North Africa and the Arab peninsula are among the best insolated regions on earth. There are very few other areas with comparable duration and intensity of sunshine. If anywhere, it is in the huge Arab desert areas that solar electricity could be generated at competitive terms, provided it will be possible to cope with the dust problem.

So far Arab countries have failed to exploit this golden resource, preferring to live on their huge oil and gas wealth.

This situation is slowly starting to change, not because of fears about climate change but because of the need to find long-term alternatives for depleting oil and gas resources. Several countries therefore aim at developing solar power capacities for replacing oil and gas in domestic electricity generation, reserving oil and gas for exports and as feed stuff for their rapidly expanding petrochemical industries.

However, only a few Arab countries have ambitious plans for investing in solar or wind energy. Algeria, Saudi Arabia and the UAE are the most advanced in terms of volume of planned investments and policy formulation.

• Algeria aims at covering one third of its energy demand from renewable sources by 2030 and investing $ 100 billion to that end.
• Saudi Arabia wants to generate 54 GW electricity from solar and wind by 2032 to free scarcer oil for exports.
• The UAE are in the process of preparing a comprehensive regulatory framework including a feed-in tariff incentive scheme. The Emirates Solar Industry Association supports the government in pushing ahead the use of solar power.

But these three countries counter-act their drive for solar power by subsidies on fossil energy, which exceed 50 per cent of the full cost of supply.

As a group the 22 Arab League member countries are among the worst climate polluters on earth. In terms of per capita C02 emissions they easily beat Western champions like USA, Canada or Australia.

As long as most Arab countries keep subsidising fossil fuel and refuse to impose even minimal excise taxes, solar power will not be competitive and no more than a fig leaf.

From a global climate perspective, they should focus on reducing their excessive fossil fuel consumption rather than promoting solar or wind energy. Phasing out fossil fuel subsidies must be the first priority. This should be the key message for the EU-Arab policy dialogue and economic cooperation.

In an almost three hour long press conference May 16^th, President Hollande has called for a Euro-zone government to overcome recession in the EU.

It should dispose of a separate budget and wide-ranging competence to harmonise taxes and economic and social policy, possess the capacity to issue debts and meet regularly under the authority of a specially designated president.

This proposal, which is part of an initiative for closer political integration to be formalised within the next two years, sounds bizarre.

• According to past experience, the EU 28 will need at least eight years to accomplish a treaty revision. Whatever its substance, it will come too late to have an impact on the urgent challenge of combating excessive unemployment in the EU.

• The 17 Euro-zone countries have already installed a framework for monetary and economic policy issues years ago. Their finance ministers meet at least once a month, in the presence of the ECB president and the Commissioner in charge of economic and fiscal policy. This arrangement functions satisfactorily.

• The idea of a separate budget for the Euro-zone countries is old. Hollande has not offered new arguments to make it more acceptable to all member countries. It would not offer any visible value added, but only add to the complications of an already complex EU reality.

• Tax harmonisation is proceeding at EU level, but at snake’s pace. There is no reason to believe that it would advance faster in the Euro-zone, as long as member countries insist on unanimity, firmly anchored in the Treaty.

• Debt issuance within the Euro-zone, via so-called euro bonds, would encounter the same political difficulties as at EU level. The EIB serves as the most effective EU-wide instrument for issuing debt and lending for investments in infrastructure, energy, trans-European networks, and, more recently small business.

• A “European Energy Community” is a “French baby” more than 20 old. The Lisbon Treaty, with its new article 194, provides for everything that Hollande calls for. Here as everywhere else, EU needs action instead of new institutional frameworks

In conclusion, Member states and EU institutions should ”take note” of the “proposals” made by President Hollande and implement what is on the table.

The focus must be on fighting unemployment. Any discussion on new institutional frameworks will only distract from that overriding concern.

During May 2013 a solar-fuelled plane, piloted by two entrepreneurial Swiss citizens, is crossing the USA from California to New York, with a few stop-overs in major cities. It is an unprecedented event aiming to encourage policy makers and business to adopt sustainable energy solutions.

The SOLAR IMPULSE has been conceived by its two pilots, Bertrand Piccard and André Borschberg, and developed with the support of dozens of engineers and technicians of the Technical University of Lausanne during the last 10 years.

