The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development

The report analyzes fossil-fuel subsidies in the GCC, noting that low energy pricing serves a political social contract but leads to domestic over-consumption and fiscal pressure. Using IEA, IMF, and GSI data, it estimates total subsidies in 2011 at over US$105 billion, with Saudi Arabia as a primary driver. The document argues that underpricing fossil fuels creates a significant barrier to renewable energy by making conventional thermal power appear cheaper and distorting the market for investors.

• Fossil-fuel subsidies in the GCC are used to redistribute resource wealth and maintain a social contract, but they have resulted in domestic over-consumption and a lack of incentives for energy efficiency.
• In 2011, total subsidies to oil, natural gas, and electricity in the GCC reached approximately US$105 billion according to the IEA, and US$107 billion according to the IMF.
• GSI's price-gap calculations for 2011 show that about US$51 billion in oil subsidies went to gasoline and diesel, with US$31 billion specifically allocated to diesel used in the electricity sector.
• Saudi Arabia is a primary driver of subsidy growth; gasoline and diesel subsidies increased from US$2 billion and US$3 billion in 2004 to US$14 billion and US$15 billion in 2012.
• The underpricing of fossil fuels acts as a major barrier to renewable energy deployment by making conventional thermal power generation appear cheaper and discouraging investment in distorted markets.
• Fossil-fuel subsidies create immense fiscal pressure, reaching nearly 11 per cent of GDP in Saudi Arabia when estimated using an opportunity cost approach.
• Electricity consumption in the GCC grew by approximately 7 per cent annually between 1999 and 2008, with the residential sector accounting for about half of domestic power demand.
• Transport fuel consumption increased by at least 60 per cent in most GCC states between 2007 and 2011, while prices remained largely static.
• The UAE has the highest gasoline prices in the Gulf region, partly because some suppliers import gasoline at market prices and pass these costs to consumers.

APA

Charles, C., Moerenhout, T., & Bridle, R. (2014). The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development. International Institute for Sustainable Development. https://www.iisd.org/gsi/sites/default/files/ffs_gcc_context.pdf

Chicago

Charles, Chris, Tom Moerenhout, and Richard Bridle. The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development. International Institute for Sustainable Development, 2014. https://www.iisd.org/gsi/sites/default/files/ffs_gcc_context.pdf.

Wikipedia

{{cite report |last1=Charles |first1=Chris |last2=Moerenhout |first2=Tom |last3=Bridle |first3=Richard |title=The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development |publisher=International Institute for Sustainable Development |date=July 2014 |url=https://www.iisd.org/gsi/sites/default/files/ffs_gcc_context.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{charles2014context, author = {Charles, Chris and Moerenhout, Tom and Bridle, Richard}, title = {{The Context of Fossil-Fuel Subsidies in the GCC Region and Their Impact on Renewable Energy Development}}, institution = {International Institute for Sustainable Development}, year = {2014}, month = jul, url = {https://www.iisd.org/gsi/sites/default/files/ffs_gcc_context.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }