Egypt is striving to lead by example as it gears up to host the Cop 27 UN climate conference at Sharm el-Sheikh in November. But its decarbonisation plans have been making slow progress as the country struggles with rampant inflation and dwindling foreign currency reserves, renewing calls for financial support.
A developing economy and an oil and gas producer, Egypt expects this year's Cop 27 gathering to focus more on "reporting the progress on existing pledges", rather than being "a Cop of big pledges and big announcements when it comes to new promises", UN climate change envoy Mahmoud Mohieldin told Argus recently.
The country updated its nationally determined contribution (NDC) in July to include a target to slash greenhouse gas emissions in the power sector, oil and gas sector and transport sector — Egypt's three main sources of carbon emissions — by 33pc, 65pc and 7pc, respectively, by 2030. But these targets refer to a "business as usual" scenario, meaning that only emissions from the oil and gas sector would actually drop in outright terms by the end of the decade.
Egypt is pinning its carbon emissions reduction targets largely on the power sector, which accounts for the vast majority of the country's emissions, being responsible for 64pc of emissions from the three sectors combined in 2015, the baseline year used for the projections. Of the 80.6mn t of CO2 reduction that Egypt pledged by 2030, 87pc would come from the power sector.
To achieve this, Egypt is aiming to generate 40pc of its electricity with renewables by 2030, rising further to 42pc by 2035. This would be up from a targeted 20pc in 2022, according to the country's New and Renewable Energy Authority (NREA). But even the 2022 figure appears ambitious, with renewables accounting for just 12pc of total generation in the 2020-21 fiscal year, the most recent figures from Egyptian Electricity Holding (EEHC) show.
In a bid to attract foreign investment, the NREA has been keen to stress the country's renewable energy potential, citing the amount of wind and solar radiation it receives. Italy's Eni, the largest gas producer in Egypt, appears to have been receptive to such opportunities, announcing in late August plans to work in the coming years with the government on a set of solar and wind projects with a combined capacity of around 10GW. But progress in building up capacity has been slow. Combined installed hydropower, wind and solar capacity totalled 5.85GW — just 10pc of total capacity — in the 2020-21 fiscal year,unchanged from a year earlier, according to EEHC.
Are friends electric?
Egypt is also attempting to position itself as a regional hub for electricity transmission to countries in Europe, Africa and the Mideast Gulf. Egypt plans interconnection projects with a combined capacity of 9GW. Its plans are likely to gain traction in the wake of Russia's invasion of Ukraine, which has sent shockwaves through energy markets and exacerbated already raging global inflation. In the medium to long term, Cairo hopes to offset its growing trade deficit through pricing and selling its kilowatt-hours in hard currency.
Egypt finds itself as a centre point connecting three different interconnection projects — the Eight Country Interconnection Project, the Maghreb Countries Interconnection Project and the Gulf Co-operation Council (GCC) Power Grid Interconnection Project — a position it plans to capitalise on. The country is already linked with neighbours Jordan and Libya, and in February signed an agreement with Amman to boost interconnector capacity to 2GW from 450MW.
Construction work on a 3GW interconnection project with Saudi Arabia began earlier this year. The project, which would be the first large-scale high-voltage direct current (HVDC) interconnection within the Middle East and north Africa region, is due to start at half its planned capacity in late 2024 before reaching full capacity by 2026. Cairo wants eventually to be able to supply power to Europe, and hopes to finalise feasibility studies on interconnectors with Cyprus and Greece before the end of this year.
Egypt will have some progress on cutting emissions to showcase at COP 27. It was able to gradually reduce emissions from the power sector — to 368t of CO2/GWh in 2020-21 from 489t of CO2/GWh in 2016-17 — EEHC figures show. But this largely stemmed from the country's push to use more natural gas for power generation since its domestic production began to recover, as well as efficiency gains made possible by new gas-fired plants installed in recent years.
Egyptian gas production dwindled in the wake of the 2011 revolution, which led the government to prioritise supply to the domestic market. Both its LNG terminals halted exports and the country swiftly turned into a major LNG importer until 2018, when the rebound in upstream output from new discoveries — most notably the 849bn m³ Zohr field — allowed Egypt to halt imports and gradually switch back to exports.
Cairo has been striving to make greater domestic use of its natural resources since then, in a bid to tackle energy poverty and erase the memories of recurring blackouts in the wake of the revolution. EEHC installed 27.4GW of thermal capacity in 2012-17. And it was on course to meet its target to add 3.4mn households to the gas distribution grid across 2018-22, while also incentivising conversions of passenger cars to run on compressed natural gas.
Environmental pledges on hold?
But Egypt may have been one of the many countries forced by the energy crisis to put environmental plans on the back burner and deal with more immediate threats to its own energy security. With global gas and LNG prices rising above international crude benchmarks since mid-2021, the Egyptian government already opted to boost fuel oil use for power generation in October last year, in a bid to free up gas supplies for LNG exports. Fuel oil consumption rose to 108,000 b/d in January-June from 22,000 b/d a year earlier, with June demand of 114,000 b/d the highest for any month since June 2018, the most recent figures made available by the Joint Organisation Data Initiative show.
Last month, the government went further, approving measures aimed at rationalising electricity consumption, again in a bid to save gas supplies that can be re-exported as LNG at record-high prices — and beef up foreign currency reserves, which had shrunk to $33.4bn at the end of July frrom $41bn at the end of February. Egypt has had to draw on its foreign currency reserves to keep up with debt repayments and "calm the markets", according to the central bank, with the country's foreign debt rising by $8bn in just three months to $145.5bn by the end of December 2021. The increase in foreign debt was expected to consume almost 45pc of the state's revenues in the 2022-23 fiscal year, while the central bank in March devalued the Egyptian pound by around 16pc overnight to "stem the widening export deficit".
All these factors "limit Egypt's ambition on allocating future climate investments", the updated NDC document says, as Cairo renews the call for developed countries to provide financial support to developing ones. Egypt estimates the total cost of its updated NDC at an eyewatering $246bn, including $196bn for mitigation actions and $50bn for adaptation interventions. As it prepares to show progress and renew pledges on emission targets, it will also ask for "an update on the pledges that have been made on financing", climate envoy Mohieldin says.
| Egypt GHG emission reduction targets | mn t of CO2e | |||
| Power sector | Oil and gas | Transport | Total | |
| Baseline GHG emissions 2015 | 87.7 | 2.1 | 48.2 | 138.1 |
| BAU* scenario 2030 | 214.7 | 2.6 | 124.4 | 341.7 |
| Reduction target vs BAU 2030 | 69.9 | 1.7 | 9.0 | 80.6 |
| GHG cut vs BAU by 2030 % | 33.0 | 65.0 | 7.0 | 24.0 |
| GHG emissions in 2030 vs 2015† | 57.1 | -1.2 | 67.2 | 123.1 |
| GHG emissions 2030 vs 2015† ±% | 65.0 | -58.0 | 139.0 | 89.0 |
| *business as usual †if reduction vs BAU achieved | ||||
| — Egypt updated NDC, July 2022 | ||||