The crossing of the USA serves as a test for an even more ambitious tour around the earth, scheduled for 2015 in an improved version equipped with a pressurised cabin for two pilots.

SOLAR IMPULSE weighs no more than a car. It is composed of specially developed super light carbon-composite material. Its wings stretch over 60 m, comparable to those of an Airbus 380; its cruising speed is about 70 km/h.

Thanks to its 12 000 photovoltaic cells and its rechargeable lithium polymer batteries it can fly by day and night at altitudes up to 10 000 m. This is a major progress compared to the remotely piloted solar-fueled planes developed and launched by NASA in 2008 for long-duration scientific flights.

The SOLAR IMPULSE has cost € 120 million to build, largely financed by more than 80 mostly European partners and sponsors, among them many big names of European business, from Omega, to Schindler, Swiss Re, Bayer and Deutsche Bank, who have found it worthwhile to be associated with this experiment of solar flying.

Because of technical constraints PV will never be able to power large commercial air craft. But it may very well give an impetus to amateur flying which may become much cheaper because of fuel costs solar.

The main merit of the transcontinental flight, however, is to have demonstrated a new application for PV power. So far we have used it for road signs, remote electricity generation and, recently, grid-connected power plants.

But nobody would have guessed 25 years ago that in 2013 a plane would be able to cross the United States by means of electric engines driven by PV cells.

60 years after Bell Laboratories have produced the first practical photovoltaic cell we should pay tribute to European imagination and technical curiosity for having developed its most advanced application so far.

Brussels 10.05. 2013 Eberhard Rhein

The EU is in the process of defining its energy/climate policy beyond 2020.

This is timely for two reasons:

• European business needs to be fixed on the policy framework for their long-term investments related to energy, transport, buildings, grids etc.
• The EU must have advanced on its medium-term climate strategy before engaging in the negotiations on an international agreement in 2015.

There is a wide consensus on the need for ambitious 2030 targets.

By 2050 the EU aims at having reduced its C02 emissions by 80-95 per cent over 1990. By 2020 it will have achieved at best 20 per cent reduction! We are therefore far away from the ultimate objective and have to speed up the process.

2030 being mid-term towards the middle of the century, the EU needs to have reduced its emissions by at least 45 per cent over 1990! That may come as a shock; but it is time to make citizens aware of the implications of a low carbon society.

The crucial issue is how to achieve a much more ambitious target in 2030.

Should the EU again fix separate targets for the share of renewable sources in the energy mix and the rise of energy efficiency? This is what part of the business community, especially the solar and wind industries, claim.

Or is it preferable to stick to one over-riding target – 45 per cent of C02 emission reduction – and focus on concrete policies for implementing it.

Defining more ambitious targets for renewable energies will become tough. To be meaningful, wind and solar electricity would have to supply about two thirds of EU power consumption in 2030. That seems unrealistic without a generous EU-wide system of incentives. But more important, we would need 28 targets, as the comparative advantages for generating renewable energies vary widely among member states. In some of them renewable energies are very difficult to generate at competitive costs, while others have enough land, wind or the sun to generate essentially all their electricity demand even without granting any subsidies.

To achieve a quantum leap in the reduction of C02 emissions within the next 15 years the EU will need to put in place an effective policy framework. This requires a balanced inter-action between EU and member states.

Member states should bear the main responsibility for implementing the average EU emission target, which should continue to be differentiated according to per capita emissions.

The new framework should introduce a regular policy dialogue between Commission and energy ministries of member countries, under which member states will have to report to Commission and all member states on the concrete policy measures they intend to take and their effective transposition.

At EU level the main policy instruments should be reinforced:

• A reformed carbon cap and trading (ETS)

  The pace of annual C02 reductions will have to be lifted in according with the tougher 2030 target and provide for possibilities of adjustment to avoid the violent fluctuations of carbon prices that have impaired the effectiveness of EU climate policy during the last few years.

• Tough energy efficiency standards wherever possible.In the automobile sector these are under preparation for cars, light utility vehicles and trucks.
• Accelerated energetic renovation of public buildings

  The pace of renovation needs to be accelerated.

