Egypt Country Environmental Analysis Promoting Circular Economy and Blue Economy for Environmental Sustainability Acknowledgments This report was prepared by a team of World Bank staff The team would also like to thank all who provided useful and experts led by Suiko Yoshijima (Senior Environmental feedback during the various discussions and consultations Specialist), and consisted of Hanan Elhadary (Senior that took place in Egypt for developing the report, including Environmental Specialist), Fadi Doumani (Consultant), Sherif Eng. Mohamed Abdel Kerim, CEO of Industrial Development Arif (Consultant), Dalia Sakr (Consultant), Pablo Ahijado Authority (IDA), Mr. Ahmed Taha, Chairman Associate IDA, Mrs. Aparicio (Consultant), and Tarek Temraz (Consultant). Additional Doaa Selima, CEO of Industrial Modernization Center (IMC), critical support throughout various stages of preparation was Mr. Hashim Abdel Kader IMC, Eng. Mohamed Sabry, Director provided by Dahlia Lotayef (Lead Environmental Specialist), A. of Egypt National Cleaner Production Center (ENCPC), Mr. S. Harinath (Senior Environmental Specialist), Ehab Mohamed Ahmed Kamal, Director of Environmental Compliance Office Shaalan (Senior Environmental Specialist), Victoria Bruce-Goga (ECO)–Federation of Egyptian Industries (FEI), Ms. Shereen El (Senior Program Assistant), and Laila Mohamed Kotb (Program Sharkawy Ministry of Finance (MOF), Ms. Mae Adel, MOF, Mr. Assistant). Overall guidance was provided by Lia Carol Sieghart Sherif Daood, Deputy Head of SD unit in Ministry of Planning (Practice Manager), Maria Sarraf (Practice Manager), Marina and Economic Development (MOPED), Mr. Ahmed Rizk, Wes (Country Director), and Robert Bou Jaoude (Country Deputy Director of United Nations for Industrial Development Manager). Organization (UNIDO), Eng. Shahenaz Fouad, Mr. Ayman El Zahaby, Mrs. Annachiara Scandone from UNIDO, Mr. The work was done in full collaboration with the Ministry of Mohamed Ezzat, Economic Adviser at Deutsche Gesellschaft Environment (MOE), Egyptian Environmental Affairs Agency für Internationale Zusammenarbeit (GIZ) GmbH, Ms. Sylvie (EEAA) and Waste Management Regulatory Authority (WMRA). Fontaine, Project Officer, Environment and Climate Change, The team would like to express its gratitude to H.E. Yasmin Delegation of the European Union (EU) to Egypt, Dr. Emad Fouad, Minister of Environment (MOE), Dr. Ali Abou Sena, Chief Hassan, European Bank for Reconstruction and Development Executive Officer (CEO) of EEAA, Dr. Tarek El Arabi, (CEO) (EBRD) Green Economy Finance Facility (GEFF), Eng. Hossam of WMRA, and special thanks to Mr. Mohamed Moatamed, Hassan and Eng. Atwa Hussein, Suez Canal Authority, Mr. Assistant MOE and the focal point for preparing the Country Kamel Shehata Commercial International Bank (CIB), Dr. Ahmed Environmental Assessment (CEA). Also special thanks to Dr. Gaber, CEO of Chemonics, Dr. Yasser Sherif, CEO Environics, Tamer Abou Gharara, Adviser to MOE, Dr. Nagwa El Karawy, and Dr. Amr Zakaria Hamoud, President of National Institute of Senior Adviser to MOE, Dr. Khaled El Farra, Adviser to the Oceanography and Fisheries. MOE, Dr. Moustafa Mourad, Head of Quality Sector EEAA, Dr. Heba Sharawy, Head of ICZM, EEAA, Dr. Mohamed Salem Constructive comments on the report were received from the Head of Natural Conservation Sector EEAA, Mr. Mohamed following peer reviewers: Peter Kristensen (Lead Environmental Farouk, Head of Inspection and Compliance Department Specialist), Helena Naber (Senior Environmental Specialist), and EEAAA, Dr. Mohamed Salah, Assistant to MOE on Legal Etienne Raffi Kechichian (Senior Financial Sector Economist). Affairs, Eng. Doaa Ahmed, Head of Strategies & Investment The team would also like to acknowledge several other Department WMRA, Eng. Yosra Abdel Aziz, General manager colleagues for their suggestions, including Sherif Bahig Hamdy of Environmental Crisis Management EEAA, Dr. Eid Elraghy, (Senior Operations Officer), Federica Ranghieri (Program General manager of Fresh Water Quality, Eng. Nesrin Baz, Head Leader), Mark Eugene Ahern (Lead Country Economist), Sara of Environmental Management Sector EEAA, Dr. Hossam Ezz B. Alnashar (Senior Economist). The team also thanks Valerie El Din, Director of Egyptian Pollution Abatement Project (EPAP), Hickey (Global Director) for her encouragement and support. and Dr. Shadia El Sheshini, Senior Technical Adviser EPAP. The manuscript was edited by Lauri Scherer and Darcy Gallucio. Any remaining errors or omissions are the authors’ own. The team gratefully acknowledges the financial support provided for the report by the PROBLUE, a multi-donor trust fund administered by the World Bank, that supports the sustainable and integrated development or marine and coastal resources in a healthy ocean. © 2023 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: +1-202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. The findings, interpretations, and conclusions expressed in this work do not necessarily reflect the views of The World Bank, its Board of Executive Directors, or the governments they represent. 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Cover photo: Adobe Stock © Freepik Contents Acknowledgments .......................................................................................................................................................... 1 Acronyms and Abbreviations ............................................................................................................................. 9 Executive Summary ..................................................................................................................................................... 11 Introduction ......................................................................................................................................................................... 17 Purpose and Methodology ............................................................................................................................................... 19 Report Structure ................................................................................................................................................................. 19 Chapter 1: Egypt’s Environmental Status ................................................................................................. 21 1.1 Environmental Impacts, Challenges, and Trends ................................................................................................. 22 Air Quality ....................................................................................................................................................................... 23 Water Quality ................................................................................................................................................................. 23 Waste .............................................................................................................................................................................. 24 Marine Pollution ............................................................................................................................................................. 24 Loss of Marine Biodiversity ......................................................................................................................................... 24 1.2 Natural Capital and Cost of Environmental Degradation ................................................................................... 29 Chapter 2: Evolution of Egypt’s Environmental Agenda and Governance .................... 31 2.1 Legal Framework and Justice of Environmental Management ......................................................................... 32 2.2 Institutional Setup ........................................................................................................................................................ 36 2.3 Effectiveness ................................................................................................................................................................. 37 2.4 Efficiency ........................................................................................................................................................................ 38 2.5 Participation, Responsiveness, and Consensus among Stakeholders .......................................................... 39 2.6 Transparency ................................................................................................................................................................. 40 Chapter 3: Circular Economy and Pollution Management .......................................................... 41 3.1 Overview of Egypt’s Industry and Pollution Issues ............................................................................................. 42 3.2 The Circular Economy and Its Importance for Egypt .......................................................................................... 43 3.3 Industrial Green Policies and Programs ................................................................................................................. 44 3.4 Circulatory Potential .................................................................................................................................................... 46 3.5 A Closer Look: The Food and Beverage Sector .................................................................................................... 48 3.6 Circularity Opportunities in the F&B Sector and Its Value Chain ..................................................................... 