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Revisiting Energy Subsidy Calculations: A Focus on Saudi Arabia

Anwar A. Gasim and Walid Matar

Year: 2023
Volume: Volume 44
Number: Number 1
DOI: 10.5547/01956574.44.1.agas
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Abstract:
The implicit nature of many energy subsidies has led to disagreements over what defines a ‘subsidy' while making it difficult to estimate their indirect fiscal cost. Most energy subsidies in Saudi Arabia are implicit, leading to forgone government revenue. Using a comprehensive dataset, we estimate energy subsidies in Saudi Arabia for ten fuels and electricity for the 2007–2018 period. We begin by applying the price-gap method, then introduce a formulation that better captures the forgone revenues from maintaining a subsidy, accounting for the domestic demand response to the removal of the subsidy, which in turn frees up exports that can reduce the international market price. Our method shows that the magnitude of Saudi Arabia's implicit energy subsidies may be overestimated. For instance, we find that the crude oil subsidy can fall from $8.6 billion (the price-gap estimate) to as low as $3.3 billion in 2018.



Projecting Saudi Arabia’s CO2 Dynamic Baselines to 2060: A Multivariate Approach

Abdulelah Darandary, Anwar A. Gasim, Lester C. Hunt, and Jeyhun I. Mikayilov

Year: 2024
Volume: Volume 45
Number: Special Issue
DOI: 10.5547/01956574.45.SI1.adar
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Abstract:
Using an econometric model, we generate scenario projections of CO2 emissions under different sets of assumptions on the underlying drivers. These drivers include GDP, the energy price, economic structure, and the underlying emissions trend. Our baseline scenario projects that Saudi CO2 emissions will rise from 540 Mt in 2019 to 621 Mt in 2030 and 878 Mt in 2060. In a high GDP growth scenario, the corresponding numbers for CO2 emissions are 635 Mt in 2030 and 985 Mt in 2060. In contrast, in a low GDP growth scenario, CO2 emissions would grow to 607 Mt in 2030 and 781 Mt in 2060. In an economic diversification scenario, CO2 emissions would grow to 602 Mt in 2030 and 769 Mt in 2060. These projections are 646 Mt and 1096 Mt for the heavy industrialization scenario. Even in our lowest scenario, further efforts are needed to meet the net zero ambition.





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