  A € 200 billion programme for energetic renovation of private buildings, enabling the EU to tackle its biggest source of C02 emissions, to be financed by EIB and structural funds.

• Phasing out all subsidies on fossil energies

  This job is progressing slowly, due to political obstacles. But the principle to tax fossil energies according to C02 emissions is largely accepted, except for heating fuel and gas.

  The EU must lift taxes on heating fuel/gas in view of encouraging house owners to improve insulation and heating systems. This politically unpopular measure will boost employment in the construction and mechanical industries.

In conclusion, the EU has the unique chance of putting in place a comprehensive strategy by which to tackle its excessive C02 emissions and show the rest of the world that such a strategy pays. The Commission must urgently come up with effective recipes to enable EP and Council to adopt the new package before the end of the present legislature in May 2014.

Eberhard Rhein, Brussels

In 2011 the EU Commission set out a long-term energy road-map for a Europe 2050 getting along almost without fossil energies.

Though it has sketched out the direction that ought to be taken to that end it has not explained what this would mean for our practical life.

The present ”vision” tries to do so. Indeed, if the EU wants to convince citizens of the merits of clean energy it needs to demonstrate that their standards of living will not be shaken and prepare them for the changes they will have to adapt to.

Living without fossil energies will be difficult to achieve without reducing our energy consumption. Much higher energy efficiency and renewable energy sources, though indispensable, will not be sufficient to do the job. The European renewable energy potential will not suffice to replace fossil sources which remain the mainstay of our present energy supply; and even much higher energy efficiency will not be able to produce miracles.

We must therefore learn not to waste energy, from switching off lights, computers or TV when not being used or resorting to public transport instead of personal cars.

We shall have to say good-bye to 500 km plane or car week-end trips and cultivate our distant contacts increasingly by electronic means.

We shall live differently. Most of us will live in big cities and put an end to suburban existence with daily commuting over 30 km or more. Urban life will once again become more attractive. Air and noise pollution will have largely disappeared. We shall move around walking, biking or using public transport.

We shall use substantially less energy for heating and cooling buildings.

Housing and public buildings will be so well insulated that they can do with a minimum of heating or cooling. District heating with combined power plants running on renewable energies and waste will have largely replaced individual heating and cooling; and the remaining needs will be covered through efficient heating and cooling systems like heat-pumps.

To reach that stage Europeans will have invested hundreds of billions of Euro in thermal refitting of buildings, the biggest private/public investment programme ever launched.

We shall use more electricity than today. But it will be generated essentially in plants powered through wind, water, solar and biomass. To cope with the inherent variations of these sources Europe will have installed a sophisticated continental network of transmission lines (grid) and storage facilities that will even out the fluctuations of supply. It will need a lot of technological prowess, especially in winter, and investments of many billion Euro to complete in the next few decades.

Consumers will not feel much of these profound changes. But they will become aware of the permanently varying electricity rates, reflecting sharply fluctuating supply. Manufacturing companies will fast adapt by operating as much as possible in low-price periods. So will clever households using their washing machines, laundry dryers etc. at night or weekend.

It is not possible to forecast if energy will be more expensive than today.

That will depend on the pace at which fossil energy will become more expensive than renewable ones, cost of which will further decline due to technical progress and economies of scale. Consumers able to exploit the fluctuations of electricity prices will most likely pay less for their electricity than today.

Transport will undergo profound changes in the next 40 years.

For long-distance travel we shall mostly use high-speed trains, powered by renewable electricity.

For cars, electrical engines will have largely replaced the 120 years old internal combustion engine, and conventional gas stations will have almost disappeared. This will be a revolution for the car industry and lead to an impressive increase in efficiency. The size and weight of cars will go down substantially; gone will be the days of four-wheel gas guzzler vehicles. Car ownership will be much less common than today; and those who still own one will benefit from cheap night- and weekend electricity rates to charge their batteries. Those without a car will feel relatively “richer” as they have much more money to spend for other purposes.

Heavy duty trucks for transporting goods across Europe will switch to hydrogen fuel cells produced by wind and solar electricity.

Customers are likely to buy more regional and local local produce and frown upon air-borne flowers, strawberries or grapes from South Africa, Australia or Chile during off-season,because it may have become more economical to store domestic fruits and vegetables . It will also become too costly to drink bottled mineral water transported 1500 km across Europe.