50 3.7 Role of Green Entrepreneurship ............................................................................................................................... 52 © Adobe Stock Chapter 4: Blue Economy Opportunities and Challenges .......................................................... 53 4.1 Overview ........................................................................................................................................................................ 54 4.2 Strategic Marine and Coastal Management .......................................................................................................... 58 4.3 Coastal and Marine Resources Natural Stock and Status ................................................................................ 60 Geomorphology ............................................................................................................................................................ 61 Fisheries ........................................................................................................................................................................ 61 Coral Reefs in the Red Sea ........................................................................................................................................ 61 Mangroves ..................................................................................................................................................................... 62 Seagrass ....................................................................................................................................................................... 62 Coastal and Marine Protected Areas ........................................................................................................................ 63 4.4 Coastal and Marine Resources Natural Stock and Status ............................................................................... 63 4.5 Potential Conflicts and Opportunities for Stimulating Ecotourism and Fisheries ..................................... 65 Tourism .......................................................................................................................................................................... 65 Fisheries ........................................................................................................................................................................ 67 Chapter 5: Mobilizing Green Financing to Support the Transition ................................... 69 5.1 General Definition and Specific Scope of Green Finance ................................................................................. 70 5.2 Egypt Green Finance Architecture .......................................................................................................................... 71 Ministry of Planning and Economic Development .................................................................................................... 71 Ministry of Planning and Economic Development and Ministry of Environment ................................................. 73 Central Bank of Egypt and Financial Systems ......................................................................................................... 73 Financial Regulatory Authority ................................................................................................................................... 74 Selected Initiatives Launched at COP27 .................................................................................................................. 74 5.3 Green Finance Policy Instruments and Programs in Egypt: Stocktaking, Opportunities, and Weaknesses 74 Regulatory and Incentive Policy Instruments for the Circular Economy ............................................................... 79 Fiscal Policy Instruments for the Circular Economy ............................................................................................... 79 Fiscal Policy Instruments for the Circular and Blue Economies ........................................................................... 80 Incentive Policy Instruments for the Circular and Blue Economies ...................................................................... 83 Moral Suasion Policy Instruments for the Circular and Blue Economies ............................................................. 84 5.4 Green Financing Opportunities ................................................................................................................................ 85 National Green Financing ............................................................................................................................................ 87 National Prudential Framework .................................................................................................................................. 89 Selected International Green Financing .................................................................................................................... 90 Chapter 6: Toward Green and Resilient Growth ......................................................................... 91 References ..................................................................................................................................................................... 97 Annex 1: Cost of Environmental Degradation (CCZED) Methodology ...................... 105 Annex 2: Coastal Natural Resource Stock Calculations ...................................................... 115 Annex 3: Existing and Suggested Green Instrument Taxonomy for the Circular and Blue Economies ................................................................................................. 121 LIST OF FIGURES Figure 1.1: Sources of Ambient Air Pollution at Six Sites in the Greater Cairo Region, 1999–2002 ............................ 22 Figure 1.2: Distribution of Medical Waste Treatment Facilities in Egypt (Incinerators and Autoclaves) ...................... 26 Figure 1.3: Oil Spill Density and Maritime Traffic in the Mediterranean Sea ................................................................... 27 Figure 1.4: Physical Impacts of Climate Change on Egypt’s Northern Coast in the Near (2030–40) and Long (2050–70) Terms under Representative Concentration Pathway 8.5 .......................................................... 28 Figure 1.5: Egypt’s Wealth and Natural Stock per Capita, 2005, 2014, and 2018 ......................................................... 29 Figure 1.6: Selected National, Local, and Coastal Cost of Environmental Degradation Valuation .............................. 30 Figure 2.1: Chronological Development of Egypt’s Environmental Policies and Regulations ...................................... 33 Figure 2.2: Targeted Collection Efficiency and Municipal Solid Waste to Sanitary Landfill, 2017–35 ......................... 34 Figure 3.1: Key Indicators for the Manufacturing Sector, Fiscal 2021 .............................................................................. 42 Figure 3.2: Benefits of a Circular Economy .......................................................................................................................... 44 Figure 3.3: Key Components of Eco-Industrial Parks ......................................................................................................... 47 Figure 3.4: MEDTEST II Case Study, El Marwa for Food Industries Company, Potential Savings .............................. 55 Figure 4.1: The Blue Economy ............................................................................................................................................... 56 Figure 4.2: Six Principles of the Blue Economy ................................................................................................................... 56 Figure 4.3: Maritime Spatial Planning Process .................................................................................................................... 59 Figure 4.4: Egypt Marine Natural Resource Capital Stock 2021–2045, in 2021 Prices ................................................ 64 Figure 5.1: The CE and BE in SDGs and Egypt Vision 2030 ............................................................................................ 72 Figure 5.2: German Dual System EPR Setup ..................................................................................................................... 80 © Freepik 7 Egypt Country Environment Analysis LIST OF TABLES Table 1.1: Waste Generation in Egypt, 2001–22 ................................................................................................................ 24 Table 1.2: Selected National, Local, and Coastal Cost of Environmental Degradation as a Percentage of GDP...... 30 Table 3.1: Comparator Benchmarks for Energy Saving, and Circularity Potential in Select Egyptian Industries ...... 46 Table 4.1: Egypt Marine Natural Resource Capital Stock 2021–45, in 2021 Prices ...................................................... 64 Table 5.1: The CE and BE in SDGs and Egypt Vision 2030 ............................................................................................. 72 Table 5.2: Selected Supporting Donors, Private Sector, and Government of Egypt Green On-Lending, Technical Assistance, and Grants ........................................................................................................................................ 78 Table 5.3: Options for Partnership Responsibilities and Concessions for PAs .............................................................. 