GCC ‘must impose carbon tax’, says clean energy chief

Reuters/Mohamed Abd El Ghany

• Dr Nasser Saidi calls for reduction in fossil fuel subsidies
• Region is ‘making great strides’ to invest in clean energy
• Consumers and businesses need more price pressures 
• Concerns remain that carbon tax will impact economic growth

GCC countries should introduce a carbon tax and reduce subsidies for fossil fuels as part of the fight against climate change, Dr Nasser Saidi, chairman of the Clean Energy Business Council (CEBC), has said.

Speaking at the 10th annual CEBC summit, Dr Saidi said: “Subsidies in our part of the world are among the highest globally compared to GDP. And it’s not just the subsidies, we don’t charge for pollution, we don’t have carbon taxes.

“We need to reign in the subsidies for using fossil fuels, and start imposing carbon taxes as we move forward.”

Saidi, the former Lebanese economy minister and chief economist at the Dubai International Financial Centre Authority, said that “out of all the regions in the world, the existential threat [of climate change] to our part of the world is the greatest” – and that the decarbonisation process needs to happen “much more quickly than we have done in the past”.

“To address the climate challenge by 2030, we’ll need at least $5.2 trillion annually. We’re far from that,” he said.

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A report from consultants McKinsey estimates $250 trillion of cumulative spending on physical assets is needed over the next three decades in order to meet the Network for Greening the Financial System Net Zero 2050 scenario.

The Mena region’s carbon intensive energy focus is said to be in part the result of low domestic fossil fuel energy prices, courtesy of generous government subsidies.

A report from Oxford Economics revealed subsidies in the UAE and Kuwait stood at around $600 per capita per head in 2020. This number dropped to $500 in Saudi Arabia and was roughly $200 for Qatar and Bahrain.

It claimed subsidies make renewable energy uncompetitive, removing the incentive to shift to lower carbon sources, and enabling wasteful consumption.

Gurmeet Kaur, partner with law firm Pinsent Masons in Dubai and a panellist at the CEBC event, said that consumers in the region have not switched to renewables at home, largely because of the price of electricity.

“Until [energy] pricing is adjusted, you probably won’t get the uptake that you see in Europe,” he said.

The UAE has set a target of 2050 to reach net zero, along with Oman and Israel, while Saudi Arabia and Bahrain have committed to this target by 2060.

A report on carbon prices led by Nobel Laureate Joseph Stiglitz and Lord Nicholas Stern in 2017 found that, to achieve the Paris Agreement temperature targets, a levy on the carbon content of fossil fuels or a carbon tax in the region of $50–100/total carbon dioxide by 2030 is required.

However, concerns remain over how the introduction of carbon taxes will impact economic growth, income distribution and international competitiveness.

Scott Livermore, chief economist at Oxford Economics Middle East, said there are 68 countries with carbon pricing initiatives in place, which covered 23 percent of greenhouse gas emissions in 2022.

“One aspect of the energy transition is investment in new energy that cleans power generation,” he said.

“The [Middle East] region is making great strides here but it is important to influence consumer and business behaviour and price is essential for this.

“The first step before any carbon tax will be to reduce energy price subsidies and manage the adjustment of the regulated prices.”