Our diet is most likely to change as we shall get more health-conscious. We shall eat red meat, which will become increasingly expensive because of mounting scarcity of fertile land, not to speak of the negative impact on methane emissions.

We shall be close to a paper-less society by the middle of the century. Newspapers and print books will have become rarities. This will be a very positive contribution to a healthier C02 balance.

By the middle of the century recycling will have become standard procedure for all waste, from metals to paper, wood, plastics and water. We shall not be able to do otherwise in view of rising scarcities and prices of raw materials. Cheaper methods of collection and sorting will make recycling much more attractive.

By the same token we shall say goodbye to the throw away society and return to old-fashioned habits of using durable goods and even clothing for longer time spans than presently, which would, of course, help reducing C02 emissions.

We shall find jobs in new activities. Energy-intensive industries and conventional power generation will have largely disappeared and the service sector will employ the bulk of the active population.

The list of changes on the path towards a C02 free society is, of course, much longer.

But these examples show that life without fossil energies will be very different from today, but not necessarily worse. We shall become a less material society, which is reason to celebrate. Physical, artistic and intellectual activities with friends and neighbours will take more of our time, which would do us good.

Let us bravely advance towards a C02-free society while constantly checking progress and obstacles on the way.

Eberhard Rhein, Brussels.

Governance is about setting and implementing rules. It is based on reciprocal trust between governments and citizens. The more citizens share similar values and traditions the easier it is to govern. Big countries or those encompassing different cultures therefore resort to federal structures, which allow much of the rule setting to take place at regional level.

As the number of member states and subject matters covered by EU legislation increases EU governance is bound to become even more complex.

Recent rifts on macro-economic policies between North and South, UK resistance to perceived EU encroachments on national traditions, Polish hesitations about stricter EU climate policy standards or poor compliance of southern member states with EU directives illustrate the conundrum of EU governance.

Europe cannot suspend legislation until national mentalities may have converged towards a single European one. That process will take decades; even then will Europe remain a federation of nation states with strong national identities, which distinguishes it from “born federations” like USA, Canada or Switzerland where primary loyalty goes to the Federation.

There are at least six ways for the EU to mitigate its conundrum with policy making.

• Keep a brake on enlargement

  Candidate countries should undergo a much longer apprenticeship in European culture and governance. The bureaucratic transposition of EU law is insufficient proof of their preparedness to act like a full club member. Much longer and intensive training of political elites about the special ways of EU government must precede formal membership.

• Put a cap on the number of Commissioners

  Their number should not exceed 75 per cent of member states, as provided by the Lisbon Treaty. This would also curb the expansion of EU staff, who quite normally want to demonstrate their abilities by proposing new rules.

• Put more emphasis on compliance with EU legislation

  Part of the present difficulties in southern member countries is due to lax implementation of EU legislation. The EU Commission must become a much stricter guardian of EU law and devote more of its energy to this rather unpleasant mission.

• Impose more self-restraint before proposing new rules

  The tense relations between EU and citizens are largely due to the flood of new rules from Brussels, which citizens are less and less able to digest. The EU Commission should restrain its urge to propose new rules. Before any new proposal it should systematically ask if it is absolutely necessary in the interest of all It might more frequently limit itself to making recommendations and leave it up to member states to follow according to their interests, without burdening the legislative process.

• Resort more frequently to enhanced cooperation

  It will often suffice to set rules only for the most interested member countries, or to introduce them very progressively, as in the case of EMS. That minimises the risks of backlash.

• Encourage adoption of «private» standards

Private/public networks of regions and municipalities may often serve as a flexible substitute for legislation. The EU should encourage such cooperation wherever feasible.

Eberhard Rhein, Brussels

At the last meeting of the UNFCCC in Doha in December 2012 the contracting parties have pledged to finalise negotiations on an international climate compact before the end of 2015 that should enter into force by 2020.

This pledge will only become reality if the international community is prepared to adopt a radically new approach to the negotiation process and the substance of the compact.

This is the lesson from 20 years of frustrating and mostly unproductive negotiations at global level.

