Energy productivity as a New Growth Model for GCC Countries

About the Project

Increasing energy productivity holds some of the greatest possibilities for enhancing the welfare countries get out of their energy systems. It also recasts energy efficiency in terms of boosting competitiveness and wealth, more powerfully conveying its profound benefits to society. 

KAPSARC and UNESCWA have initiated this project to explore the energy productivity potential of the Arab region, starting with the six GCC countries.

Aimed at policymakers, the project aims to highlight the social gains from energy productivity investments, where countries are currently at, and articulate options for achieving improved performance in this area.

Key Points

Following the collapse in oil prices, Gulf Cooperation Council (GCC) countries have intensified efforts to find a new growth model which increases the welfare of their citizens, while reducing exposure to volatile energy markets. This paper argues that placing energy productivity at the heart of such a new growth paradigm offers a compelling path forward to strengthen economic diversification, energy efficiency and innovation efforts. Key findings of this paper include: 

• Setting national energy productivity targets would provide a powerful signal on the future direction of government policies and increase transparency to monitor and evaluate progress. Clear, shared goals can also act as a helpful coordinating instrument between different stakeholders. 
• Evidence suggests that greater economic value and per capita income is possible along a high-energy productivity growth pathway. Higher energy productivity can help address the Gulf’s “energy paradox” of the current growth model driving higher energy consumption as a proportion of energy production, while relying on energy export revenues for public investment and spending to support growth. 
• Many advanced economies show strong evidence of having successfully decoupled economic growth from energy consumption along a high-energy productivity pathway. GCC countries exhibit this trait only weakly, if at all. 
• Setting energy productivity goals could constitute a regionally appropriate form of ‘‘green growth’’ and also strengthen GCC engagement with various international processes such as the UNFCCC and G-20 initiatives on energy and the environment.