Impacts of electricity price reform on Saudi regional fuel consumption and CO2 emissions

Saudi Arabia enacted two waves of energy price reforms in 2016 and 2018 to effectively gauge their impact to curb historically fast-growing electricity demand. We quantify the effects of these policy measures on regional fuel consumption and carbon emissions. We model the resulting emissions and fuel savings on the supply side using an optimization model representing Saudi Arabia's power generation sector. We estimate that between 2016 and 2019, electricity demand decreased by 8.8% per year on average following price reforms, resulting in USD 1.4 billion in fuel savings. International oil prices would bring the total savings up to USD 9.8 billion. Moreover, we show that the two waves of reforming electricity prices avoided 81-102 million tons of carbon dioxide emissions, i.e., a potential increase of 8.2%-10.4% of the power sector's emissions. Our results for Saudi Arabia demonstrate the benefits of reforming energy prices for countries with administered tariffs as an effective tool to reduce inefficient demand and carbon emissions to achieve climate pledges.