Can Egypt, host of next year’s COP27, break its gas addiction?

Egypt, the likely host of next year’s COP27, is home to some of the Middle East’s largest wind and solar farms as well as a booming natural gas industry.
Egypt, the likely host of next year’s COP27, is home to some of the Middle East’s largest wind and solar farms as well as a booming natural gas industry.
Image: REUTERS/Amr Abdallah Dalsh
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Between 2011 and 2014, Egypt was roiled by revolution, enduring a succession of mass protests, scores of civilian deaths, and the ouster of two presidents. Yet a second power struggle flickered in the background: Routine, sweeping blackouts caused by faulty infrastructure and fossil fuel shortages left Cairenes (residents of the capital, Cairo) sweating in the dark for hours, and shops and factories unable to operate.

“There was no investment, no maintenance, no nothing,” said Hisham Fahmy, CEO of the American Chamber of Commerce in Egypt. “Even in the power plants we did have, the efficiency went down to around 30%. It was a disaster by all means, and pretty miserable.”

Times have changed. The post-revolution government of president Abdel Fattah el-Sisi, a former defense minister, has opened the taps on the country’s fossil fuel resources. In 2015, Italian oil major Eni struck what might be the largest offshore gas deposit ever found in the Mediteranean, off Egypt’s northern coast. Over the next few years, the government worked with the German conglomerate Siemens to build three massive gas-fired power plants.

Today, blackouts are a rarity and Egypt is a net energy exporter for the first time, shipping out record volumes of liquified natural gas from newly-built coastal terminals and inking transmission line deals to sell excess electricity to Europe, Saudi Arabia, and others. Egypt is the second-biggest gas producer in Africa, and the surge is ongoing: Production companies invested at least $4 billion in gas fields in 2020, and on Oct. 27 Eni announced the discovery of three big new onshore deposits.

“It’s mind-boggling,” Fahmy says. “No country in the world has moved so quickly from such dire straits to having excess electricity.”

Egypt has big climate ambitions

Gas is the fuel behind a surge in economic activity in Egypt; although one-third of the population still lives on less than $2 per day, GDP has increased nearly 20% since Sisi took office. It’s also boosting the country’s carbon footprint at a time when government and private sector leaders are looking to tout Egypt as a regional standard-bearer for climate-conscious development.

Egypt has big climate ambitions. The country is drawing in at least $1 billion annually in clean energy investment, according to the UN Environment Program, which in a 2019 report called it a clean energy “market that has come from nowhere in recent years.” It has among the world’s highest solar potential, and is building out some of the region’s biggest wind and solar farms. The government has committed to dedicate half of public infrastructure spending to climate-related projects by 2024, and to source at least 42% of its electricity from renewables by 2035, up from about 10-12% of generation on a daily basis today.

Egypt is also the likely host of the COP27 climate summit next year. The government sought to host COP27 in order to showcase these projects and speak up for the rest of Africa on climate finance, Ayman Amin, deputy environment director in the Ministry of Foreign Affairs and a member of the COP team, said in an interview. Next year’s COP could be an opportunity for Egypt to attract more international private finance to its clean energy sector—but it will also put the country’s growing reliance on fossil fuels under a microscope.

“Egypt is setting a path toward a more sustainable economy, and it can be an example to countries across the Mediterranean and Africa,” Frans Timmermans, executive vice president of the European Commission and the body’s top climate official, said in an interview during a visit to Cairo. “The problem is that you don’t want to be locked in forever in fossil fuels. There’s a thin line between using natural gas as a transitional energy carrier, and being locked into gas for a very long time.”

Can Egypt avoid locking in natural gas?

Climate change is a major threat to Egypt. Water scarcity is a growing concern. Annual rainfall has dropped 22% in Egypt over the past 30 years, a situation expected to worsen over the coming decades, especially for rural communities and the agriculture sector. Egypt remains locked in an escalating diplomatic dispute with Ethiopia over the construction of a massive new dam upstream on the Nile providing nearly all of Egypt’s water. Meanwhile, Alexandria and other Mediterranean cities are highly vulnerable to rising sea levels.