82 Table 5.4: Green Financing Opportunity Matrix .................................................................................................................. 85 Table 6.1: Recommended Actions ........................................................................................................................................ 92 LIST OF BOXES Box 3.1: European Union Circular Economy Initiative .................................................................................................... 43 Box 3.2: Environmental Pollution Abatement Project Phase III Financing of Circular Economy Initiatives ............ 45 Box 4.1: Zaki Reef Resilience ............................................................................................................................................ 62 Box 4.2: Red Sea Mass Tourism versus Eco-Tourism, Trade-Offs ............................................................................... 66 Box 5.1: Environmental Pollution Abatement Project and Green Sustainable Industry Green Financing ............... 75 Box 5.2: Selected Egyptian Credit Guarantees ................................................................................................................ 76 Box 5.3: Debt Swaps to Be Bound by Macroeconomic and Environmental Conditionalities .................................... 81 Box 5.4: Selected Venture Capital for Start-Ups in Egypt .............................................................................................. 89 Box 5.5: Third Parties Entering a Debt-for-Nature or Debt-for-Climate Swap Agreement with a Debtor Government ............................................................................................................................................. 90 © Freepik 8 Egypt Country Environment Analysis Acronyms and Abbreviations AFD Agence Française de Développement Framework of the Environmental FEDDG Sustainability Standards Guide BE blue economy General Authority for Fish Resources GAFRD Development BOE barrel of oil equivalent GCF Green Climate Fund BTU British thermal unit GEF Global Environmental Facility C&D construction and demolition GEFF Green Economy Financing Facility CAP compliance action plan GHG greenhouse gas Central Agency for Public Mobilization CAPMAS Deutsche Gesellschaft für Internationale and Statistics GIZ Zusammenarbeit CBE Central Bank of Egypt GOE Government of Egypt CCDR Country Climate Development Report GSI Green Sustainable Industry Cost of Coastal Zone Environmental CCZED Degradation ICT information communications and technology CE circular economy ICZM Integrated Coastal Zone Management CEA Country Environmental Analysis IDA Industrial Development Authority CGC Credit Guaranty Company IFI international financial institution COED Cost of Environmental Degradation IMF International Monetary Fund (United Nations Framework Convention COP27 on Climate Change) 27th Conference of Intended Nationally Determined the Parties INDC Contribution CSR corporate social responsibility International Organization for ISO DFI development finance institution Standardization EC European Commission IT information technology EEAA Egyptian Environmental Affairs Agency International Union for Conservation of IUCN Nature EIA Environmental Impact Assessment KFW Kreditanstalt für Wiederaufbau (Germany) EIB European Investment Bank LCA life cycle assessment EIP eco-industrial park Lakes and Fish Resources Development LFRDA Agency EPAP Environmental Pollution Abatement Project Mainstreaming Biodiversity into Egypt’s EPR extended producer responsibility MBDT Tourism ESG environmental, social, and governance Ministry of Agriculture and Land MOALR Reclamation ESIA Environmental Social Impact Assessment Ministry of Communication and Information MOCIT EU European Union Technologies MOE Ministry of Environment EWS early warning system MOF Ministry of Finance F&B food and beverage MOFA Ministry of Foreign Affairs FAO Food and Agriculture Organization MOHP Ministry of Health and Population FDI foreign direct investment 9 Egypt Country Environment Analysis MOIC Ministry of International Cooperation PPP public-private partnership MOLD Ministry of Local Development PRO producer responsibility organization Ministry of Planning and Economic PV photovoltaic MOPED Development SCZONE Suez Canal Economic Zone MOTA Ministry of Tourism and Antiquities SDG Sustainable Development Goal MOTI Ministry of Trade and Industry SEA strategic environmental assessment MOU memorandum of understanding SEFF Sustainable Energy Financing Facility Ministry of Petroleum and Mineral MOPMR Resources Strategic Environmental and Social SESA MSME micro, small, and medium enterprise Assessment Micro, Small, and Medium Enterprises SME small and medium enterprise MSMEDA Agency TA technical assistance MSP marine spatial planning TSFE The Sovereign Fund of Egypt MWRI Ministry of Water Resources and Irrigation UN United Nations National Climate Change Strategy 2050 NCCS (Egypt) UNDP United Nations Development Programme NDC Nationally Determined Contribution United Nations Industrial Development UNIDO NGO nongovernmental organization Organization ODA official development assistance USAID U.S. Agency for International Development PA protected area WMRA Waste Management Regulatory Authority 10 Egypt Country Environment Analysis Executive Summary © Adobe Stock 11 Egypt Country Environment Analysis Background Evolution of Egypt’s Environmental Agenda and Governance Over the last two decades, the Government of Egypt (GOE) has pursued its sustainable and resilient development. The The Egyptian legal framework has progressively Ministry of Environment (MOE) has improved the governance underpinned sustainable development, mainstreaming framework and promoted new policy instruments to meet growing the environmental agenda into policy-making and environmental challenges. Two primary reports articulate the sectoral policies. The current environmental law is one of country’s sustainability strategy over the short/medium term and the most significant legislative milestones to date, evolving a long term, respectively: in the updated Sustainable Development framework to match the sector’s complexity and crystalizing Strategy (SDS): Egypt Vision 2030 and the National Climate actors’ agency. The 2020 waste management law signaled the Change Strategy 2050. In complement, the World Bank is country’s determination to valorize the waste value chain for supporting Egypt through this Country Environmental Analysis circularity and investment, and the 2017 industrial licensing (CEA), which is aligned with its regional flagship Blue Skies, law streamlined industrial permitting in a one-stop-shop at the Blue Seas: Air Pollution, Marine Plastics, and Coastal Erosion in Industrial Development Authority. Prior to these laws, Egypt the Middle East and North Africa and the 2022 Country Climate Vision 2030 laid out the social dimension of environmental Development Report. justice, recognizing a legacy built on weak governance with limited transparency and accountability as a major challenge. The purpose of this CEA is to help Egypt address some of these environmental challenges by providing strategic The Egyptian institutional framework for environmental guidance to the GOE to achieve green, resilient, and governance has risen in prominence and strength. inclusive growth while creating new jobs. This CEA has been The Ministry of State for Environmental Affairs rose from developed in consultation with the GOE and has identified short- a subordinate institutional status to the full-blown MOE in to medium-term priority areas in: (i) circular economy (CE) for 2014, responsible for mainstreaming, organizing, policy industrial pollution and waste management; (ii) blue economy planning, and creating special agencies such as the newly (BE) with a focus on sustainable coastal zone management; (iii) established Waste Management Regulatory Authority (WMRA). environmental governance; and (iv) innovative green financing The MOE established 18 branch offices for 27 governorates mechanisms targeting the CE and BE. It was conducted and extended the number of monitoring stations. Although their by reviewing existing analytical work on environmental human resources are insufficient (especially the WMRA) to meet management in Egypt, current environmental regulations, their mandates, there are encouraging signs for undertaking strategies, reports, and public data. In addition, consultation institutional reforms in the organizational structure to include workshops, meetings (with government representatives, core functions. It is important to mainstream environmental nongovernmental organizations [NGOs], research institutions, management, green commitments, and BE goals into the private sector, and key experts), and focus group discussions whole-of-government and to include broader stakeholder voices, were carried out to further modify or validate the findings. interests, and values. Egypt has improved the efficiency of resource-reliant sectors to meet the Sustainable Development Goals (SDGs). However, the efficiency of pollution management still needs to be enhanced by implementing the following measures: operationalizing the polluters pay principle, the use of life cycle assessments, circular production technologies instead of end of pipe, the use of cost benefit analysis/strategic environmental studies and by reducing environmental damages by pollutants. Furthermore, the Environmental Impact Assessment (EIA) system still needs to be enhanced according to international standards to be robust and comprehensive. Certification of EIA consultants and reviewers is crucial. The use of strategic environmental and social assessments is critical for developing national visions, strategies, policies, and programs as well as strengthening impact assessments for social aspects. 