In recent years, international efforts have been made to reduce fossil fuel-based energy subsidies as the energy transition has accelerated in response to climate change. As part of a social contract, energy subsidies have been used to stabilize domestic prices and stimulate the economy, especially in the Middle East and North Africa. As a result, per capita energy subsidies in the Middle East and North Africa (hereafter referred to as MENA) have reached the highest levels in the world, and excessive government spending has also been identified as a factor preventing the expansion of social services for the most vulnerable. In light of the decarbonization trends and research showing that energy subsidies contribute to air pollution, subsidy policies are at a critical crossroads between reduction and maintenance. However, the Arab Spring in 2011 occurred in countries that attempted to reduce energy subsidies and resulted in consumer prices rises contributing to political instability.  More recently, the overall increase in energy subsidies since 2020 was also an attempt to stabilize the domestic situation by overcoming the economic downturn through the successive outbreaks of the COVID-19 pandemic and the Russian-Ukrainian war. Despite its importance, there is little research on the impact and social perceptions of energy subsidy policies in the MENA region with coverage since thelate 2010s.

To fill this gap, this study focuses on the impact of energy subsidy policies on the economy and environment, and social perceptionsof energy subsidies in the MENA region. Using satellite data such as nighttime lights and air pollution concentrations, this study examines trends in energy subsidy policies and levels in the MENA region in the 2010-2021 period. Lastly, we conducted an online survey to examine awareness of energy subsidy policy and policy reform in the MENA. Based on these findings, this study proposed recommendations for energy subsidy policy reform, taking into account the the MENA context

Chapter 2 discusses trends in energy subsidies and policy changes in the MENA. Overall, the size of energy subsidies has declined significantly since 2010. In particular, the subsidy share of GDP in 2010 reached 9%, compared to only 4% in 2016 . However, the size of the subsidies has increased again since 2016, and it is generally on the rise, with the exception of 2020, when COVID-19 took place.

Six countries included in this study(Egypt, Lebanon, Jordan, Morocco, Tunisia, and Saudi Arabia) provided energy subsidies through social contracts under authoritarian systems of government . After reducing or suspending subsidies to ease the government's financial burden, the government budget was reduced by raising domestic fuel prices. Also, governments used their budget to support the poor, improve infrastructure, and expand social protection programs. Additionally, efforts have also been made to introduce a price indexation system for petroleum products. In several countries, including Egypt and Tunisia, this process led to anti-government protests and a return to government policies. In terms of subsidy reform, Morocco and Jordan have been considered successful. This is because Morocco, in particular, had a greater chance of success because it implemented subsidy reform in the mid-2010s, when oil prices remained low. MENA countries are constrained in their ability to reform energy subsidies because they must not only stabilize their domestic situation but also make sure that external shocks do not lead to price increases.

In Chapter 3, we examine the impact on energy subsidies on economic activities in the MENA region. Upon examining the impact of energy subsidies on nighttime illuminance, it was found that both the proportion of subsidies to GDP and their per capita subsidy affected the brightness of nighttime lights. Subsidies on electricity, in particular, have increased the brightness of nighttime lights. This shows that reducing electricity rates through the payment of electricity subsidies increases electricity consumption in the home and service sectors, as well as having a positive effect on the industrial sector.

Chapter 4 examines the impact of energy subsidies on air pollution. This study analyzed emissions data of three types of air pollutants, including NO2, CO, and PM25. Expansion of energy subsidies is contributing to an increase in nitrogen dioxide emissions, which can also be attributed to an increase in industrial production, electricity production, and road traffic. Specifically, electricity subsidies and natural gas subsidies contribute to nitrogen dioxide emissions, while oil subsidies contribute to ultrafine dust emissions. Previous studies have shown that energy subsidies have a relatively small impact on carbon monoxide emissions, but, a lot of carbon monoxide is produced by sandstorms, so it is unclear whether the expansion of energy subsidies has fully contributed to carbon monoxide emissions. Additionally, we found that electricity subsidies contribute to increased greenhouse gas emissions in the electricity/heating sector, as well as oil subsidies increase greenhouse gas emissions in sectors such as transportation, manufacturing and construction. Based on these findings, it is clear that energy subsidies in the MENA contribute to air pollution, and that it is necessary to gradually reduce subsidies for electricity and oil.

Chapter 5 examines respondents' perceptions of energy subsidies in four MENA countries (Egypt, Jordan, Tunisia, and Saudi Arabia). The results of the online survey s with a total of 2,040 respondents, indicate that respondents in the MENA region generally prefer policies that reduce energy prices to those that provide social security benefits. In addition, the MENA region is unique in that it tends to oppose improving social security services as an alternative to energy subsidies. There appears to be a difference in preferences between income levels when it comes to energy subsidy policies and social security benefits. The government system should expand social security services targeting vulnerable groups in order to attract middle-income citizens . This indicates that it is important not only to improve, but also to increase awareness of groups other than low-income groups. Residents of the MENA region are more likely to agree with reducing subsidies for global efforts to combat climate change and decarbonization than with reducing subsidies for government fiscal soundness or expanding social services . A campaign to reduce energy subsidies should take this into account.

Chapter 6 presents policy recommendations based on the previous discussion results. This study highlights the need for a gradual reduction of energy subsidies in the MENA region. Our recomendations also include 1) increasing subsidies for renewable energy, 2) improving energy efficiency policies and finances, and 3) supporting small and medium-sized enterprises that may be adversely affected by subsidy reform, 4) improving and expanding public transportation systems, 5) improving social security services, and 6) reducing fossil fuel energy subsidies as much as possible.