Egypt’s immediate priority is to address those climate impacts for its rapidly growing population before it ends its reliance on natural gas. This week, a team of Egyptian delegates is in Glasgow for COP26, the global climate summit. Amin said that the team’s main objective is to pressure rich countries to follow through on the promised delivery of funding for adaptation efforts in low-income countries, a sentiment Sisi echoed in his speech to world leaders on the summit’s first day.

Egypt has previously tapped international climate finance to support the construction of coastal flood barriers and renewable energy projects, and cited new priorities for climate adaptation spending in a long-term climate plan released Nov. 2, including water desalination plants, protections for vulnerable antiquities and tourist sites, and water conservation measures for agriculture.

“We need to ensure the finance available for us will be predictable, adequate, and sustainable,” Amin said.

Still, the country has lagged behind some peers in setting other key climate targets. It is one of only a few countries to have not submitted a new Nationally Determined Contribution (NDC), the document required of each signatory to the Paris Agreement that was meant to be updated with stronger commitments ahead of COP26. A new NDC will not be forthcoming at COP26, but will be published by COP27, Amr Osama, a senior advisor in the Environment Ministry, said in Glasgow.

And although Egypt’s per-capita carbon footprint remains far below that of most peers in the Middle East and North Africa, it has not followed the lead of fellow fossil fuel exporters like Saudi Arabia or the UAE (as well as 61 other countries globally) in setting a specific date to reduce emissions to net zero, the level the global economy must reach by 2050 to avert catastrophic warming. Egypt is also among the countries at COP26 negotiating in favor of flexible accounting rules for a global carbon market that could create a “very worrisome” loophole for misleading emissions claims, said Brad Schallert, director of carbon market governance at the World Wildlife Fund.

The pace of Egypt’s transition, and its willingness to set more ambitious and specific climate targets, are largely contingent on the delivery of cash from wealthier, higher-emitting countries, Amin said. “We aren’t ready to present absolute [emissions] numbers or to set a date for peak emissions,” he said. “If you want to ask me to deliver on mitigation, you have to raise your ambition on finance.”

That attitude may need to change before COP27 in order for Egypt to remain credible as a climate leader, said Waleed Mansour, climate program manager in Cairo for Friedrich Ebert Stiftung (FES), a think tank and development aid foundation supported by the German government. In a report on Egypt’s energy transition published just before COP26, FES called out Egypt’s reliance on oil and gas as a primary barrier to the adoption of a majority renewable energy system.

Investments in clean energy won’t put Egypt on the right track until they’re paired with a plan to phase out fossil fuels, Mansour said. “This isn’t something we should wait for others to tell us how to do,” he said. “We need to start talking about emissions reductions, and this is the moment to do that.”

Egypt’s climate ambitions run through hydrogen and offsets

Egypt’s long-term energy strategy boils down to a gradual buildup of renewables while natural gas continues to provide the baseload of the country’s energy mix. In the short term, Egypt is looking at ways to use its natural gas for more than power production.

One is a government program that allows car, taxi, and microbus owners to swap old gas-guzzling vehicles for subsidized new models that run on compressed natural gas. Tarek Awad, a spokesperson for the Finance Ministry overseeing the program, said it aims to replace 250,000 vehicles over the next few years. Egypt is also looking to attract investment for a nascent petrochemical industry, the Environment Ministry’s Osama said, converting its gas into plastics, a strategy that risks locking-in gas production for decades.

Egypt needs to upgrade its electric system, and find new clean-energy products, to expand renewable energy while retiring inefficient fossil power plants, said Ayman Soliman, chief executive of the Sovereign Fund of Egypt which invests national funds in private-sector infrastructure projects.

That means much more investment in the electric grid and finding ways to convert excess electrons from renewable energy into exportable products. The Fund is already backing several green hydrogen pilot projects (produced using renewable electricity), and Soliman said there could be a large opportunity in offset credits for sale on the international carbon market. “Large corporates that are committing to net zero need to shop for those carbon credits,” he said. “We are raising a big flag to capture that market.”

The government is also hoping COP27 will act as a marketing opportunity. The Environment Ministry plans to present Egypt as a venue for international clean energy investment and a model for other fossil-reliant countries in the Middle East and North Africa to transition to clean energy, according to Osama.

“They’re trying their best to be on the right track, but with a lot of compromises given the overall economic situation in Egypt,” Mansour said. “But hosting the COP next year shows there’s an ambition and a will to do something.”