econometricmodellinganalysisofEgyptshowsthattheenergytransitioncanboostthecountry’seconomy,createmorejobsandpromotepeople’swell-being.Overthe2021‑2050period,underthe1.5°CScenarioGDPis5.5%higher,onaverage,thanunderthePES–adifferencedrivenmainlybytrade.UnderthePES,thecountry’sGDPisexpectedtogrowbyaroundUSD1.1trillion30between2021and2050.Indeed,changingEgypt’senergystrategyawayfromfossilfuelstowardsrenewablesisexpectedtohaveasubstantialpositiveimpact,addingUSD63billion31tothecountry’sGDPin2050alone.Inaddition,by2050,employmentislikelytobe0.3%higherunderthe1.5°CScenariothanunderthePES.By2030,thenumberofpeopleemployedinEgypt’senergysectormayhavealreadyrisenfromthecurrent0.4milliontoover1.0millionunderthePESand1.5millionunderthe1.5°CScenario.Inthelatter,42.2%oftheenergyindustryworkforcewillworkinrenewablesby2050,representingaround1.0millionjobs.Workassociatedwithpowergridsandenergyflexibilitywillaccountforanother24.0%,or0.6millionjobs,whileemploymentrelatedtoenergyefficiencywillincreaseby16.1%,or0.4millionjobs.Inthe1.5°CScenario,solartechnologiesaccountfor25.3%ofrenewableenergyjobsin2030(about71000people)and70.2%in2050(over0.7millionpeople).Windrepresents60.8%ofrenewableenergyemployment(around170000jobs)in2030and18.3%(over187000jobs)in2050.Asmanyas77500peoplecouldbeemployedinthehydrosectorbythelatteryear,too,whilebioenergyisexpectedtohaveover39000jobsbythattime.By2050,intermsofwelfare,the1.5°CScenariooutperformsthePESby12.2%,withthisdrivenmainlybythesocialandenvironmentaldimensions.Thisanalysishasalsohighlightedsomekeyareaswheregovernmentactioncouldboostlivingstandards,andthestudy’ssocial,economic,environmentalanddistributionaldimensionsshouldbeconsideredbypolicymakers.Increasesinsocialexpenditureandincreasesinconsumptionandinvestmenttoimprovepresentandfuturewell-beingofferthegreatestpotentialforprogressintheeconomicandsocialdimension.Thereisopportunityforimprovementinenvironmentalpolicyaswell,particularlyintheareaofGHGemissionsreduction.Improvingthedistributionaldimensionrequirespolicyactionaimedatexpandingthedistributionofwealthandprovidinggreaterbudgetaryflexibilityviahigherinternationalclimatecollaborationflowsandcarbontaxes.Supportivepoliciestailoredtothecountry’ssocio-economiccircumstancesandchallengesshouldgointandemwiththeenergytransition.GivenEgypt’svulnerabilitytoclimatechange,thesecurityofwater,energy,andfoodareintertwined.Inordertoaccomplishefficientandintegratedplanningandmanagementofresources,itiscrucialtoaddressthedifferentlinksbetweenthewatersectorandtheseothersectors.Anexusstrategymustbeusedtotackletheseconnectedproblems,iftheworldistomeettheSDGsandreduceclimatethreats.30In2019USdollars.31In2019USdollars.49Acarbontaxmighthelpstrengthenthepositiveeffectsofsector-specificeffortsontheoveralleconomy,ifimplementedwithintheframeworkofthemedium-termrevenuestrategyandwithcomplementarymeasuresinplacetomitigateanynegativeeffects.Resourceswouldalsohavetobeprovidedtosupportprivatesectorinvestmentsinadaptationandmitigation.Thetransitiontorenewableenergycanalsobeaidedbytherationalisationofenergysubsidiesthroughenergyreforminitiatives.Airpollutioncanbeaddressedbyadoptinganintegrated,multi-sectoralapproachthatincludeslow-emissioninnovations.Itiscrucialtomakethenecessaryefforttodecarbonisetheoil,gasandelectricitysectorsbecauseinternationalcommerce–includingnewtraderegulationsandpreferencesshiftingtowardslower-carbon-contentitems–cancreatetransitionopportunitiesforEgypt’seconomy.Fossilfueldemandissettodrasticallydecrease,whichwillcauseEgypt’soutputtoplummetevenbefore2030.AnearlyaccelerateddecarbonisationmeansthatEgyptwillnolongerbeneedingtoimportfossilfuelsandwillthussavesubstantiallyonimportbills,whilealsoavoidingacuteenergyshortages,suchasthatof2013/2014.Highoverallfiscaldeficitsthreatenmacroeconomicresilience.InEgypt,interestpaymentstakeup39%oftotalexpenditure,whiletaxrevenueremainslow.Thishighlightstheimportanceofinternationalcollaborationandsupportfromadvancedeconomies.AdoptionofaglobalcollaborationfundwillmeanthatcountriessuchasEgyptwillbeabletohavegreaterfiscalspacetonotonlysupporttheenergytransition,butalsotoinvestininfrastructurerelatedtosocialwell-being,byincreasingspendingontheeducationandhealthsectors.Efficientpublicspendingcouldhelpdirectmorepublicresourcestowardactivitiesthathelpattractprivateinvestmentandincreaseproductivity,supportmacroeconomicresilience,andredirectresourcesawayfromactivitiesthatdrivecitizenstowardlow-skilledemployment.Activelabourmarketprogrammes,digitaljobboards,andincome-generatingassetandskillstrainingcanhelpprovidemorejobopportunities.Egypt’stransitiontoacleanerandmoresustainableenergysystemhasthepotentialtoaddressmanyofthecountry’spressingsocial,economicandenvironmentalchallenges.Byreducingthecountry’sdependenceonfossilfuelsandincreasinginvestmentinrenewableenergy,Egyptcanimproveaccesstoreliableandaffordableenergyforallitscitizens,butparticularlyforthoselivinginpoverty.Thisshiftcanalsocreatenewjobopportunitiesandpromoteeconomicgrowth.Additionally,renewableenergycanhelpreduceairpollutionandGHGs,improvingpublichealthandmitigatingthemultipleimpactsofclimatechange.Overall,asuccessful,justandinclusiveenergytransitioninEgyptcanbringaboutabrighter,moreprosperousandhealthierfutureforallEgyptians.50ReferencesAbou-Ali,H.etal.(2023),KeystoclimateactionChapter3–ClimateactioninEgypt:Challengesandopportunities,WorkingPaper#180.3,www.brookings.edu/wp-content/uploads/2023/02/Chapter-3.-Climate-action-in-Egypt-Challenges-and-opportunities-1.pdfAfDB(2016),AddressinginformalityinEgypt,WorkingPaper,AfricanDevelopmentBankGroup,www.afdb.org/fileadmin/uploads/afdb/Documents/Publications/Working_paper_-_Addressing_informality_in_Egypt.pdfAl-Kady,B.(2022),“Egyptofficiallyentersstateofwaterpoverty”,Al-Monitor,www.al-monitor.com/originals/2022/01/Egypt-officially-enters-state-water-povertyAssaad,R.(2022),“Bewareoftheecho:TheevolutionofEgypt’spopulationandlaborforcefrom2000to2050”,MiddleEastDevelopmentJournal,Vol.14,https://doi.org/DOI:10.1080/17938120.2021.2007649Aziz,M.(2020),“Egypt’swaterchallenges:Beyondthedamsaga”,AhramOnline,www://english.ahram.org.eg/NewsContent/1/64/359272/Egypt/Politics-/Egypts-water-challenges-Beyond-the-dam-saga-.aspxBreisinger,C.etal.(2019),“EnergysubsidyreformforgrowthandequityinEgypt:Theapproachmatters”,EnergyPolicy,vol.129,pp.661–71,https://doi.org/10.1016/j.enpol.2019.02.059CBD(n.d.),“Countryprofiles-Egypt”,ConventiononBiologicalDiversity,www.cbd.int/countries/profile/?country=egCE(n.d.),“E3MEDatabase”,CambridgeEconometrics,https://www.e3me.com/features/ClimateActiontracker(2022),NaturalGasinAfrica-Whyfossilfuelscannotsustainablymeetthecontinent’sgrowingenergydemand,ClimateActionTracker,www://climateactiontracker.org/documents/1048/CAT_2022-05_Report_NaturalGasinAfrica.pdfCrippa,M.etal.