Negotiations should focus on C02 emissions, presently the major green house gas and its three major sources:

• Emissions from major emitter countries.To ensure a breakthrough of negotiations before the end of 2014 only a small number of countries accounting for more than three quarters of global C02 emissions must participate. Once these have come to terms, some 20, mostly small countries with per capita emissions of more than five tons annually, must also be invited to join, for reasons of equity.
• Emissions from deforestation, especially of tropical forests, amounting to at least six per cent of C02 emissions.
• Emissions from international air and maritime transport, which presently account for three per cent of C02 emissions, but are rising fast.

Following this approach the international community would conclude four separate texts tackling essentially all C02 emissions. This would substantially ease negotiations. Only after these texts have been adopted should the international community address financing climate mitigation and climate adaptation, two other burning subjects for many, especially developing countries.

China, USA, EU, India, Russia, Japan, Canada, Australia, South Korea, Saudi Arabia, South Africa, Brazil, Mexico, Iran, Indonesia, Turkey and Ukraine must join the 2015 agreement because of their their global climate relevance.

Each of them accounts for more than one per cent of global emissions (0.3 million tons of C02 per year); jointly they are responsible for more than three quarters of global emissions.

Per capita CO2 emissions should be the common yardstick by which to measure the actions to be undertaken by the contracting parties.

By 2040 latest, no country must emit more than five tons of CO2, the 2010 global average. In the absence of legal enforcement, this goal can only be a political one.

In climate terms, this is the minimum of what is necessary. But politically, a target of emissions of five tons per capita will be the limit of what major countries with high per capita emissions (USA, Canada) are likely to agree to.

Each country would have to decide for itself the actions to be taken in view of reducing emissions. Whatever their precise nature, they will have to imply raising the cost of fuel fossils and/or reducing that of renewable energies.

Abolishing all subsidies and raising taxes fuel fossils gas should be the foremost action.

Many countries, among them very poor ones, spend up to 4 per cent of GDP on subsidising fossil fuels, the benefits of which mainly accrue to middle income citizens. Abolishing these subsidies should be a priority for the international community.

Countries granting such subsidies should not qualify for loans/grants from

IFC` s, unless they introduce the necessary adjustments. By 2025 latest, essentially all subsidies on fossil fuels should have disappeared.

This can only be a first small step on the necessary path towards higher fossil fuel prices.

Introducing or raising excise taxes on fossil fuels should be an even more crucial priority for all countries. To have have an impact on consumption they must be substantial and progressive over time, say 30 per cent of sales prices to start with.

To encourage the consumption of gas at the expense of coal and oil, which emit substantially more C02, tax rates should vary according to the C02 content.

This should apply in particular to China and, to a lesser degree, USA.

Countries with reliable statistics and administrative controls might introduce CO2 cap-and-trade systems, following the EU example. Focusing on big emitters these are relatively easy to introduce and manage, and they are effective in ensuring a reduction of emissions according to the “cap” chosen, say 2 per cent annually.

Subsidies for wind, hydro and solar electricity or/and renewable quotas for utilities are an indispensable component of any energy policy intent on reducing C02 emissions. They should therefore be essential components of any national energy/climate policy.

So are actions aiming at raising energy efficiency. They should target automobiles and buildings, the two biggest sectors of C02 emissions in almost all countries :

• Average new cars should not emit more than 75 g C02 by 2025-30.
• Each country must introduce strict rules for insulating buildings in line with domestic climate conditions and international standards.

These two fields should be subject informal arrangements among major countries.

To ensure proper compliance, parties will have to accept annual audits of their policies. This will be easier said than done, considering the aversion to transparency in several major countries. But there is not much point negotiating an international climate agreement without ensuring its effectiveness.

Allowing action against “carbon leakage” from non-participating countries will help promote compliance and overcome opposition from energy-intensive sectors in contracting parties.

Negotiations will only have a chance of succeeding if USA, China and EU, the three biggest emitters, jointly take the lead. They must agree on the broad outlines of the 2015 agreement well before the end of 2014. This will be the main stumbling block and require urgent intervention at the highest political level.

The EU should focus its diplomatic skills on this difficult challenge.

Separately to the negotiations among the main emitter countries, the international community must finally agree on curbing emissions from maritime shipping and international air traffic, which keep rising rapidly with the growth of international trade.

