The spread of COVID-19 has brought on a global public health threat and economic paralysis that is unprecedented in recent decades. This crisis has uncovered fault lines in business-as-usual approaches and has presented an opportunity to rethink wide-ranging aspects of our societies. Worldwide policy shifts are needed to build a more equitable and sustainable reality. Efforts to decrease carbon emissions at a household-level have mainly focused on carbon taxes (or equivalently subsidy cuts). While these may encourage households to consume less, they disproportionately affect poor households that spend higher portions of their earnings on utilities. They also do not directly incentivize shifts to cleaner energy tools. We present household-level renewable energy subsidies as an alternative to more popular carbon taxes or subsidy cuts as a means of improving socioeconomic and environmental outcomes.
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Renewable-energy technologies are indisputably good for the environment compared to carbon-emitting alternatives (Environmental Protection Agency, n.d.). Often, the hurdle to adopting these technologies is their impact on industrial productivity. But there are cases where environmental, social and economic interests are all aligned &ndash; these opportunities should be leveraged to improve welfare. For low-income households using non-modern methods to secure energy, like kerosene lamps, gas tanks, or fires, access to renewable energy sources can free up valuable time and money, reduce respiratory diseases and lower risks of burns, all while reducing carbon emissions. But it will take far-reaching efforts to get these technologies in the hands of end-users. Policy can play a role in encouraging this shift. We use the case of water heating practices among low-income communities in Egypt to demonstrate how encouraging the use of solar technologies can be transformative on both a household and national scale.
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The Egyptian government has committed to increasing the share of renewable energy to 20% by 2022 and 42% by 2035, with solar energy as a key focus (International Renewable Energy Agency, 2018). So far, &lsquo;stick&rsquo; approaches have been applied: progressive subsidy cuts have resulted in a surge in electricity bills intended to lower excess consumption, in addition to generating government revenue. Yet residential consumers in Egypt and the MENA region are slow to adopt renewable energy technologies. We propose that an added &lsquo;carrot&rsquo; approach of renewable energy subsidies may nudge consumers towards cleaner products that also improve living conditions.
Socio-Economic Benefits of Renewable Energy&nbsp;
According to a 2015 national survey, nearly 50% of Egyptian households do not have access to a modern water heater (Open Access Micro Data Initiative [OAMDI], 2017). In many cases, these households rely on kerosene lamps or gas tanks to heat water on a daily basis for basic needs like bathing or cleaning. This process is time-consuming, taking up roughly two hours each day, and the burden to heat water often falls on women or children. That is time that can be spent working, studying or simply with family. We estimate that an average low-income household spends around USD10 a month to heat water, which equates to 15% of the monthly earnings of households in the 20th percentile or below (World Bank, 2019). The process of heating water also impacts lung health and safety. Inhaling fumes from a kerosene lamp on a regular basis has been equated to smoking two packs of cigarettes a day (Melik, 2012).&nbsp;Hospitals in Upper Egypt have reported child-burns from kerosene lamps (Hassen et al., 2010).
There are far-reaching benefits for a family that switches from a kerosene lamp to renewable energy for water heating. Those two hours used to heat water daily can be converted directly into financial gain. For example, many families raise and sell chickens on their rooftops. With more time, they would be more able to pursue this economic opportunity and others like it. When children no longer have to spend time heating water for their basic needs, they can focus on their education or spend more time on leisure activities or with family.
On a national scale, this means a more productive and more highly educated workforce with more hours of labor to give. If each family in the bottom quartile of income worked an additional 2 hours each day, the annual GDP would rise (Levine, 2013). If the time were used for leisure, it would mean stronger social ties and family bonds, and improvements to mental health. That additional productivity, in turn, increases capacity for government spending &ndash; providing a return on the cost of subsidies. Reducing inhalation of the pollutants and carcinogens emitted by kerosene lamps means that these families will live longer, healthier, and more productive lives &ndash; and less money will be spent on health and medical care.&nbsp;Renewable energy subsidies have the potential to uplift livelihoods while cutting government spending, boosting productivity, and decreasing carbon emissions in the long term.
Renewable Energy Subsidies: Overcoming Credit Constraints and Accessing Clean Energy&nbsp;
While Egypt&rsquo;s subsidy cuts are progressive, they still present a burden to the 30% of the Egyptian population living under the national poverty line. Since 2016, energy bills have tripled due to subsidy cuts. These bills represent a substantial portion of the monthly income of those living in poverty. Although renewable energy sources can offer a way out of increasing monthly bills, they all require an upfront investment that is too large for these families to make. With renewable energy subsidies, families will be able to afford this upfront cost.&nbsp;
Renewable technologies can alleviate poverty on the household level by reducing the regressive nature of securing basic needs. Egypt has the potential to lead in experimenting with policies that successfully promote this. Household spending on basic needs is often regressive; poor families spend a higher proportion of their income securing everyday needs compared to higher income households. But it doesn&rsquo;t have to be that way. The cost of renewable energy technologies is largely upfront and fixed &ndash; in the form of buying and installing a solar panel, for example. Running costs in the form of maintenance are much lower than a monthly electricity bill (McBain, 2019). As a result, they have the potential to reduce consistent spending on energy. While the upfront costs of securing solar technologies is decreasing, this is where we believe policy comes in.&nbsp;
Renewable energy subsidies progressively reward households for choosing renewable alternatives and simultaneously circumvent constraints that prevent them from doing so. This has the effect of both reducing carbon emissions and boosting the welfare of these families over the long term. It also has the potential effect of making these technologies cheaper; increased demand may attract more research investments and allow for scaling that can lower per-unit costs.
