Greening Egypt’s economy

Ahmed Mahdi , Tuesday 11 Oct 2022

As Egypt prepares to host the COP27 Climate Change Conference in Sharm El-Sheikh next month, Cairo is seeking ways to green the Egyptian economy, writes Ahmed Mahdi

Fathi Abul-Ezz
illustration: Fathi Abul-Ezz

In November 2021 during the UN COP26 Climate Change Conference in Glasgow, it was announced that Egypt had been chosen to host the next conference, COP27, in Sharm El-Sheikh in November 2022.

A “Conference of the Parties” to the UN Framework Convention on Climate Change (UNFCCC) is held every year to discuss global efforts to preserve the environment and combat climate change and global pollution. The first COP Conference (COP1) was held in Berlin in 1995. COP27 will start in Sharm E-Sheikh on 6 November and run until 18 November.

The global environment is in danger due to harmful gases emitted by factories and vehicles and non-degradable waste and other forms of pollution. These cause environmental degradation in the form of climate change, the greenhouse effect, deforestation, desertification, the pollution of the air, health issues, and other dangers. They have long-term economic costs in terms of the loss of arable land and agricultural crops, the cost of healthcare, coastal cities in danger of drowning, and other economic and human costs.

As the host of the COP27 and therefore at the centre of world attention for the next few weeks, Egypt is naturally required to set a good example in terms of environmental policies, energy saving, and green technology. But it will face a dilemma encountered by all the countries of the world when it comes to environmentally friendly policies.

This dilemma has to do with a contradiction between reducing pollutants and harmful emissions, on the one hand, and preserving economic performance and business profits on the other. Even in the advanced western countries, governments usually have to choose one at the expense of the other.

During hard economic times, governments, even those in the advanced West, usually choose economic performance at the expense of preserving the environment. Given the economic difficulties the world is facing today in terms of rising food and energy prices, most of the world’s major economies have yet to fulfill the promises they made at the COP26 meeting in Glasgow to meet the goal of cutting emissions.

It is the purpose of international summits such as the COP27 to try to find solutions to this dilemma, which include policies such as recycling and replacing fossil fuels with renewable energy in the energy mix. Different countries are trying to achieve what is dubbed the “green economy”, defined by the UN Environment Programme (UNEP) as an economy that is “low-carbon, resource efficient, and socially inclusive”.

“In a green economy, growth in employment and income are driven by public and private investment in economic activities, infrastructure, and assets that allow reduced carbon emissions and pollution, enhanced energy and resource efficiency, and the prevention of the loss of biodiversity and ecosystems.”

There is no denying that Egypt is currently going through hard economic times, with the devaluation of the Egyptian pound vis-à-vis the US dollar, the rise in consumer prices, the need to save electricity, and so on. Egypt can little afford to sacrifice economic performance for the sake of preserving the environment.

Over recent years, however, Egypt has taken steps and come up with strategies to preserve the environment without sacrificing economic performance. This is seen in policy documents such as the Egypt Vision 2030 and the Egypt Energy Strategy 2035 and in its adoption of new technological trends such as green financing, building a circular economy, and establishing green hydrogen technology, among others.     


POLICY TRENDS: Egypt’s official policy documents reflect the country’s awareness and commitment to green projects.

One such notable policy document is the Integrated Sustainable Energy Strategy for 2035 (ISES 2035), approved by the cabinet in 2016. ISES 2035 sets goals for Egypt’s future energy mix under which by 2035 the country should generate 42 per cent of its electricity mix from renewable energy, with another three per cent coming from nuclear energy and the remaining 55 per cent from fossil fuels. ISES 2035 also aims to reduce energy demand by 18 per cent by 2035 through increased efficiency.

Another important policy document was announced in May 2022 by Minister of Environment Yasmine Fouad — the National Climate Change Strategy 2050 (NCCS 2050). The main objectives of the NCCS 2050 are maintaining sustainable economic growth, reducing the polluting emissions produced by various economic activities, promoting the use of renewable energy, promoting research and development in green technology, producing energy from waste, and using alternative energy forms like green hydrogen.

