Econostrum | Economic News in the Mediterranean

“We need less dogmatism and more pragmatism”

Written by Interviewed by Gérard Tur on Friday, September 21st 2018 à 15:40 | Read 495 times

Dario Chello, president of the Mediterranean Association of National Agencies for Energy Management (MEDENER), is calling for a change of tack with regard to energy efficiency in Southern Mediterranean states. Version française

“We need less dogmatism and more pragmatism”

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Dario Chello, president of the Mediterranean Association of National Agencies for Energy Management (MEDENER)
Dario Chello, president of the Mediterranean Association of National Agencies for Energy Management (MEDENER) You are organizing a conference on 4th October, 2018, in Amman, Jordan on the theme “Energy efficiency and energy prices: a peaceful cure for the headache”. What is this headache that needs curing?
Dario Chello. This is the sixth conference organized by the MEDENER (Mediterranean Association of National Agencies for Energy Management). Each year, we address a major issue in the field of energy conservation and try to move forward. The price of energy can be an obstacle in matters of energy efficiency. In many countries on the Southern Mediterranean Rim, it’s ridiculously low –when it’s paid- due to state subsidies. In Algeria, 50% of electricity subscribers don’t pay their bills. Therefore, there’s no incentive for the population or companies to invest to reduce their consumption. Yet money remains the best motivation, way ahead of the future of the planet.
So we should do away with those subsidies?
D.C.. The good practices put in place in Europe in terms of energy efficiency cannot be reproduced “as is” in the Maghreb or Mashriq countries as the results would be nil. The legislative frameworks in the energy sector are too dissimilar. We cannot just wait for the market to take over on the southern shores of the Mediterranean because climate change is doing damage right now. Removing subsidies and letting the market fix the price would lead to huge increases and a backlash, since the people would no longer be able to heat their homes or get around. This summer, the Jordanian government, pressured by the World Bank, increased energy prices. The scale of the demonstrations that followed led to the government back-pedalling and the prime minister’s resignation.

Waste of time and resources

Are tax breaks the answer?
D.C.. Here again, the European answer isn’t suitable. In many Northern Mediterranean countries, a large portion of insulation costs is tax-deductible. It’s a good incentive. But for it to work, the target populations’ income would need to be at a sufficient level to be liable to tax and the work carried out would have to be outside the informal economy. In many Mediterranean countries, these two conditions are not met.
So what to do?
D.C.. Be pragmatic. Forget all the dogmatism. Market rules do not work in countries without any real distribution of income and in which monopolies control huge swathes of the economy. The Western systems put in place in Africa lead to a waste of time and resources. We have to change them. The people in these countries buy cheap air conditioners and keep their fridges for decades because they don’t have a lot of money… All this represents a huge consumption of energy. With aid from international donors, states could, for example, give buyers a 75% discount on the price of efficient appliances. The drop in electricity consumption would be immediate and massive. Aid such as this goes against the rules of free competition espoused by the World Bank and IMF, but it would produce results. There are no longer any technical barriers to energy efficiency. It’s just a matter of political will on behalf of the states and international donors.

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