Egypt can unlock significant economic growth by embracing climate action, transforming its cities into resilient hubs that attract investment, create jobs, and enhance the quality of life for citizens.
Effective and sustainable climate action would also enable Egypt to use and allocate natural resources more efficiently, reduce the impacts of climate change on people and businesses, and enhance Egypt¡¯s competitiveness in global markets.
Without sustained efforts to address the climate challenge, estimates suggest the country may face a GDP loss of 2% to 6% by 2060. The cost of air pollution on health alone, for instance, was estimated to amount to approximately 1.4% of Egypt¡¯s GDP in 2017.
Egypt is already moving forward with several measures to tackle climate change. In May 2022, Egypt launched its first National Climate Change Strategy 2050, which includes high-priority projects aimed for completion by 2030. The second update to Egypt's Nationally Determined Contribution to Climate Action sets ambitious emission reduction targets for the power sector, aiming to achieve 42% renewable energy in the generation mix by 2030, a target previously set for 2035.
Building on its national strategies and the World Bank Group¡¯s Egypt Country Climate and Development Report (CCDR), Egypt launched a flagship program, the Country Platform for the Nexus of Water, Food, and Energy (NWFE), which addresses the interdependence between these sectors. The platform seeks to optimize resource use, transition to low emission infrastructure and strengthen water and food security. In the first phase, the platform focuses on nine priority projects in the water, food and energy sectors, selected from the National Climate Change Strategy, with sustainable transportation projects added at a later stage.
"Egypt¡¯s ambitious plans to transition to a low-carbon economy require significant efforts to reduce greenhouse gas emissions by shifting to alternative energy sources like solar and wind, upscaling energy efficiency, and other measures," said climate expert Dalia Sakr, Founder & CEO of SHiFTERRA Consultancy. "Despite these ongoing efforts, global temperature increases could still be catastrophic, particularly for the Nile Delta, necessitating urgent measures to protect citizens from the adverse effects of climate change, especially the poor and vulnerable. The majority of Egypt¡¯s needed climate actions are reflected in its second update for its Nationally Determined Contribution submitted in 2023, but international support is essential to achieve those targets."
The FY24 national budget statement outlines an ambitious plan to increase green public investments to 50 percent of total investments by FY25, building on an estimated 40 percent in FY24. This marks a significant progression from just 15 percent in FY21, reflecting Egypt's commitment to scaling up environmentally friendly projects. These efforts are part of a broader strategy to expand the country's portfolio of sustainable initiatives that drive economic growth and enhance citizens' well-being. Additionally, national Initiatives like 'Decent Life' and 'Green Village' are specifically designed to foster sustainability in rural communities. The Green Village initiative eventually will cover 175 communities, boosting resilience by implementing green building standards and putting in place modern irrigation systems. Recent regulations also mandate that all ministries submit their budgets with program matrices that provide detailed information on programs related to the green economy and environmental projects to ensure consistency with Egypt's Vision 2030.
Empowering the private sector to take an active role in the green transition is also a high priority in the government's climate action plans, following on the recommendations of the World Bank Group¡¯s CCDR. This includes taking steps to encourage investment in green sectors such as low-carbon municipal waste management and sustainable urban development. In many situations, policy and institutional reform can unlock planned private investment, but there can also be a role for well-designed tax incentives. The Government approved a National Low-Carbon Hydrogen Strategy in 2023 followed by the approval of a Green Hydrogen Incentives Law and the launch of a National Council for Green Hydrogen in 2024 to provide the policy and regulatory direction, address private investment barriers and ensure alignment with the nation¡¯s economic and social strategies.
Actions to build resilience are particularly important in vulnerable areas like the coastal governorate of Alexandria, where rising sea levels pose a significant risk. Preventative actions such as implementing robust stormwater management systems can protect the city from considerable economic losses, as disruptions in services reduce productivity and transportation, limiting mobility and access to essential resources. Better infrastructure can also help protect critical socio-economic infrastructure, for example against flooding of schools and hospitals as well as heritage sites.
In addition to protecting cities and people, climate action also creates opportunities for Egypt's growth. As markets adopt stricter carbon standards¡ªsuch as the European Union¡¯s Carbon Border Adjustment Mechanism, which imposes tariffs on carbon-intensive imports¡ªreducing the carbon intensity of Egyptian products can strengthen their competitiveness and meet the growing demand for sustainable goods in global markets.
Through its operations and research work, the World Bank Group is committed to supporting Egypt's climate action through providing technical assistance, financing, and policy advice.
ľ¹ÏÓ°Ôº Group CCDR, published in 2022, has helped guide national climate efforts, including the NWFE platform and the broader shift towards more private sector participation in the green economy. The report explores the challenges and opportunities for improving the alignment of Egypt¡¯s development goals with its climate action ambition. It identifies opportunities to reduce inefficiencies, manage risk, and strengthen the foundation for increased private-sector participation in the green economy and increase the contribution of green and sustainable projects to GDP to reach at least 5%. The report also provides policy and investment suggestions that aim to create quick wins in the short term and pave the way to significant long-term benefits.
In addition, the World Bank Group¡¯s recent development policy financing package for Egypt supports essential components of the country¡¯s?climate-smart policy ¨C also informed by the CCDR ¨C including ambitious water management regulations, setting up systems for emissions monitoring, and enabling financial regulators to facilitate carbon market transactions. The goal is also to enable private companies to supply renewable energy to other private companies and reduce energy waste. These efforts will save gas used for electricity generation, thereby promoting green energy and mobilizing private capital.
Climate action carries numerous benefits for Egypt, allowing the country to leverage renewable energy and sustainable practices to drive economic development, creating new job opportunities and fostering innovation. And by investing in climate resilience, the country can protect infrastructure and food security, helping ensure safety and stable livelihoods for its citizens for years to come.