Fouad said that potential sources of funding for the newly issued Strategy include both international and local sources. The international sources include the Green Climate Fund, banks and multilateral institutions such as the World Bank and the African Development Bank, the French Development Agency, and others. Local sources include the government budget and private-sector investment.

Both documents, ISES 2035 and NCCS 2050, are based on the Sustainable Development Strategy (SDS): Egypt Vision 2030, which was launched in 2016 and updated in 2018. This aims to achieve the goals of sustainable development on the economic and environmental levels.  

Another area of policy is the promotion of a circular economy, defined by the UN Conference on Trade and Development (UNCTAD) as one where the market “gives incentives to reusing products, rather than scrapping them and then extracting new resources. In such an economy, all forms of waste, such as clothes, scrap metal and obsolete electronics, are returned to the economy or used more efficiently. This can provide a way to not only protect the environment, but use natural resources more wisely, develop new sectors, create jobs and develop new capabilities.”

According to the Circularity Gap Report 2021, the global economy as a whole is currently only 8.6 per cent circular. In 2018, it was 9.1 per cent circular, however, which shows an alarming decline in the circularity of the global economy. The world needs to double this percentage to 17 per cent, in order to reach the global goal of reducing global warming to less than two degrees Celsius compared to pre-industrial levels, as agreed at the COP21 Conference in Paris in 2015.

Egypt produces 26 million tons of garbage per year. If a large portion of this was recycled, it would improve economic performance and the environment. Despite this potential, however, the country has a long way to go in terms of achieving the goals of a circular economy, especially given the increase in its consumption of energy and raw material.

Egypt experienced significant growth of 32 per cent in per capita primary energy consumption from 1990 to 2014. Moreover, its economy is six times more energy intensive than the EU average. According to the UN Industrial Development Organisation (2014), “the final energy consumption per unit of output in the most important industries in Egypt is typically 10 to 50 per cent higher than the international average.”

Egypt also entered a condition of water poverty under former president Hosni Mubarak, and the quality of the Nile’s water, which supplies the vast majority of Egypt’s water, has been severely impacted by pollution, including industrial and agricultural wastewater and sewage. The aim of a circular economy is to reduce pollutants and recycle waste material and increase efficiency in the use of raw materials, water, and energy.

Another policy to increase energy efficiency and reduce pollutants and emissions is the Ehlal initiative that aims to replace older private vehicles with new ones running on natural gas. This would increase energy efficiency as it would reduce fuel consumption by about 60 per cent and reduce emissions since natural gas is cleaner than petrol.

People can replace their old vehicle with a newer one running on natural gas, if they satisfy certain conditions, including that the license of the old car is valid and the model is from 2001 or before. So far, about 20,000 older vehicles have been scrapped and replaced with new ones running on natural gas.


GREEN POWER: Hydrogen gas is another green and environmentally friendly energy source.

It can be extracted from various sources, and the type of energy used gives its name to the type of hydrogen. For example, the hydrogen extracted using natural gas is called “blue hydrogen”. Natural gas, despite being more environmentally friendly than other fossil fuels, is a non-renewable fuel that produces harmful emissions.

Hydrogen extracted using coal is called “black hydrogen”, and coal is also a non-renewable and polluting fuel. Hydrogen extracted using a nuclear reactor is called “yellow hydrogen”. Nuclear energy is non-polluting as long as it is carefully managed and no leaks of nuclear waste occur. Finally, the hydrogen extracted from water and using solar panels is called “green hydrogen”, and this is what the world is aiming for in terms of clean hydrogen.

Egypt has opportunities that it can seize in this regard. Saudi Arabia is the leading Arab country in terms of green hydrogen production, but Egypt, too, has solar panels at the Benban Solar Park in Aswan, one of the largest solar plants in the world, that can be used to produce green hydrogen.

The country has lately signed agreements with companies from India (ReNew Power), Norway (Scatech), Germany (H2 Industries), and the UAE (Masdar) to provide a total of US$40 billion by 2030 to fund the production of green hydrogen in the Suez Canal Industrial Zone. It aims to be a regional centre for green hydrogen production, this then being exported to neighbouring states. The Ministry of Electricity is also working on a National Hydrogen Strategy to be presented at COP27.

