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Impacts of electricity price reform on Saudi regional fuel consumption and CO2 emissions

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  • Darandary, Abdulelah
  • Mikayilov, Jeyhun I.
  • Soummane, Salaheddine

Abstract

Saudi Arabia enacted two waves of energy price reforms in 2016 and 2018 to effectively gauge their impact to curb historically fast-growing electricity demand. We quantify the effects of these policy measures on regional fuel consumption and carbon emissions. We model the resulting emissions and fuel savings on the supply side using an optimization model representing Saudi Arabia's power generation sector. We estimate that between 2016 and 2019, electricity demand decreased by 8.8% per year on average following price reforms, resulting in USD 1.4 billion in fuel savings. International oil prices would bring the total savings up to USD 9.8 billion. Moreover, we show that the two waves of reforming electricity prices avoided 81–102 million tons of carbon dioxide emissions, i.e., a potential increase of 8.2%–10.4% of the power sector's emissions. Our results for Saudi Arabia demonstrate the benefits of reforming energy prices for countries with administered tariffs as an effective tool to reduce inefficient demand and carbon emissions to achieve climate pledges.

Suggested Citation

  • Darandary, Abdulelah & Mikayilov, Jeyhun I. & Soummane, Salaheddine, 2024. "Impacts of electricity price reform on Saudi regional fuel consumption and CO2 emissions," Energy Economics, Elsevier, vol. 131(C).
    • Handle: RePEc:eee:eneeco:v:131:y:2024:i:c:s0140988324001087
    DOI: 10.1016/j.eneco.2024.107400
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    More about this item

    Keywords

    Energy price reform; Electricity demand modeling; Carbon emissions; Saudi Arabia; Power system modeling;
    All these keywords.

    JEL classification:

    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • O21 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Planning Models; Planning Policy
    • Q41 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Demand and Supply; Prices
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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