12 EGYPT COUNTRY ENVIRONMENT ANALYSIS Across the last three decades, Egypt has interwoven laws, Egypt would avoid the irreversible, environmental policies, and instruments for more effective inspection and degradation of fast industrialization and expand social compliance. Yet the Egyptian Environmental Affairs Agency inclusion by prioritizing CE strategies for sustainable (EEAA) systems need enhancements for effectiveness, and the economic growth. Industries have huge opportunities to country’s fiscal position needs reframing to make penalties more improve resource efficiency where some industries in Egypt impactful. In the last few years, efforts have been made to improve have circularity potential between 40 and 80 percent: plastics the relation between environmental inspection and effective (polyethylene terephthalate packaging), glass, electric and compliance to lower transaction costs and better coordinate electronic equipment (durable consumer goods), textiles, and the different rules and procedures. Moreover, consistency of construction. Waste management has significant potential data and its timeliness is crucial for improving the effectiveness to create new business opportunities, increase employment of the inspection system. This could be achieved by digitalizing and resource efficiency, and reduce waste disposal, and eco- the reporting of the environmental register and EIA systems industrial parks (EIPs) offer solutions for efficiently managing and mandating the self-reporting. Moreover, the continuous waste. An integrated framework for green manufacturing online monitoring of stack emissions, ambient air, water quality, practices across supply chains could facilitate uptake, and industrial wastewater discharge monitoring networks is technology transfer, and progressive expansion of this CE. important for collecting the information, but mainstreaming and integrating with other agency monitoring stations would have One of the oldest and most important pillars of the Egyptian a greater impact on environmental management. Finally, more economy—the food and beverage (F&B) sector—has transparency and stakeholder engagement beyond environmental strong circularity potential. The F&B sector represents technical staff would be encouraged to make consultation process 21 percent of manufacturing value-added in Egypt in 2019. more inclusive and meaningful. In the Greater Cairo Region, F&B processing ranks first in water pollution load and second in industrial waste while Environmental threats and climate change, however, are generating dust and volatile organic compounds. Yet water- forcing Egypt to better preserve its natural capital stock. and energy-saving opportunities are significant: 25–90 percent The country is seeking to employ sustainable approaches and and 10–70 percent, respectively. The agriculture sector policies to ensure natural assets are preserved and societal consumes about 80 percent of the country’s total water budget, well-being is protected for generations to come while ensuring and Egypt is close to the severe water scarcity threshold. sustainable economic growth. Population growth, urbanization, In the F&B value chain specifically the upstream makes up industrialization, and coastal artificialization are putting pressure almost 34 percent of the total global GHG emissions. on the natural capital in Egypt. While the country has improved environmental management effectiveness, it still faces Blue Economy Opportunities and Challenges environmental challenges and environmental degradation that are impeding sustainable development. In 2016/2017, the In economies around the world, the definitions of and Cost of Environmental Degradation (COED) related to the air in strategic approaches toward the BE vary. The World Bank Greater Cairo was equivalent to 1.35 percent of gross domestic defines the BE as “the sustainable use of ocean [and sea] product (GDP) (US$3.35 billion). resources for economic growth, improved livelihoods, and jobs while preserving the health of the ocean [and sea] ecosystem.” Circular Economy and Pollution Management A strategy building on this definition requires ascertaining the BE geographic scope and share of the economy to help The Egyptian industrial sector represents almost shape efficient policies for preserving and even increasing the 17 percent of GDP and plans for new development and renewable coastal and marine natural capital while using the rapid industrialization over the next 25 years. The sector nonrenewable capital such as oil, gas, and mining for green and registered growth during the 2017–2018 macroeconomic blue transitions. Here, the BE scope is restricted to the coastal reforms eliminating fuel, electricity, and water subsidies. It area delimited by the coastal road in nonurban areas and the rebounded strongly from the global COVID-19 pandemic in marine environment as well as coastal urban areas (Alexandria, 2022, registering 9.6 percent growth. Fast industrialization Port Said, resorts, and tourist venues) and economic activities has led to higher demand of resources for production and (ports, oil and gas hubs, industrial zones, fisheries, and generated environmental pollution. According to the State of aquaculture) where the land-sea coastal and marine interface the Environment Report 2020, Egyptian industry has improved represents about 19.6 percent of the economy in 2021. The environmental performance for air quality indicators—particulate natural capital stock of both Seas was conservatively estimated matter, carbon monoxide, lead, nitrous oxide, ozone, and sulfur at US$233.4 billion in 2021. dioxide, yet it accounted for 37 percent of the country’s total energy consumption, 12.5 percent of its total greenhouse gas (GHG) emissions. Industrial water use increased from 1.2 billion cubic meters in 2012 to 5.4 billion in 2018 with about 10 percent of total water consumption. The sector’s heavy reliance on imported primary and secondary production inputs, representing 44 percent of total imports in 2019, also increases its vulnerability to external factors and impacts its competitiveness. 13 EGYPT COUNTRY ENVIRONMENT ANALYSIS Egypt has deployed integrated coastal zone management Mobilizing Green Financing and Introducing Green (ICZM), strategic environmental assessments (SEAs), and a Policy Instruments to Support the Transition BE strategy framework that have been executed by various stakeholders. The environmental law 4/94 has included Coastal A green financing framework has been evolving and Zone management, then the MOE has developed ICZM strategy, supporting green and, more recently, climate investments which helped to improve preparedness, build capacity, and in Egypt over the last two decades. Presently, the framework enhance coastal resilience. For instance, an ICZM 2009–17 aligns with the G20 Green Finance Study Group, which includes executed by the Ministry of Water Resources and Irrigation the de-risking of finance for climate change mitigation and in coordination with the Coastal Research Institute and the adaptation—as a subcategory of green financing. The green Egyptian Shore Protection Authority sought to integrate the financing effort started with a homegrown hybrid instrument management of sea level rise risks into development planning. to regulate and incentivize industrial pollution abatement Conversely, a 2017–20 ICZM project in Alexandria executed by initially developed with World Bank support—Egypt’s EEAA helped reduce land-based sources of pollution entering Environmental Pollution Abatement Project (EPAP)—in 1996. the Mediterranean Sea by identifying hot spots around the city, Official development assistance (ODA), development finance especially Lake Mariout. Subsequently, the 2022 SEA for the Red institutions (DFIs), and international financial institutions (IFIs) Sea tourism sector, supervised by several public actors having introduced green financing by building on the EPAP positive jurisdiction over the spatial area, helped inform decision makers experience to offer blended financing through the banking sector on policy designs, plan formulations, and future programs with or without a technical assistance grant. Recently, Egypt has to increase preservation and conservation of the targeted issued green bonds that are gaining momentum in addition to area (ecotourism). The BE strategy framework will guide the creating the African voluntary carbon market for carbon trading, formulation of a BE strategy and will notably rely on developing which is housed within the Egyptian Stock Exchange. marine spatial planning (MSP) central to the planning exercise Four central actors have been shaping green financing in that should be more inclusive, and integrative in its engagement Egypt in coordination with the MOE. The Ministry of Planning of stakeholders. Building on all the ICZM and SEA efforts, the and Economic Development (MOPED) formulated three scope of MSP extends an estimated 263,451 square kilometers green financing principles, and the MOPED-MOE developed in Egypt and supports BE transitional concerns while forging a framework for environmental sustainability standards. society-wide partnerships and using advisory and analytical The Central Bank of Egypt introduced guiding principles for instruments to gauge economic synergies versus trade-offs in sustainable financing and should expand the scope of credit conjunction with resource preservation versus degradation.  