Cost of energy inefficiency in Qatar

Abstract

Energy policy and security of a country heavily depends on its resources, geography, demographics and economic structure. While most active strategies include the discovery, extraction and utilization (through new infrastructure) of energy resources, a more subtle approach to reduce energy demand and increase energy security is to use the resources more efficiently and conserve them to increase the life span in which they can be used. This understated approach is the implementation of energy efficiency policy. Energy efficiency taken holistically includes the improvements in technology as well as changes in human behavior to do a task with less amount of energy. While different studies have shown the impact of efficiency policies and programs on individual economic sectors (i.e. industrial, commercial, residential, agriculture and transport), a complete overview of the impact of efficiency on economy has received little attention. This approach overlooks the interdependence of each economic sector and their influence on each other. Similarly, the rebound effect, a consequence and a major element of efficiency is avoided in these studies as well. Rebound effect is the increase in energy consumption because of lower prices of energy commodities due to increase in efficiency. The rebound effect not only has a direct impact on the individual sector, like driving more miles because of a more efficient vehicle, it has also indirect consequences, such as going to a vacation because of the money being saved through efficiency. Thus, the study of efficiency, its dynamic influence and calculating a realistic magnitude are required to ideally approach the costs and benefits of implementing an efficiency program or policy. This research looks into the economy wide impacts of energy efficiency and the dynamic interaction and impacts of each sector on the other. First, a hierarchal list of variables, which influence the energy supply and demand of any economy, is created. Second, a list of indicators which measure the health of an economy is formed. Using data for the top 10, oil and gas producing countries (these countries give a good mix of economies which heavily rely on oil and gas rents such as Qatar, UAE, Saudi Arabia as well as economies, which produce some of the highest energy resources, while relying very little on its influence on their economies, such as US, Norway), the magnitude and impact of each variable to the economy is calculated. These variables are then used to create a system dynamics model which includes the production, conversion and transportation of energy from different sources to consumption in different sectors. Estimated energy efficiency measures and impacts are then incorporated into the systems model to see the effect of efficiency as well as the rebound effect on the economy. A major goal of this study is to find the future impacts of energy efficiency policies and the consequences of these policies, if they are not implemented because of financial constraints or present gains (such as more revenues from greater resource production). The cost benefits as well as the effective implementation of efficiency measures are calculated and compared using the economic indicators obtained in the second step. Finally, these indicators can be used to determine as to why some countries are more efficient with their energy resources as compared to others.