Higher prices for kerosene and bunker oil have been the driving force for keeping a lid on C02 emissions, through impressive increases of fuel efficiency and lowering speeds.

The future answers will have to be even higher fuel efficiency, slower speed and “green fuels”.

The “easiest” answer for the future would be “mandatory surcharges” on passengers and freight according to the emissions they cause. These are easy to calculate and to apply.

ICAO and IMO would only have to negotiate the technical modalities, each organisation for its sector.

They would have to overcome three major hurdles:

• at what price to fix to the C02 price per ton of emissions;
• how to take into account the specific situation of very isolated countries like Chile, New Zealand and Australia;
• how to insure compliance by air and shipping companies.

Forests will have to be covered by a separately negotiated agreement among the major forest countries.

Deforestation is one of the biggest threats to life and climate on the planet.It is responsible for as much as10 per cent of fuel fossil-induced CO2 emissions.

The target should be crystal-clear: Humanity must stop net deforestation, especially of tropical rain forests, which are of irreplaceable value for the diversity of species.

But many forest countries, especially in tropical regions with demographic pressure are unwilling or unable to preserve their forest areas. Governments find it hard to prevent illegal logging, whether for timber exports or for transformation into pastures/agricultural areas.

The international community will therefore have to compensate forest countries for the preservation of their tropical forests. The $200 billion “international climate fund” to be established by 2020 for financing climate-relevant programmes should become the principal source of financing.

In return, national governments will have to guarantee protection against illegal logging and exports. This will not be easy to put in place. Forest countries may want to get more funding than the international community will be willing to pay.

But there is a minimum of bilateral experience on which to base an effective international agreement.

The main tropical forest countries should be asked to supply their ideas. On these bases a special working group should elaborate a draft text by the end of 2014.

In order to get anywhere in 2015 the EU must urgently engage in bilateral ministerial meetings with China and USA to explore their readiness to accept a more pragmatic, but ambitious approach. The three parties need a minimum of consensus in order to enter the negotiation process with a minimum prospect of success.

Eberhard Rhein, Brussels

The five-year mandate of the present European Commission President expires October 31th 2014. Contrary to the restrictive provisions concerning the President of the European Council and the members of the Court of Justice the Treaty on the European Union is silent on the possibility for Commission presidents and members to be reconfirmed.

During the last 60 years most Commission presidents and members have served only one term, and there is no precedent for a president to have served more than two mandates.

Not surprisingly, recent declarations by President Barroso leaving open a certain readiness on his part for a third term have provoked a debate on the issue.

Constitutionally, it is up to the European Council to designate the next Commission president in the summer of 2014, taking into account the parliamentary elections in May.

The main parties represented in the EP have expressed a willingness to nominate and campaign for their candidate, and the European Council will find it difficult not to designate the candidate from the party having obtained most votes, especially if this candidate also happens to reflect majorities in major member states.

Though it is absolutely open who will be the next Commission President it is worthwhile to weigh the pros and cons of re-appointing an incumbent for a third time and creating a precedent for more permanence at the head of the European bureaucracy.

The function of Commission President is no doubt the most demanding political job in Europe. It requires extraordinary physical and mental stamina and a rare combination of political leadership, management and language skills. The number of qualified candidates is therefore much smaller than for the function of Commissioner.

This gives a natural edge to any incumbent embodying long national and European political experience, as those in charge of deciding will want to minimise the risk of choosing an unknown newcomer.

But the argument for change remains powerful. Europe is in dire need of fresh blood and novel ways to address a complex future. The Commission can no longer do business as usual at the risk of turning into a huge behemoth. It must redefine its role,become leaner and stop thinking that its main role is the distribution of money. It must above all regain lost confidence with European citizens and establish a better balance between European and national functions.

The next Commission President should be above all a “strategist” able and willing to chart a long- term future for the EU. That demands charisma, focus and delegation of powers.

For these reasons it is not wise to keep a President for more than 10 years. He or she are bound to come up with the same old solutions and lack the courage and inspiration of novelty.

Europe needs to look for new faces and approaches. The party leaders in the EP should therefore agree with the European Council that 10 years in office should be enough for any Commission President.