guarantees together with ODAs, DFIs, and IFIs through the Blue tourism needs to be nature positive, low impact, Egyptian Credit Guarantee Company to target entrepreneurs, and low carbon while artisanal fisheries need continued including micro, small, and medium enterprises (MSMEs). The GOE conservation support. Updated Egypt Vision 2030 Financial Regulatory Authority mandated the Environment, has triggered the Tourism Reform Program, creating green Social and Governance (ESG) rating disclosure for companies certification for protected area (PA), managing diving and listed on the Egyptian stock exchange. In parallel, ODAs, snorkeling activities, and promoting PAs. At the 27th Conference DFIs, and IFIs have been supporting the buildup of a climate of the Parties (COP27), the GOE committed to designating the change market and a social risk management system as Red Sea Fringing Reef as a PA. In lockstep, governorates are COP27 advanced these measures making tourism more sustainable, such as limiting the use of into international discussions plastics to stem their flow into the country’s waters. Ecotourism is and programmatic lending. on the rise and shows an increased knock-on effect on the local economy with less pressure on the commons. Conversely, the newly created Lakes and Fish Resources Development Agency (Law No.146/2021) has a clear mandate on the fishing sector that plays a vital role in food security by mainly relying on fish farming. Still, the agency needs to engage in better coordination with stakeholders to replenish the fish stock and stop ecosystem deterioration, preserving fish species and creating a template for other waters as well as for mariculture and nontraditional species. © Adobe Stock 14 EGYPT COUNTRY ENVIRONMENT ANALYSIS The effectiveness of green financing is bound by In sum, Egypt has improved its policy and systems for maintaining the macroeconomic and exchange-rate environmental and pollution management. However, more work stability. To attract climate funding, ODAs, DFIs, and IFIs remains, and based on the analysis in this CEA, priorities for have been helping the authorities and the financial sector to reform and investment should include the following: upgrade the green financial framework by: improving Egypt green predictive budgeting and planning; issuing green bonds; i. Strengthen environmental governance. The most setting up a prudential framework, inclusive of green loan important policy action is to finalize the revised environmental guarantees, and an export credit guarantee; and harnessing law. As for the institutional framework, MOE functions need to private equity investors and venture capitalists, including angel be decoupled from its two regulatory agencies, and the MOE investors. CE and BE funding are being articulated along organogram needs to reflect core functional areas related five main conduits: (i) introducing blended financing program to major environmental priorities. In addition, local decision targeting CE and BE adopters, enablers, beneficiaries, and making, partnership promotion, and stakeholder participation business model innovators and providing blended financing, need to be strengthened; for example, pilot reforms could be grants, and appropriate technical assistance to be initially carried out at the local government level (Cairo or Alexandria cofinanced by ODAs, DFIs, IFIs, and the GOE, with funding governorates) based on SDGs. To strengthen environmental being gradually fully assumed by local resources over time; enforcement and accountability, it is highly recommended to (ii) opportunistically tapping climate funding by breaking down develop a comprehensive management information system benefits between local benefits related to CE as well as BE with automated self-monitoring, given its capacity to drive and global benefits; (iii) updating the prudential framework down costs and improve effectiveness. The environmental to secure green loans and green credit export guarantees information, to the extent possible, should be accessible and expanding the scope of the insurance sector to cover online and available to the public, thus increasing polluters’ environmental liabilities; (iv) issuing green bonds with specific accountability, participation, and transparency. It is also targeting of CE and BE; and (v) channeling venture capital and critical to strengthen third-party certification for the private private equity green funding toward both CE and BE innovation sector and/or polluting enterprises to improve data reliability. to boost the startup ecosystem scope for MSME entrepreneurs. Regular inspections and monitoring can then be gradually outsourced to these institutions to support environmental clearance processes and to supplement EEAA staff capacity Toward Green and Resilient Growth for a Livable for compliance monitoring. Transparency and accountability Planet should be addressed by engaging NGOs and the business Moving forward, a fundamental shift toward the CE and community and providing open access to environmental data BE with effective green financing conduits is necessary (particularly air and water), EIA executive summaries, and to achieve sustainable and resilient development. lists of noncompliant enterprises. The uncontrolled use and consumption of natural resources ii. Apply CE principles to reconcile environmental for the sake of economic growth and material prosperity have performance with competitiveness. A top priority is proven highly unsustainable in the long term. Instead, green to integrate CE principles and practices into policy and development envisions a world in which natural resources— sectoral strategies, and to develop CE guidelines starting including the coastal and marine environment—are sustainably with the high-priority industries (F&B, fertilizers, etc.). Clear managed and conserved to improve livelihoods, increase national standards for green products should be defined economic returns, create jobs, and ensure food security. and markets should be created by adopting incentive This requires decoupling prosperity and resource use and, schemes such as green procurement. An Extended consequently, any associated carbon emissions. According to Producer Responsibility (EPR) should first target industrial the MacArthur Foundation, transitioning to a CE entails adopting zones, and where vertical and horizontal (e.g., agriculture regenerative design principles and extending product lifespan to waste to packaging waste) synergies and symbiosis exist. achieve zero waste, relocating waste from the end of the supply Several producer responsibility organizations (PROs) will chain to the beginning. Similarly, the transition to a BE calls for the have to be created to raise competition and performance, responsible use of marine natural resources, reducing conflict in where industries could select the most efficient PRO to the marine space through MSP, and enhancing blue investments, manage their waste chain. Upscaling the implementation of both public and private, in innovative, eco-smart technologies. the CE in value chains and industrial zones could have a major impact on raising Egyptian industry’s competitiveness and economic growth, with technology transfer platforms further facilitating access to innovative CE technologies. Waste exchange platforms need to be developed to facilitate industrial symbiosis. This must be carried out with the WMRA, as all industrial waste data are reported to the WMRA based on Waste Management Law 202/2020. 15 EGYPT COUNTRY ENVIRONMENT ANALYSIS Finally, new entrepreneurs—focusing on youth and women— iv. Promote green finance to protect the environment and should be supported through incubator and accelerator ensure sustainable resource use. With the improvement programs to develop green and circular business models for of Egypt’s economic prospects, the GOE needs to build deeper CE market penetration. further international and national green investors’ confidence and green finance growth by reaching the macroeconomic iii. Harness the power of the BE. Defining, institutionalizing, stabilization program targets set by the IMF. The MOE and gauging the BE is instrumental to determine the has gained invaluable experience implementing the EPAP coastal and marine resource stocks, value-added, and Phase III and demonstrated its capacity to integrate the CE environmental degradation, thus helping derive trade-offs in industrial facilities. The MOE or CBE can gradually take and synergies. The complexity of sustainably managing the over and expand the process to cover industrial zones, EIPs, coastal and marine environment requires a holistic approach green value chains, and tech start-ups and academia can for planning, allocating rights and uses, and managing this channel efforts toward CE research and application. Climate fragile ecosystem to optimize the trade-offs and synergies financing is already transforming the financing sector in that will increase the resilience of economic opportunities, Egypt. De-risking climate investment tools could be used livelihoods, and conservation of the commons. To initiate for de-risking CE and BE investments, while grants, low- the transition to a BE and increase the BE sustainable interest loans, and credit guarantees can help target 90 and resilient growth, the coastal and marine governance percent of Egyptian MSMEs, which have no access to credit, system needs to be strengthened by introducing a legal and stimulate CE and BE growth. To improve the enabling (forthcoming revised environmental law), institutional, environment, these are additional sources of green finance and