Energy policy in general and energy subsidies in particular have direct and indirect
impact on the sustainable development path in both developed and developing
countries. The need to reform energy subsidies was one of the major issues addressed at
the World Summit on Sustainable Development held in Johannesburg in September
2002. While a proven long list of both environmental benefits and economic gains from
reforming or phasing out subsidies was affirmed both in theory and through
international experience, still social and political consequences especially in developing
countries is surrounded by uncertainty. This fact is clearly reflected in the case of Egypt
as one of the developing countries. Where despite clear evidence of the negative
implications on the environmental and economic dimensions, energy subsidies was
growing in both absolute and relative terms until 2010.
Recently many developing countries - among which is Egypt- has either announced or
initiated energy price reforms, this trend was called for by and is expected to be
welcomed by the international community.
This paper argues that phasing out fossil fuel subsidies by developing countries is
economically motivated, especially in the light of budget deficits accumulated after the
global economic crisis. Consequently price reform policies and strategies may be biased
towards the economic dimension of sustainable development with no or even negative
impact on the social and environmental dimensions.
In light of the above the primary objective of this paper is evaluates the relative weight
of the energy sector in Egypt sustainable development path. The secondary objective is
to evaluate the possible impacts of phasing out fossil fuel subsidies on the three
dimensions of sustainable development in Egypt as one of the "developing countries"
with special emphasis on the social and environmental dimensions. The final objective is
to develop policy recommendations for phasing out fossil fuel subsidies to have a
balanced impact on the three dimensions of sustainable development in Egypt.
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