The region needs to reduce its fossil fuel energy subsidy levels to help promote the use of clean energy, Nasser Saidi, former chief economist and head of external relations at the Dubai International Financial Centre (DIFC) Authority and chairman of the Clean Energy Business Council, has said.

Speaking at the Clean Energy Business Council’s annual meeting in Dubai on 1 December, he pointed to figures from the Washington-based IMF, which show half of the world’s $600bn-worth of fossil fuel subsidies are in the Middle East, with much of that $300bn being spent in the GCC. Conversely, global renewable energy subsidies are only $100bn.

Energy subsidies make up 20 per cent of Middle East governments’ budgets, and cheap energy encourages overuse. “Our use is some of the highest in the world,” said Saidi. Spending that money instead on education and healthcare would be “transformational” for Middle East societies, he added. “It’s shocking that we are spending more on fuel subsidies than on education and healthcare in our region.”

He said there also needs to be a drive to reduce carbon emissions and stimulate innovation in technologies and business practices.

Speaking to MEED on the sidelines of the conference, Saidi said a long-term fall in the oil price would not necessarily hinder the growth of renewables energy. “If you continue with subsidies, you encourage a lot of consumption and so you have less to export,” he said. “So you have large reduction in government revenues [with a lower oil price].”

Overall, there has been encouraging progress this year towards both the use of alternative energy and the funding of such projects, he told delegates.

He pointed to Saudi-based Acwa Power’s recent bid of 5.98 cents a kilowatt hour (kWh) for the latest phase of Dubai’s solar farm, under a 25-year, fixed-tariff build-own-operate (BOO) contract, as being the lowest price in the world. “If we continue with these prices, we will have a change in the energy landscape across the region,” Saidi told delegates.

Acwa Power submitted the lowest tariff price for the 100MW photovoltaic (PV) solar independent power plant (IPP) on 20 November. Dubai Electricity & Water Authority (Dewa) received bids from 10 of the 24 prequalified consortiums for the scheme, which is the second phase of the emirate’s Mohammed bin Rashid al-Maktoum Solar Park development.

Financing of green projects has been a key issue in the industry, and the first seven months of 2014 have seen $22bn-worth of green bonds issued globally. That figure is expected to reach $40bn by the end of the year, three times higher than the global total for 2013.

“Banks are willing to take risks for well-structured projects,” said Saidi.

Climate change should be part of the decision-making by governments and businesses, with performance indicators in place as well as incentives for energy efficiency. The region needs to phase out carbon subsidies and develop energy financing. The GCC has an opportunity to be the hub of the global green sukuk (Islamic bond) market, said Saidi.

“This is the time to promote green sukuk and make them part of our overall financing.”