policy framework supported by appropriate planning, and green policies: venture capital and private equity green management, and research tools. In parallel, it is urgent to funding to support the CE and BE entrepreneurial ecosystem, integrate an Earth observation–based early warning system adjusting concession and partnership responsibilities for PAs, (EWS)/preparedness and response system with the other debt-for-nature/climate swap agreements, issuing green and existing and planned meteorological and climate EWS to blue bonds targeted to the CE and BE, private trust funds, timely contain maritime pollution events. The GOE should exploitation of coefficient rights in urban areas (based on the also adopt the MSP building on the existing ICZM strategies, Italian perequazione urbanistica), and a prudential framework SEAs, and plans, whereas the EEAA should have a clear will need to be fine-tuned for the CE and BE, notably through mandate across sectors and government tiers to coordinate credit guarantees, insurance to de-risk specific investments, the process with relevant stakeholders. Further, a PPP and export credits guarantees. mechanism could be considered where the PAs and their environs could be managed by the ecotourism, artisanal v. Build capacity and raise awareness. Technical expertise fisheries, and communities where goods and services is essential to promote the CE and BE, yet understanding generate revenues while promoting conservation. Putting of these concepts is at an early stage in Egypt. Capacity in place a strict MOE monitoring and verification regime in building at all levels is required to strengthen strategic conjunction with the Convention on Biological Diversity’s Aichi planning, policies, and effective implementation. Establishing Biodiversity Target 11 and Kumming-Montreal- 2022 COP15 a national or regional center of excellence to promote the CE, UN Biodiversity Conference is also recommended. environmental management policies and standards, and good international industry practices will facilitate technological transfer. Education also plays an important role in generating knowledge and growing a new generation of experts to © World Bank introduce modern technologies and innovative solutions. Finally, pressure from the public has often been a key factor in pushing polluters and regulators to improve environmental management. Well-trained practitioners in environmental and social communication with the knowledge, perspective, and practice of Egyptian culture can help empower the public; thus, it is important to develop a communication strategy as well as raising awareness campaigns to address the major environmental and social issues. 16 EGYPT COUNTRY ENVIRONMENT ANALYSIS Introduction © Adobe Stock 17 Egypt Country Environment Analysis Egypt has made substantial efforts in introducing Egypt Vision 2030 is the first official government document environmental policies, reforming the environmental sector, that provides a transparent self-assessment of the major and improving the overall management of environmental challenges in each of the 10 pillars4 and priority actions to issues. The first Country Environmental Analysis (CEA), address them. Egypt not only endorsed but also shifted to align published in 2005, identified air and water quality, solid waste its policies and strategies to meet the SDGs. In 2016, Egypt management, integrated coastal zone management (ICZM), formulated its own national Sustainable Development Strategy and environmental policies and institutions as the country’s (SDS): Egypt Vision 2030. Subsequently, several ministries most critical focus areas. The Ministry of Environment (MOE) have developed their own sustainable development strategies has since made great strides in reforming the sector. It has in collaboration with the MOE. These include the National Water established an air quality monitoring system and reduced urban Resources Strategy 2017–37, the Sustainable Development ambient air pollution, notably reducing enterprise air emissions Strategy for Tourism, the Integrated Sustainable Energy Strategy and water effluent through the World Bank Egyptian Pollution 2035, National Strategy for Women’s Empowerment 2030,5 Abatement Project (EPAP). It also has scaled up compressed and the Low Emission Development Strategy. At the local natural gas–powered cars and taxis; introduced the country’s level, the Ministry of Planning and Economic Development first Waste Management Law 202/2020, Executive Regulations, (MOPED) and the UN Population Fund prepared 27 reports and an oversight agency—the Waste Management Regulatory on localization of the SDGs in each governorate. Strategic Authority (WMRA)—and has carried out and implemented documents were published in 2021 and 2022, including the ICZMs. Despite these improvements, environmental issues Guide to Environmental Sustainability Standards: The Strategic remain a serious problem. Climate change will put further Framework for Green Recovery; a report on Egypt’s 2021 significant pressure on the country’s land and water resources, voluntary review of the SDGs; and Egyptian National Climate which are already strained by high population growth and rapid Change Strategy 20506 to continue supporting its sustainable urbanization.1 To this end, the World Bank Group’s 2022 Country development and growth amidst a changing climate. Climate Development Report: Egypt (CCDR) assesses the macrofiscal linkages with climate change.2 Moving forward, a fundamental shift toward the green, circular, and blue economies is necessary to achieve Globally, environmental sustainability has become central sustainable development. The uncontrolled use and to the international development agenda. The external consumption of natural resources for the sake of economic landscape has changed considerably since the last CEA. In growth and material prosperity have proven highly unsustainable 2015, the UN member states launched the 17 Sustainable in the long term. Instead, green development envisions a Development Goals (SDGs) to end global poverty, advance world in which natural resources—including oceans, land, and health and education, reduce inequality, protect the environment, forests—are sustainably managed and conserved to improve and accelerate economic growth. There is increasing realization livelihoods, increase economic returns, create jobs, and ensure among stakeholders of the importance of environmental food security. This requires decoupling prosperity and resource and social sustainability and responsibility as cornerstones use and, consequently, any associated carbon emissions. of development. The decentralization of decision-making The circular and blue economies are two frameworks that powers from governments downward toward local institutions, can significantly help achieve greener development patterns. nongovernmental organizations (NGOs), and communities is Transitioning to a circular economy (CE) entails adopting an important feature of environmental governance approaches, regenerative design principles, extending product lifespan to which aim to improve accountability and accessibility and achieve zero waste, and relocating waste from the end of the provide a voice for local people and their representatives.3 supply chain to the beginning.7 Similarly, the transition to a blue Environmental, social, and governance (ESG) has extended economy (BE) calls for the responsible use of marine natural across many business organizations and emerged as a key resources, reducing conflict in the marine space through marine metric for evaluating how an organization is led and how it spatial planning (MSP), and enhancing blue investments, both manages risks and opportunities. ESG is no longer the sole public and private, in innovative, eco-smart technologies. responsibility of the public sector, nor only achieved through traditional regulatory means. 1 WBG 2022a. 2 WBG 2022a. 3 See https://www.sciencedirect.com/topics/agricultural-and-biological-sciences/environmental-governance. 4 The 10 pillars of Egypt Vision 2030 are (i) Economic Development; (ii) Energy; (iii) Knowledge Innovation and Scientific Research; (iv) Transparency and Efficient Government Institutions; (v) Social Justice; (vi) Health; (vii) Education and Training; (viii) Culture; (ix) Environment; and (x) Urban Development. 5 National Council for Women 2018. 