Improving car energy efficiency leads to low social welfare rates

April 04, 2018

Samar Yahya

Saudi Gazette

JEDDAH — King Abdullah Petroleum Studies and Research Center (KAPSARC) economic meeting held at the centre campus on Tuesday discussed how to develop frameworks for the management of oil revenue stabilization funds and restructuring the electricity generation sector in the Kingdom.

The meeting also highlighted the first study of its kind to measure the rebound effect for more efficient passenger cars by senior research associate Anwar Gasim. The study was on social welfare in 100 countries and ways to develop more pragmatic policies and objectives for global climate change.

He showed that improving energy efficiency in cars leads to low social welfare rates due to the additional driving. The study found that these external costs are higher than the additional driving benefits in most cases.

He pointed that improving the energy consumption efficiency of cars makes driving less expensive, allowing them to drive longer distances. This additional driving is known as the rebound effect, because it eliminates part of the expected energy savings from improved energy efficiency.

Senior research associate Nader Al-Kathiri’s presentation was on “Managing Oil Revenue Stabilization Funds: A Framework for Developing Policies”. Al-Kathiri said “oil revenue stability funds provides short-term protection against fluctuations in oil revenues, showing that Saudi Arabia's deposits and reserves with the Saudi Arabian Monetary Authority are considered a source to isolate the government's budget from fluctuations the oil revenues went through”. In addition, he also mentioned that sovereign wealth funds are working to create a source of income for future generations, to replace other sources of income from the non-renewable resources.”

Senior research associate Bertrand Rioux‘s topic was "Restructuring Saudi Arabia’s Power Generation Sector: Model-Based Insights" that the structure of the sector provides more than $4 billion annually. He also reviewed two challenges facing the structure of the electricity generation sector in the Kingdom that are to ensure a sufficient reliability in electricity supply during peak demand, and reduce the possibility of price manipulation by exercising market power through power producing companies.

Research associate David Wogan talked about "Towards More Pragmatic Global Climate Goals and Policies". He discussed four different scenarios to reduce carbon emissions, and the most important climate and economic impacts in the year 2200. He noted that the objectives of the global Paris Climate Agreement, formulated by each individual country, are not enough to keep the rising rates of global temperatures under 2°C.

KAPSARC and the Institute of Energy Economics, Japan (IEEJ) are undertaking a joint research project to examine more practical approaches to climate change policy which includes two main elements; developing efficient global pathways that incorporate the total cost of climate change and examining nationally optimal approaches that reflect local starting points and how they might be influenced by stakeholder interests.

He stressed on the importance of investing and working constantly on the development of low-carbon and zero-carbon technologies, describing the agreement as one of the most important steps taken by the international community to face the challenges of climate change.

KAPSARC meeting was attended by the President of the Center Adam Sieminski, the Vice President, Research David Hobbs, the Director General of the Department of Consultancy Services at the Center, Dr. Nayef Al Musehel, a number of KAPSARC researchers, media and opinion writers specialized in energy and economics. — SG

April 04, 2018
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