(2021),GHGEmissionsofAllWorldCountries:2021Report,No.EUR30831EN,https://op.europa.eu/en/publication-detail/-/publication/45c88a84-2d65-11ec-bd8e-01aa75ed71a1/language-en51DTUDA(2020),Labormarketprofile-Egypt2020/2021,DanishTradeUnionDevelopmentAgency,www.ulandssekretariatet.dk/wp-content/uploads/2020/09/LMP-Egypt-2020-final1.pdfEgyptToday(2021),“ElectriccarstobemanufacturedinEgyptmid-2022”,www.egypttoday.com/Article/3/105118/Electric-cars-to-be-manufactured-in-Egypt-mid-2022-MinisterEl-Rawy,M.,etal.(2021),“ImpactsofdecreasingNileflowontheNileValleyaquiferinEl-MiniaGovernorate-Egypt”,AlexandriaEngineeringJournal,vol.60,pp.p2179-2192.ESMAP(2017),Egypt,Energysubsidyreformfacility,WorldBankgroup,https://olc.worldbank.org/system/files/120075-WP-PUBLIC-26-9-2017-12-41-5-FINALESMAPCountryBriefEgypt.pdfIEA(n.d.),“Dataandstatistics”,InternationalEnergyAgency,www.iea.org/countries/egyptIMF(2013),EnergysubsidyreforminSub-SaharanAfrica:experiencesandlessons,InternationalMonetaryFund,WashingtonD.C.,www.imf.org/external/pubs/ft/dp/2013/afr1302.pdfIMF(2021),ArabRepublicofEgypt:2021ArticleIVConsultation,SecondReviewUndertheStand-ByArrangement-PressRelease;StaffReport;andStatementbytheExecutiveDirectorfortheArabRepublicofEgypt,IMFStaffCountryReports,No.2021/163,InternationalMonetaryFund,MiddleEastandCentralAsiaDept.,https://doi.org/10.5089/9781513592046.002InformaMarkets(2022),EgyptEnergySector,MarketReport,www.egypt-energy.com/content/dam/Informa/egypt-energy/en/pdf/Egypt%20Energy%20Report-16-5%20.pdfIRENA(2016),Renewableenergybenefits:Decentralisedsolutionsintheagri-foodchain,InternationalRenewableEnergyAgency,AbuDhabi,www.irena.org/publications/2016/Sep/Renewable-Energy-Benefits-Decentralised-solutions-in-agr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sformation-policy-review-of-egypt_302fec4b-enOrtiz-Ospina,E.,andRoser,M.(2016),GovernmentSpending,OurWorldInData.org,https://ourworldindata.org/government-spendingOurWorldInData(n.d.),Domesticmaterialconsumptionpercapita,2000to2019,https://ourworldindata.org/grapher/domestic-material-consumption-per-capita?tab=chart&country=EGY~USA~OWID_WRL~DEU~ZAFPiketty,T.(2013),CapitalintheTwenty-FirstCentury(2014thedition),BelknapPress:AnImprintofHarvardUniversityPress.Qantara(2022),SinkingAlexandriafacesuptocomingcatastrophe,https://en.qantara.de/content/cop27-and-the-middle-east-sinking-alexandria-faces-up-to-coming-catastropheRCREEEandMEDENER(2020),MappingEEandRESmarketpotentialareaswithhighimpactonlocaleconomyandjobcreation:Tunisa,EgyptandLebanon,RegionalCenterforRenewableEnergyandEnergyEfficiency,MEDENER,https://rcreee.org/wp-content/uploads/2020/04/v3_15_a32_impact-map-eco-and-job_final.pdfREGLOBAL(2021),SiemensEnergysignsMoUwithEEHCinEgypt,https://reglobal.org/siemens-energy-signs-mou-with-eehc-in-egypt/Reuters(2020),EgyptbecomesfirstArabcountrytoissueGreenbondswith$750milliondeal,www.reuters.com/article/egypt-bonds-int-idUSKBN26K1MJUNDESA(2022),WorldPopulationProspects2022,UnitedNations,DepartmentofEconomicandSocialAffairs,PopulationDivision,https://population.un.org/wpp/Download/Standard/Population/UNDP(2018),NationalAdaptationPlansinfocus:LessonsfromEgypt,UnitedNationsDevelopmentProgramme,www.adaptation-undp.org/sites/default/files/resources/naps_in_focus_lessons_from_egypt.pdfUNDP(2020),Humandevelopmentreport2020:Thenextfrontier-HumandevelopmentandtheAnthropocene,UnitedNationsDevelopmentProgramme,https://hdr.undp.org/system/files/documents/hdr2020pdf.pdfUNDPandMoPED(2021),EgyptHumanDevelopmentReport2021,UnitedNationsDevelopmentProgrammeandMinistryofPlanningandEconomicDevelopmentEgypt,www.undp.org/egypt/publications/egypt-human-development-report-2021UNICEF(2022),Egypt–Climatechange,www.unicef.org/egypt/climate-change#:~:text=Stronger%20warming%20has%20been%20documented,the%20younger%20generations%20of%20todayUNIDO(2021),EgyptCountryProfile,UnitedNationsIndustrialDevelopmentOrganization,https://iap.unido.org/country/EGYUNSD(n.d.),Egypt-Energybalancevisualization,UnitedNationsStatisticsDivision,https://unstats.un.org/unsd/energystats/dataPortal/USEIA(2022),CountryAnalysisExecutiveSummary:Egypt,USEnergyInformationAdministration,www.eia.gov/international/content/analysis/countries_long/Egypt/egypt.pdf54ReferencesWaheed,H.(2017),RegulatoryFrameworktodevelopRESprojectsinEgypt,RES4MED,www.res4med.org/wp-content/uploads/2017/05/StrategicOutlook_Egypt-RES4MED-Day-Egypt_WAHEED.pdfWID(n.d.),“Incomeandwealthinequality”,WorldInequalityDatabase,https://wid.world/data/WorldBank(1990),WorldDevelopmentReport1990:Poverty,WorldBank,https://openknowledge.worldbank.org/entities/publication/6db831cb-da31-5fa6-a754-0dc7182ef75bWorldBank(2021a),UnlockingEgypt’sPotentialforPovertyReductionandInclusiveGrowth:EqyptSystematicCountryDiagnosticUpdate,WorldBank,https://doi.org/10.1596/36437WorldBank(2021b),EgyptCountryProfile,https://climateknowledgeportal.worldbank.org/sites/default/files/2021-04/15723-WB_Egypt%20Country%20Profile-WEB-2_0.pdfWorldBank(2023),WorldBankCountryandLendingGroups,https://datahelpdesk.worldbank.org/knowledgebase/articles/906519-world-bank-country-and-lending-groupsWorldBank(n.d.),WorldDevelopmentIndicators,WorldBank,https://databank.worldbank.org/source/world-development-indicators#WRI(2022),ClimateWatchHistoricalGHGEmissions,WorldResourcesInstitute,www.climatewatchdata.org/ghg-emissions?end_year=2020&start_year=1990.55Appendix1:Carbonpricing,internationalcollaboration,subsidiesandprogressivefiscalregimesDuetotheregressiveimplicationsofcarbonpricing,itslevelshavebeenreducedbyhalfinthisanalysis,comparedtopreviousreports(IRENA,2020,2021).Carbonpricingisalsohigherunderthe1.5°CScenariothanunderthePES.Inaddition,underthe1.5°CScenario,carbonpricesarehigherforhigh-incomecountriesthanforlesswealthyones.So,whilethefigureforhigh-incomeeconomiesin2030isaroundUSD150/tCO232andforlow-incomecountries,USD30/tCO2,Egypt’scarbonpriceforthatyearissetatUSD105/tCO2.Inmostcases,themacroeconomicmodellingassumesrevenueneutralityingovernmentfiscalbalances.Thepoliciesusedtoimplementrevenueneutralitydependontheprogressivenessoftheappliedpolicybasket.InthePES,whengovernmentrevenuesincrease(forinstancethroughcarbonprices),incometaxesdecrease,andviceversa.Thisapproachhasregressiveimplications,however,asthewealthiesthouseholdsgenerallypaythelion’sshareofincometaxesandbenefitaccordinglyfromhighertaxcuts.Bycontrast,inthepolicybasketusedforthe1.5°CScenario,revenuesarerecycledthroughlump-sumpaymentsthattargetlower-incomehouseholdsprogressively:60%ofthepaymentsgotothelowest-incomequintile,30%tothesecondquintileand10%tothethirdquintile.Progressivedistributionalpolicieshelpmitigatetheregressiveeffectsoftheenergytransitionandclimatechangeitself.Anotherkeyassumptionoftheclimatepolicybasketsisthelevelofinternationalcollaboration.WhereasnoadditionalcollaborationisassumedinthePES,the1.5°CScenariopolicybasketdoesincludeenhancedlevelstoaddresstheclimatechangechallengeandthestructuralaspectsunderpinninganunequaldistributionofburdensandresponsibilities.Withinthisframework,allcountriescontributetoajointeffortaccordingtotheirrespectivecapabilityandresponsibilityintermsofclimateequity.33Underthe1.5°CScenario,between2021and2050internationalcollaborationisequivalentto0.7%ofglobalGDP.Incontrast–andgiventhatcurrentcommitmentsandclimatefinancepledgeshavenotbeenmet–thePESdoesnotconsiderinternationalclimatecollaborationflows.32In2019USdollars.33BasedontheClimateEquityReferenceCalculator(seehttps://calculator.climateequityreference.org/,accessed16October2023).56Appendix2:EnergypolicyinEgyptAppendix2:EnergypolicyinEgyptThroughtheTechnicalSupportProgrammeforRestructuringtheEnergySector(TARES),representativesfromtheEgyptianelectricity,renewableenergyandpetroleumsectorspreparedastudyontheoptimummixoftechnicalandeconomicenergyupto2035.Thisprojecthadseveralpartsandcameupwithseveralscenarios.Themostimportantpart,however,wastheproject’ssupportfortheIntegratedSustainableEnergyVisionto2035,adoptedbytheSupremeCouncilofEnergyinOctober2016anddesignedtobeusedasthereferenceforEgypt’senergyplanning(NREA,2021).WhileEgyptdelayedsettingformalrenewableenergytargetsforalongtime–andhadnoformalrenewablestargetinitsNDC–thischangedwiththelaunchofMoPMaAR2016.Atthetimeofwriting,Egypthasatargetof42%renewableenergyinpowergenerationby2035.AsshowninTable3,solarandwindpowerarethekeytechnologies(InformaMarkets,2022).Biomassisnotlisted,butalsohasgreatpotential(Box6).Table3:Energymixobjectivesfor2035SolarPVShareinpowergeneration(%)22Windpower14SolarCSP3Hydroelectricity2Nuclear3Thermalpowerplants55.7Source:MoPMaAR2016.57BOX6:BIOMASSINEGYPTMorethan30milliontonnesofsolidbiomasswasteareproducedannuallyfrombothagricultureandmunicipalresourcesinEgypt.Althoughagriculturalresiduesaccountforthelion’sshareofthesolidwastegenerated,sustainableusageofthissubstantialquantityofbio-residuescontinuestopresentaformidablechallengeforthecountry.PromotingsustainableenergygenerationusingbiomasswillultimatelyhelpinbridgingEgypt’senergygapusingindigenousresources(IRENA,2018b).Thesetargetsandplansshouldbesupportedbystrongpolicies,soundlegislationandstrongmonitoringandevaluationsystems.EgypthasprogressedwellinthisregardandFigure16showsthemaindevelopmentsinitsenergylegislationsince1986–developmentswhichhavesuccessfullypavedthewayformorerenewables.Figure16:RenewableenergyregulationsJune1986July2014Sep2014Oct2014LawNo.102/1986ElectricitytarisCabinetdecreePresidentialdecreeestablishmentreformNo.1974/2014ﬁrstNo.135/2014ofNREAofNREAroundFITDec2014July2014July2015Sep2015RenewableenergyElectricitytarisTheelectricitylawCabinetdecreelaw2014reformNo.1974/2014No.2532/2016thesecondroundofFiTOct2016Aug2017Oct2019May2020PresidentialdecreePeriodicaldecreeCabinetdecreeforPeriodicaldecreeNo.116/2016No.3/2017NetelectricitypricesforNo.2/2020allocatingmeteringbiomassunderFiTschemeforPVrestructringthenet7600kmforREmeteringschemeSource:NREA,2021.Amerchantindependentpowerproducer(IPP)schemewasputintoforcein2012.Sincethen,severalprojectshavebeencommissionedusingthebuild-own-operate-transfer(BOOT)andbuild-own-operate(BOO)systems.InMarch2014,thenameofMinistryofElectricityandEnergywasamendedtobecomeMinistryofElectricityandRenewableEnergy.InJuly2014,afive-yeartariffreformprogrammewasannouncedandadopted,allowingthepriceofelectricitygeneratedbyrenewableenergytodecreasegraduallyandhenceincreaseinvestment.ThistariffplanwasrevisitedrecentlyandrevisedinordertoalleviatetheimpactoftheCOVID‑19pandemiconEgyptianconsumers.Therevisedversionprolongstheplanfromitsoriginalenddateoffiscalyear2021/2022tofiscalyear2024/2025.InSeptember2014,theEgyptiancabinetapprovedFiTsforelectricityprojectsproducedfromsolarPVandwind,withpricesissuedviaprimeministerialdecreeinOctoberthesameyear.Thatmonth,theNREAestablishinglawwasalsoamendedtoallowfortheNREAtoestablishcompaniesbyitself,orinpartnershipwiththeprivatesector,inorderoperateandmaintainrenewableenergyprojects.58Appendix2:EnergypolicyinEgyptTwomonthslater,therenewableenergylawwasissuedandon12July2015,thenewelectricitylawwasissued.Thelawallowedfortheestablishmentofacompetitiveelectricitymarketbasedonbilateralcontracts.Italsoadoptedtheconceptofeligiblecustomers.Inaddition,itallowedthirdpartyaccess.Thelawalsoallowsfortheestablishmentofatransmissionsystemoperatorandprovidesassurancesofitsindependence(Waheed,2017).InSeptemberthesameyear,thecabinetdecreeforFiTswasissuedandwasimplementedinOctober2016.ElectricitypricesforbiomassundertheFiTschemewereannouncedinOctober2019.Notably,netmeteringdidnottakelongtobeappliedinEgypt,asitwasannouncedinAugust2016andthenrestructuredbasedonPeriodicalDecreeNo.2/2020intheyear2020(NREA,2021).Whenitcomestoindustrialpolicyaimedatacceleratinginclusiveandsustainableindustrialisation,oneofthemostrecentdevelopmentsintheEgyptianmarketwasthesigningofthefive-yearProgrammeforCountryPartnership(PCP)withtheUnitedNationsIndustrialDevelopmentOrganization(UNIDO).Ineuro(EUR)terms,thisisworthsomeEUR172million.ItaimstosupportEgypt’stransformationinlinewiththecountry’spoliciesanddevelopmentstrategies,aswellaswiththeUnitedNationspartnershipdevelopmentframeworkforEgyptandtheSDGs(UNIDO,2021).Giventhedevelopmentsabove,Egypt’sregulatoryframeworkhasfocusedonwindandsolar,whilenotgivingmajorattentiontotheexploitationofthecountry’sbiomasspotential.Nevertheless–andsinceelectricitypricesforbiomassundertheFiTwereannouncedinOctober2019–theexploitationofbiomassisexpectedtodevelopsteadilyinfuture.AccordingtotheNREA,thecountrycurrentlyhas12MWofinstalledcapacityinbiomass,10MWofwhichareinAlgabalAlasfar.Some2MWhavebeeninstalledbytheprivatesector,3MWareunderconstructionand51MWareunderdevelopmentbytheprivatesector.Furthermore,thecountryhas300MWofplannedprojectstobeinitiatedinthecomingyears(NREA,2021).Whenitcomestothetransportsector,recentyearshaveseensignificantprogressinpoliciesregardingEVs.TheEgyptiangovernmenthassignalledastrongdeterminationtoincreasedependencyonthesevehiclesbycreatinganenablingframeworkforlocalEVmanufacturingandthegradualroll-outofaframeworkforEVlicensingandoperation.TheframeworkincludescustomsbreaksforimportingEVsandtheircomponents.Italsoincludessettingacompetitivetariffforelectriccharging,witheffortsstillongoingtoenhanceEgypt’selectriccharginginfrastructure.TheEgyptianElectricityUtilityandConsumerProtectionRegulatoryAgency(EgyptERA)willberesponsibleofsettingpricesforchargingEVs,annually.EgyptERAwillalsoberesponsibleforissuinglicensesforEVchargingstations.IncentivestoencourageEVdevelopmentalsoincludeafixed,2%customsfeeonallimportedmachineryandequipmentrelatedtothem.Thereisalsoanexemptionfromstamptaxandregistrationfeesonallincorporationcontracts,financeandmortgagecontracts,withthisrunningforfiveyearsafteranEV-relatedcompanyregisters.Additionalincentivesunderconsiderationinclude:subsidiesofapproximatelyEGP50000perEVforthefirst100000locally-producedcars;publicsectorcompaniesbeingrequiredtoreplace5%oftheirfleetwithEVsonayearlybasis;specificprogrammestoprovidefinancingforelectrictaxipurchases;andotherfinancingsystemstofacilitatepurchaseofpersonalEVs(Lynx,2020).Additionally,inco‑operationwithChina,theMinistryofMilitaryProductionhasdevelopedanEVindustrialstrategywiththreemainphases:2019‑2024,2025‑2030and2031‑2040.Themainpillarsofthisstrategyincludetheestablishmentoflocalmanufacturing,whichwillcreatemorejobsinrenewableenergyandhasatargetof65%localEVindustrialisationtechnologyby2035.ThestrategyalsoaimstoplaceEgyptattheforefrontofEVexportsbytheendof2040,whilereducingthehealthandenvironmentalrisksresultingfromtheuseoffossilfuelsby75%bytheyear2040.This,thestrategyindicates,meansincreasingtheEVmarketshareto2%in2030and5%in2040andincreasingtherateofindustrialinputby50%(Mostafa,2020).59OneofthemainstakeholdersinthisfieldistheMinistryofPublicEnterpriseSector.InJune2021,thisannouncedthatEgyptwouldmanufactureEVs,startingin2022,withaneventualcapacityof50000cars.Theministryalsoannouncedthatthecountrywouldbuild3000chargingstations,where6000carscouldbechargedatthesametime.Mostofthestationsaretobebuiltnearhomesorworkplaces(EgyptToday,2021).Finally,theEVstrategywon’tonlyincludepersonalvehicles,taxis,andprivatecars,butitwillalsoincludepublictransportation,suchaspublicbuses,withspecialchargingstationssetupforthispurpose.Inaddition,inSeptember2020,EgyptbecamethefirstcountryintheMENAregiontosellgreenbonds,withaUSD750million,five-yearissuance(Reuters,2020)Followingthisup,inJune2021,Egypt’sCommercialInternationalBank(CIB)issuedafurtherUSD100millioningreenbonds.ThatissuancewasthefirstofitskindforEgypt’sprivatesector.Thebondsareexpectedtobelinkedtovariousclimate-supportinginitiatives,includinggreenbuildings,energyefficiency,renewableenergy,waterandwastewatermanagement,andcleantransportation(Moneim,2021).Aspreviouslymentioned,EgyptiscurrentlyfollowinginternationaltrendsandexploringeveryavenueforGHGemissionsreduction,whileatthesametime,bridgingitsenergygap.Thecountryhasthereforerecentlystartedexploringgreenhydrogen.Thisisexpectedtoofferlongtermopportunitiesforintegratingahighershareofrenewableenergyintothegrid,whilealsoenablingtheexportofrenewableenergytothirdcountries.Greenhydrogencanalsohelpdecarbonisesectorsthatareoftendifficulttodecarbonise,suchastransport,oil,gas,steel,andmining(Mahmoud,2021).Inthisregard,Egypthasformedaministerialcommittee,signedseveralhydrogen-focusedmemorandaofunderstanding(MoUs)andconductedastudyforthefutureofgreenhydrogen.Moreover,inMarch2021,theMinistryofElectricityandRenewableEnergyannouncedtheimplementationofanexperimentalprojectfortheproductionofgreenhydrogeninEgypt.Forthis,MinisterofElectricityandRenewableEnergyDrMohamedShakersignedandMoUwiththechiefexecutiveofficerofSiemenstostartdiscussionsandbeginastudyonimplementingtheproject.Thiswillbeafirststepintheexpansionofthisfieldandpossiblyleadtofutureexports(REGLOBAL,2021).Inthelightoftheserapidfirstmoves,EgyptcouldbecomeoneoftheleadingcountriesintheMENAregionintermsofhydrogen.Thecountryhasanunprecedentedopportunitytoachieveveryrapidprogressinproducinggreenhydrogen,usingitbothlocallyasareliablealternativetodepletedsourcesofenergy,andasanexportcommoditytoEuropeancountrieslookingforcleanenergy.60©IRENA,2023

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