6 MOE 2022a. 7 Ellen MacArthur Foundation n.d. 18 EGYPT COUNTRY ENVIRONMENT ANALYSIS PURPOSE AND METHODOLOGY The CEA is a tool to better understand the status of key environmental challenges and provide strategic guidance to the Government of Egypt (GOE) to achieve green, resilient, and inclusive growth. It supports sustainable growth aspirations articulated in Egypt Vision 2030, assesses environmental sector priorities over the short and medium terms, identifies further policy reforms for sustainable growth, and explores options for increasing resilience and diversifying the economy by fostering innovative green financing mechanisms. The methodology for developing the report was based on a review of existing analytical work regarding environmental management in Egypt, current environmental regulations, strategies, reports, and public data. In addition, consultation workshops, interviews (with government representatives, NGOs, research institutions, the private sector, and key experts), and focus group discussions were carried out. The outcomes of the CEA have been validated through a verification workshop with the country’s key stakeholders. The CEA was also carried out building on the CCDR, which covers climate change issues to complement natural resource management and environmental sustainability aspects. In consultation with the GOE, this CEA focuses on three priority areas in accordance with Egypt Vision 2030 and the World Bank’s regional flagship report, Blue Skies, Blue Seas: Air Pollution, Marine Plastics, and Coastal Erosion in the Middle East and North Africa. Priority pillars include the following: (i) CE for industrial pollution and waste management; (ii) BE, with a focus on sustainable coastal zone management; and (iii) green financing to address these two priority issues. These subjects are at the heart of the GOE’s request to shed light on emerging but unattended issues and were identified as priority areas through dialogue with the MOE, in alignment with Egypt Vision 2030. Furthermore, these are consistent with the World Bank’s regional framework approach developed under Blue Skies, Blue Seas in MENA, which calls for detailed analysis at the national level. REPORT STRUCTURE The report is structured as follows. Chapter 1 begins by setting the general economic and environment context in Egypt. Chapter 2 provides a general analysis of environmental management institutions and environmental governance. Chapters 3–5 are dedicated to the analysis of three priority issues identified above. Basic data and information for each of the sectors were obtained from the respective responsible ministries and agencies. Finally, chapter 6 summarizes recommendations to provide a way forward for Egypt, proposing actions to start improving environmental governance. © Adobe Stock 19 EGYPT COUNTRY ENVIRONMENT ANALYSIS CHAPTER Egypt’s 1 Environmental Status © Adobe Stock 20 Egypt Country Environment Analysis 1.1. Environmental Impacts, Challenges, and Trends Although Egypt has made progress in its environmental by 2030 and initiating significant steps to improve air quality; status over the past two decades, it is projected to face and (v) issuing national strategies for specific subjects (such significant water, ecological, agricultural, technological, as agricultural waste, climate change, and hazardous waste). and human health challenges. Notable progress includes (i) However, air and water quality, solid waste management, and mainstreaming an environmental agenda into national strategies coastal and marine environmental management are notable and increasing coordination across ministries; (ii) introducing concerns and are further exacerbated by a changing climate. the country’s first Waste Management Law 202/2020 and Population growth, urbanization, and industrialization serve its Executive Regulations; (iii) establishing the WMRA; (iv). as the leading drivers of air and water pollution and waste Committing to halving its fine particulate matter (PM10) emissions generation in the country. AIR QUALITY Egypt has reduced air pollution over the past two The Egyptian Environmental Affairs Agency (EEAA) established decades, but air quality is still a critical environmental a four-site source apportionment network and has plans to focus area,8 and the GOE has taken action to prioritize it. deploy new monitoring stations across Greater Cairo to highlight Egypt Vision 2030 sets targets to improve air quality by 2030,9 transportation emissions, including the short-lived climate and the Nationally Determined Contributions (NDCs) and the pollutant black carbon and carbon dioxide. Between September National Climate Change Strategy (NCCS) 2050 commit to 2021 and February 2022, efforts to collect and recycle rice straw reducing greenhouse gas (GHG) emissions by 2030 and 2050 reduced pollution loads originating from its open burning by respectively.10 Egypt Takes Off, a program that aims to improve roughly 31,000 tons, with a reduction rate of 99 percent.14 living standards, includes an air quality component. Greater Cairo Air Pollution Management and Climate Change Project Figure 1.1: Sources of Ambient Air Pollution at Six Sites in the Greater (US$200 million), supported by the World Bank, aims to enhance Cairo Region, 1999–2002 the capacity for air quality management along with investing in clean transportation and solid waste infrastructure. Air quality 40% has improved across all indicators: between 1999 and 2017, 35% annual ambient PM2.5 decreased from 90 to 76 micron per cubic meter (µg/m3)), leading to the reduction of the burden of 30% air pollution. Further, PM2.5 and PM10 levels must still decline, especially in the Greater Cairo area, to comply with World Health 23% Organization air quality guidelines. 20% 20% The country’s largest sources of air pollution (PM2.5) are 14% illegal open burning, including burning of agricultural 10% 9% waste in the Nile Delta; secondary particulates such as sulfates, nitrates, and chlorides; and motor vehicles (figure 1.1).11 Industry also plays a significant role in polluting Egypt’s air, especially in governorates with industrial zones.12 0% In that respect, the MOE has established national ambient Open Secondary Motor Industry Geological air monitoring stations (120 stations as of 2022) and national burning particulates vehicles and HFO material industrial emissions monitoring stations (467 stacks in Source: Larsen 2019. 94 companies as of May 2023) in the cement, fertilizers, Note: HFO = heavy fuel oil. Total may not add up due to rounding. petrochemicals, electric power stations, iron and steel, ceramics, glass, oil refineries, and aluminum industries.13 8 World Bank 2005. 9 Egypt Vision 2030 sets the target of reducing PM10 concentrations by 50 percent by 2030. 10 Includes quantifiable targets to mitigate 33 percent of emissions from the electricity sector, 65 percent from the oil and gas sectors, and 7 percent of emissions from the transportation sector by 2030, against a 2015 baseline. 11 Larsen 2019. 12 Shaltout et al. 2018. 13 MOE 2022b. 14 Note: Data provided from monitoring stations of the EEAA. 21 EGYPT COUNTRY ENVIRONMENT ANALYSIS WATER QUALITY Egypt’s freshwater supply, agricultural production, tourism, Industrial discharge and effluents pollute the Mediterranean industry, energy, and biodiversity are highly reliant on the Sea, Nile River, northern lakes, and their waterways.15 Along country’s main source of fresh water, the Nile River. This the Nile River, more than three-quarters of all discharge is either reliance on a single resource, shared by 11 countries, makes treated or diverted to agricultural drains and sewage networks. Egypt’s economy and livelihoods increasingly vulnerable to The EEAA works in collaboration with concerned entities to climate-related disruptions. The MOE, in coordination with the conduct environmental inspections to hold polluters accountable Ministry of Water Resources and Irrigation (MWRI) and MOHP, legally and through time-bound environmental compliance action regularly monitors water quality indicators (physical, chemical, plans (CAP). While industry accounts for only 6.97 percent of the and microbiological) through 458 monitoring sampling sites. country’s total water consumption,16 it contributes to, on average, 33 percent of total water pollution in the Greater Cairo Region alone.17 Of the 20 industrial facilities located on the Nile River, 11 release wastewater directly into the river (697 million m3/ year).18 Although more than 78 percent of the volume has been treated and diverted to agricultural drains or the public sewage network, 145.5 million m3 remain noncompliant. The public sugar and paper industries are key pollution sources along the river, whereas petroleum companies are key polluters in the Lake Mariout (northern Egypt near Alexandria governorate). 15 MOE 2018. 16 MOE 2021. 17 PIP 2022. 18 Note: Data provided from monitoring stations of the EEAA. © Adobe Stock 22 Egypt Country Environment Analysis WASTE Rapid population increase, fast-growing urbanization, and higher consumption rates have increased the generation of waste. Egypt’s total population reached about 110.9 million in 2022, with an annual growth of 1.6 percent.19 According to the State of the Environment Report, solid waste generated in 2019 reached around 100 million tons.20 The overall recovery rate of solid waste is not more than 12 percent, leading to serious public health and environmental impacts, as well as lost opportunities. Table 1.1 shows these upward trends in waste generation from 2001 to 2022. Table 1.1: Waste Generation in Egypt, 2001–22 Generated Quantity (million tons) WASTE TYPE Source 2001 2006 2012 2016 2022* Municipal solid waste 14.5 17 21 21 25.4 Master plans Construction & demolition waste 3.5 4.6 4 5.8 123 Strategy Agricultural waste 23.5 27.5 30 31 40–45 Strategy Industrial waste 4.25 4.75 6 4.9 NA Strategy Medical waste 0.12 0.15 0.28 0.52 1 Guidelines Sludge 1.75 2 3 2 2.5-3 WMRA Converted data from governorates from Drains and canal waste 20.0 30 25 25 4.6 cubic meters to tons using average density of 0.5 ton per cubic meter Hazardous waste NA NA 500 NA NA Total 67.62 86 89.28 90.22 >196 Source: MOE 2017. *The 2022 data is considered the most accurate estimation, since it is based on recent field studies that were conducted during the preparation of the strategies, plans, and field surveys. MUNICIPAL WASTE CONSTRUCTION AND Despite Egyptian authorities’ efforts to address the DEMOLITION WASTE solid waste crisis since the 1990s, including the recent A boom in construction is generating significant construction and establishment of WMRA and issuance of Waste Law demolition (C&D) waste. The construction sector experienced a 202/2020, major challenges remain for existing solid real growth rate of 7.0 percent in 2022, representing 7.6 percent waste management systems. Increasing levels of waste of GDP.22 