This project aimed to support the formulation and implementation of a comprehensive pricing strategy; and to enable the Government of Egypt to implement and monitor price adjustments towards a cost reflective price structure in the context of development goals and an evolving energy mix. The project was implemented with main Egyptian counterparts, namely, Ministry of Petroleum and Mineral Resources and the Ministry of Electricity and Renewable Energy.
The project was made up of three tasks: Economic costs and current subsidies; Development of an energy subsidy reform roadmap, and a Capacity building program, implemented by AF Mercados (Spain), the International Institute for Sustainable Development (IISD) (Canada and Switzerland) and Environics.
Task 1, led by AF Mercados – Economic costs and current subsidies: Estimated the financial and economic costs of energy supply are estimated with the goal of evaluating the level of subsidy, which will be used to formulate reform paths. The analysis covered the three broad categories of energy: power, natural gas and oil products, setting out data assumptions, methodology and the subsequent estimates of the cost of supply. To that end, an energy model was used for modeling Egypt’s national energy system to determine the least cost expansion and operation of the energy system for a given discount rate and considering the most recent expansion plans.
Task 2, led by IISD – Development of an energy subsidy reform roadmap: Employed the results of two models, a Computable Equilibrium Model (CGE) and a subsidies simulation model (SUBSIM), which were used to test the impacts of energy pricing and subsidy reform scenarios against social and economic indicators. Task 2 then proposed a roadmap for the reform of Egypt’s energy subsidies over the next several years, as well as a monitoring and evaluation (M&E).
Task 3, led by Environics – Capacity building program: Composed of two components: Institutional Support and Training. The Institutional Support component was concerned with providing consultancy to the Egyptian governmental institutions on the best institutional set up and scenario to serve a functional and effective subsidy reform strategy. The Training component focused on providing selected groups from the energy sector institutions, as well as socio-economic institutions, with the required knowledge and skills initialize and maintain the subsidy reform process, employing the energy, economic and social models used by the project.