The COP this year takes place amid serious challenges including the ongoing war in Ukraine and rising global prices of food and energy, which leave rich and poor countries alike grappling with the cost of living and rising debts. This creates the need for financing in order to fund the costs of protecting the environment and reaching the goals of reducing global warming amid such global economic problems.  

Among the challenges Cairo is facing in achieving these green policies are the costs of financing such projects. Therefore, Egypt is aiming to obtain a suitable amount of green financing to fund them.

UNEP defines “green financing” as aiming “to increase the level of financial flows (from banking, micro-credit, insurance and investment) from the public, private and not-for-profit sectors to sustainable development priorities.” The UK Lloyds Banking Group defines it as “a loan or investment that supports environmentally friendly activity, such as purchasing environmentally friendly goods and services or building environmentally friendly infrastructure.”

Egypt is working on increasing the amount of green financing available for green projects. In November 2021, it obtained its first green financing amounting to $1.5 billion from a group of international and regional commercial banks. These funds are intended to cover national green projects including water treatment and desalination plants, waste management, and other initiatives.

Moreover, Cairo is planning to allocate a larger share of the national budget to green projects. Sherif Daoud, vice president of the Sustainable Development Unit at the Ministry of Planning, says that Egypt’s general budget for 2021 has allocated 15 per cent to green projects targeting the sectors of electricity, transport, and population. This percentage will increase to 30 per cent in 2022 and 50 per cent in 2025, he said.

The government is also issuing what are known as green bonds, the proceeds of which are allocated to funding green projects, such as renewable energy, energy efficiency, clean transportation, responsible waste management, and others. Egypt was the first country in Africa and the Middle East to issue green bonds. In September 2020, the Ministry of Finance issued $750 million green bonds at a five-year maturity. Of the total proceeds, 46 per cent will be allocated to green transportation projects and 54 per cent allocated to sustainable water and desalination projects.

Cairo is also hoping to obtain more international assistance from COP27 to help it improve its economy and achieve emission-cutting goals. Minister of International Cooperation Rania Al-Mashat has said that obtaining these funds for the purpose of preserving the global environment will need coordination between the world’s governments and the private sectors and that tools to “de-risk” the finance pledged by the private sector is needed in order to attract more investors.

She said that “instead of just billions” in funding, we need to start talking about “trillions”. But she noted that “these trillions from private-sector commitments or pledges can never make their way to the countries that need them most unless we have more synergy between [public-sector] development finance and private capital to create de-risking tools” to make investors feel safer when investing in green technologies and green projects.

Finance Minister Mohamed Maait said that developing countries are suffering from increasing debts, and that these prevent these countries from taking measures that will reduce emissions and from making investments that will help them to cope with the effects of the climate crisis. This problem will be a key priority for Egypt at COP27, he said.

“We need to sit down together and come up with a solution. The alternative is to let the risks increase, the challenges increase, and people’s suffering increase,” he said. He added that the rich countries should provide more green financing to the poorer countries on terms and conditions that are easier than those of regular finance.

“Don’t tell me you are going to offer green finance at the same cost as traditional finance,” he said at a gathering in London recently. “This will not work.”


REALISTIC HOPES: Amid all these challenges, there is a need to have realistic goals for the outcomes of COP27.

One reality we have to deal with is that fossil fuels will remain the dominant source of energy for decades to come, making it harder to combat emissions. The whole world, even the rich countries, is also suffering from economic problems due to the repercussions of the post-Covid economy and the ongoing war in Ukraine.

One thing that is in the hands of citizens is to reduce consumption and waste. The government, too, has a duty to come up with more realistic plans to develop an environmentally friendly economy without risking economic performance because the challenge is indeed huge.  

The writer is a political science lecturer at the British University in Egypt and a member of the Egyptian Council for Foreign Affairs and the UK Royal Institute of International Affairs.

*A version of this article appears in print in the 13 October, 2022 edition of Al-Ahram Weekly.

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