Subsidy Swaps: Learning from Morocco and India
One way of generating the funds needed for renewable energy subsidies is through a &ldquo;subsidy swap,&rdquo; redirecting government support from fossil fuels to clean energy. This involves reducing traditional fossil fuel subsidies while implementing measures that increase the deployment of sustainable energy. This trade-off must not be direct or one-to-one; portions of funds redirected from fossil fuel subsidies may be used for other pressing policy areas from education to health and housing. This strategy is useful for countries where energy subsidies have risen to unsustainable levels. In Egypt, current energy subsidy cuts present an opportunity to promote subsidy swaps as a practical way of both reducing fossil fuel dependency and providing an alternate social safety tool for lower-income population segments.&nbsp;
Some countries are already embarking on subsidy swap policies. Morocco is one such example &ndash; in 2012, energy subsidies rose to 6.6% of the national GDP (Bridle et al., 2019). In 2014, to curtail this spending, Morocco began reducing petroleum and diesel subsidies and gradually increasing electricity prices. Since these policy changes, the only fossil fuel subsidies in Morocco have been those for butane gas. Simultaneously, the government has set ambitious renewable energy targets, with a goal of 52% by 2030. Several national programs have been designed to help reach this threshold. The national solar pumping program encourages the use of solar pumps for irrigation in agricultural settings. A related program creates awareness of solar pumps to increase adoption among farmers.&nbsp;
Similarly, in 2009, India committed to phasing out its fossil fuel subsidies. By 2018, it had almost entirely removed its existing gasoline and diesel subsidies. India is also providing remote, rural households with solar battery packs through an electricity subsidy known as the Saubhagya Scheme. The program also includes repair and maintenance for five years. From 2014 to 2017, India&rsquo;s subsidy support to petroleum products fell by nearly 75%, while support for renewable energy increased almost six times, from USD 431 million to USD 2.2 billion in this period (Bridle et al., 2019). Renewable energy subsidies are increasingly implemented and can help transform economic and social relations to energy. In Egypt, the current combination of ambitious policy goals and major reforms cutting fossil fuel subsidies make it opportune to explore policies that can further spur environmental improvements without reinforcing existing inequalities.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
References
McBain, B. (2019). Renewables Are Getting Cheaper All the Time &ndash; Here's Why. The Conversation. Accessed January 21, 2021. <a href="https://theconversation.com/renewables-are-getting-cheaper-all-the-time-heres-why-64799">https://theconversation.com/renewables-are-getting-cheaper-all-the-time-heres-why-64799</a>.
Bridle, R., Shruti S., Mostafa M., &amp; Geddes, A. (2019). Fossil Fuel to Clean Energy Subsidy Swaps.&nbsp; The International Institute for Sustainable Development. Available at <a href="https://www.iisd.org/system/files/publications/fossil-fuel-clean-energy-subsidy-swap.pdf">https://www.iisd.org/system/files/publications/fossil-fuel-clean-energy-subsidy-swap.pdf</a>
Environmental Protection Agency. (n.d.). <a href="https://www.epa.gov/statelocalenergy/local-renewable-energy-benefits-and-resources#:~:text=Environmental%20and%20economic%20benefits%20of,reducing%20dependence%20on%20imported%20fuels">Local Renewable Energy Benefits and Resources</a>. Accessed 12 January 2021.&nbsp;
Hassen, Y. S., Makboul, M., Taha, O., &amp; Altayeb, A. (2010). Upper Egypt Experience in Management of Paediatric Burn: The Last Six Years. Annals of Burns and Fire Disasters 23(3): 116&ndash;119. Available at <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3188256/">https://www.ncbi.nlm.nih.gov/pmc/articles/PMC3188256/</a>
International Renewable Energy Agency. (2018). <a href="https://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Oct/IRENA_Outlook_Egypt_2018_En_summary.pdf?la=en&amp;hash=58DBAA614BE0675F66D3B4A2AC68833FF78700A0">Renewable Energy Outlook: Egypt (Executive Summary)</a>. International Renewable Energy Agency, Abu Dhabi. Accessed 12 January 2021.&nbsp;
Levine, L. (2013). Economic Growth and the Unemployment Rate. Congressional Research Service. Available at <a href="https://fas.org/sgp/crs/misc/R42063.pdf">https://fas.org/sgp/crs/misc/R42063.pdf</a>.&nbsp;
Melik, J. (2012). Solutions sought to end use of kerosene lamps. BBC News. Accessed January 2021, from <a href="https://www.bbc.com/news/business-18262217">https://www.bbc.com/news/business-18262217</a>&nbsp;
Open Access Micro Data Initiative. (2017). <a href="http://www.erfdataportal.com/index.php/catalog/129#metadata-disclaimer_copyright">Harmonized Household Income and Expenditure Surveys (HHIES)</a>, Version 2.0 of Licensed Data Files; HIECS 2015 - Central Agency for Public Mobilization and Statistics (CAPMAS). Egypt: Economic Research Forum (ERF).
World Bank. (2019). <a href="https://openknowledge.worldbank.org/handle/10986/32812">Understanding Poverty and Inequality in Egypt</a>. World Bank, Washington, DC. &copy; World Bank. License: CC BY 3.0 IGO.

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