Eberhard Rhein, Brussels 10.04.2013

Egypt is again in urgent need of reform.

It has failed to replace the Mubarak regime by legitimate governance; and its economy, that had shown a remarkable performance during much of the first decade is out of step, with high unemployment, rising inflation, high budget deficits and depreciation of its currency.

It had no choice but to call upon the IMF for assistance; and the two parties are in the process of negotiating a loan package in the order of $ 4.8, hopefully to be agreed before the end of April.

As the EU has witnessed in the past three years, the IMF does not lend for free, its loans subject to policy reforms undertaken by the borrowing country to secure long-term economic sustainability.

Even a quick look at the Egyptian macro-economic data shows that the economy is far from sustainable:

• During the last 10 years budget deficits have never descended below seven per cent of GDP.
• The public debt ratio to GDP now exceeds 80 per cent.
• Interest payment on public debt absorb more than one fifth of total expenditures, depriving the government from investing in priority fields like education and infrastructure.
• Subsidy payments have become the single most important expenditure, accounting for one third of total government spending.
• Two thirds of the subsidies are being paid to keep fuel products – diesel, natural gas, gasoline – far below cost prices.

It is therefore crucial for Egypt to overcome the vicious circle of budget deficits and rising public debt and to end the addiction to low energy prices, which make Egypt – together with Russia, Ukraine and Kazakhstan – one of the most energy-intensive economies on earth, hampering the development of labour- intensive manufacturing.

Short of competitive manufactured products, Egypt exports gas to neighbouring countries, though its reserves are tiny compared to Qatar, Iran or Iraq and its needs for a population of 82 million. At the same time business and households suffer from regular power cuts, due to wasteful use of cheap electricity and lack of investment in power generation and transmission.

The government is aware of the non-sustainability of the situation. But at present it seems more afraid of the Street than of complying with painful demands from the IMF, especially with parliamentary elections due to be held in the coming months.

The IMF has most recently blamed its member countries for granting $ 500 billion subsidies on fossil fuels and failing to tax them by $ 1.400 billion for aggravating climate change It would therefore be logical if it were to insist that Egypt radically reduces its energy subsidies.

This would be the more legitimate as most of these subsidies benefit the better-off and not the poor.

The EU should support a strict IMF approach by fixing a parallel conditionality for its assistance programme to Egypt.

Brussels 10.04.2013 Eberhard Rhein

The decision by BP to sell off 4.6 GW capacity of wind power plants and projects in North America puts an end to an expensive dream to combine renewable with fossil energies that has cost BP some $ 6.5 billion since 2005. Through their investment in 16 wind farms across nine US States, BP had become one of the big investors in wind energy world-wide.

No other oil company had followed BP with a comparable zeal; Royal Dutch has already disposed of its wind parks,while TOTAL keeps no more than tiny investments in solar power. None of the US oil majors nor any of the state owned companies in Russia, China, Brazil or the Gulf have ever thought of undertaking major investments in renewable sources of energy.

From a business point of view the sell-out is perfectly understandable and even overdue:

• Like most investors in wind and solar energy BP has lost a lot of money, which demonstrates that renewable energy continues to be dependent on subsidies. Especially after the discovery of non-conventional gas energy companies find it much more thrilling to explore and drill new gas or oil fields, however expensive and risky this may be. That is what all oil companies, big or small, public or private have been doing during the last few years.

• Oil and gas production does not marry ideally with power generation, whether from fossil or renewable sources, as they offer hardly any synergies.

• Contrary to received views, oil and gas have a very long life time ahead. By the middle of the century the industry will continue to flourish, even if peak oil will long have been reached. More worrying, the industry seems determined to bet on “dirty” oil shale/sands in Venezuela, Canada or Kazakhstan,whatever the higher C02 emissions they generate.

Policy makers have to accept these realities. They cannot force investors to go for solar or wind.

But they can make fossil energy less attractive by imposing high excise taxes on gas, fuel and gasoline, while making wind and solar more attractive by generous, but degressive subsidies

So far, almost all countries are doing the opposite by not taxing fuels at least $ 25 per ton of C02 emissions, the cost of climate change.

Eberhard Rhein, Brussels