To address the challenge of increasing C&D waste, generation, changing waste characteristics, improper waste Egypt prepared a National Construction and Demolition Waste disposal practices, lack of sufficient infrastructure, and Management Action Plan 2021. It has six main objectives: (i) uncontrolled spread of urban development exacerbate the reduce the quantities of C&D waste generated; (ii) activate roles challenges to waste management processes. This has pushed and responsibilities for the C&D waste management system local governments/municipalities beyond their technical, per Waste Management Law 202/2020; (iii) establish C&D financial, and institutional capacities. Only about 30 percent waste collection, transport, recycling/treatment (stationary and of the collected waste is recycled/recovered, and 70 percent is mobile units), and final disposal infrastructure; (iv) encourage landfilled. In fact, the solid waste sector represents 4.3 percent private sector participation; (v) indicate specific targets for of total national GHG emissions due to disposal, incineration, C&D waste recycling to reach 50 percent by the end of 2030; illegal open burning, and biological treatment of solid waste.21 and (vi) establish categorization, monitoring, and follow-up measures for recycled materials. Supporting measures include drafting codes, specifications, and guidelines for the use of C&D recycled materials in construction, green public procurement, and green labels; establishing public-private partnerships (PPP) to operate integrated waste management systems; digitizing data collection; using geographic information systems; linking 19 Data on Egypt in 2022 can be found at: https://data.worldbank.org/country/EG. to the WMRA centralized database; and building capacity in the 20 MOE 2021. 21 UNFCCC 2019. C&D waste management field. 22 MOPED 2022. 23 EGYPT COUNTRY ENVIRONMENT ANALYSIS AGRICULTURAL WASTE © Shutterstock Egypt is estimated to generate more than 40–45 million tons the National Agriculture Residue of agricultural residues (including animal waste) annually Management Strategy 2019 to but to utilize less than half as animal fodder, compost, and develop an effective national fuel.23 The inadequate management of agricultural waste in system for the integrated Egypt contributes to black cloud episodes and other pollution.24,25 management of agricultural Agricultural waste recycling is difficult, as the agricultural lands residues, reduce health impacts, in Egypt mainly belong to smallholders, and transportation and maximize the use of natural expenses to centralized locations for aggregation is usually resources through recycling costly. The EEAA incentivized the collection and transformation projects to contribute to of rice straw to profitable products, which reduced black cloud,26 economic development. improved public health, and introduced circularity.27 This was further addressed under Waste Management Law 202/2020 and NONHAZARDOUS INDUSTRIAL WASTE The definition of nonhazardous industrial waste was metallurgy, petrochemicals, introduced recently in Waste Management Law 202/2020 and textiles.30 Industrial waste under Articles 47–52 and its Executive Regulations under mapping of 418 companies in Articles 24 and 41–45. This law defines nonhazardous industrial the 10th Ramadan Industrial City waste as waste generated from industrial activities, handicrafts, indicates the top five materials as or other similar activities that do not contain hazardous off-specification items and unused products (13 percent of total); materials.28 The country generates an estimated 4.9 million other wastes not specified (12 percent of total); discarded molds tons per year of industrial waste,29 and the largest producers are (12 percent of total); dye stuffs and pigments (9 percent of total); mainly concentrated in the Greater Cairo and Delta Regions. and wastes from processed textiles (9 percent of total).31 They include cement, chemicals and pharmaceutics, food, HAZARDOUS WASTE Hazardous waste management faces challenges and gaps Similarly, laboratories lack the capacity to analyze waste in Egypt. Limited monitoring and tracking of waste movement samples, and trained specialists in the field of hazardous has resulted in a lack of data on waste generation, transportation waste management are limited. There is little legal to final treatment, disposal, and exporting. The EEAA Central enforcement of penalties for violations of hazardous waste Department of Solid Waste estimates that 6 million tons of handling, leading to high noncompliance rates by hazardous industrial hazardous solid waste was generated in 2012, but waste generators. Additionally, providing capacity building other estimates indicate 150,000–500,000 tons in 2018.32 This and technical assistance to those in the hazardous waste broad range highlights the general lack of information. Further, management field, including the regulators and generators, the capacities of existing treatment facilities are not sufficient to can reduce challenges faced in the sector. Several of these treat the total volume of hazardous waste. Al-Nasriya Hazardous issues have been addressed in Waste Management Law Waste Treatment Centre in Alexandria is the country’s main 202/2020 and its Executive Regulations, such as that WMRA disposal facility; EGP 45 million was spent to close its old burial in coordination with the competent administrative entities is basin, and EGP 17 million was spent to construct a new burial designated to monitor the handling of hazardous waste as per basin, measuring 150 x 100 meters (m). The new basin opened the established requirements, and licensed contractors should in 2021. submit an insurance policy to cover potential damages and losses in case an accident or pollution. The National Hazardous Waste Strategy includes among its key five objectives to build national capacities and expand knowledge transfer. 23 WMRA-NSWMP 2019. 24 Black cloud is a phenomenon of increased air pollution caused by the burning of rice straws during the period of temperature inversion. The phenomenon has occurred since 1999 in October and November. 25 El Saeidy 2004; Nakhla, Hassan, and El Haggar 2013. 26 See www.eeaa.gov.eg. 27 See www.eeaa.gov.eg. 28 This includes cardboard, oils, plastics, scrap metals, sludge, wastepaper, and wood. 29 MOE 2017. 30 NSWMP 2018. 31 Industrial waste mapping in the 10th Ramadan Industrial City in Egypt. 32 NSWMP 2018. 24 EGYPT COUNTRY ENVIRONMENT ANALYSIS MEDICAL WASTE Over the last two decades, medical waste in Egypt has steadily increased. Hazardous medical waste is generally treated through thermal incineration or autoclaving. While there are approximately 188 incinerators distributed across governorates (figure 1.2), most do not comply with health and environmental operation requirements.33 Figure 1.2: Distribution of Medical Waste Treatment Facilities in Egypt (Incinerators and Autoclaves) al al KafrKafr 2 2 9 9 S Sheikh heikh 7 79 9 1 1 4 4 Daqahilya Daqahilya 1 1 3 3 0 0 8 8 El Beheira El Beheira North North S S inai inai Gharbia Gharbia Matrouh Matrouh Alexandria Alexandria 4 12 4 12 CAIRO CAIRO S S outhouth S S inai inai 1 1 12 12 Asy Asy out out 1 1 18 18 0 0 7 7 CAIRO CAIRO 8 8 28 28 7 10 7 10 Cairo Cairo Sohag Sohag Giza Giza 1 12 1 12 Luxor Luxor 0 2 0 2 4 24 4 24 0 5 0 5 Sea S Red Red ea F um aiy Faiyum 2 2 2 Suez S uez WadiWadi Al-Jadeed0 Al-Jadeed 3 0 3 Aswan Aswan soufsouf BeniBeni IBRD 47605 IBRD | | 47605 0 4 0 4 4 5 4 5 OCTOBER OCTOBER 2023 0 2023 7 0 7 Source: NSWMP 2020. ELECTRONIC WASTE Egypt is one of Africa’s largest e-waste generators, The government is supporting proper management according to the 2020 Global E-waste Monitor.34 Waste from of the e-waste through economic incentives for the electrical and electronic equipment results from the assembly, environmentally sound collection of e-waste. The five- manufacturing, and use of electrical and electronic device year project Protection of Human Health and Environment components. The WMRA estimates that e-waste generated from Unintentional Release of Persistent Organic Pollutants annually in Egypt ranges between 66,000 and 73,000 (about (UPOP) originating from Incineration and open burning of 0.72-0.80 kg/capita/year), of which only 2 percent is treated medical and electronic waste was implemented between 2016 and recycled. Further, Egypt represents a significant market for and 2021 as a collaboration between the EEAA, MOHP, and consumer electronics, with the information and communications the Ministry of Communication and Information Technology technology (ICT) sector growing 15.2 percent in 2019/20.35 (MOCIT). The project assisted the government to extend safe The growth rate is not expected to decrease anytime soon, as and suitable management of e-waste through: preventing the there is still a need for ICT expansion and digital upgrading. open burning of e-waste plastic residuals; applying the best Government programs such as Our Digital Opportunity, environmental practices and the latest available technologies launched in 2020 to engage small and medium enterprises for handling e-waste; developing National Policy Framework (SME) in the digital transformation process, are essential for e-waste Management and amending national legislation for economic growth but will also exacerbate Egypt’s to address issues of persistent organic pollutants and their e-waste situation. unintended emissions; supporting formalization of eight informal recycling facilities; and establishing relevant capacity building and awareness raising programs. The MOCIT, in collaboration with the Swiss government, is executing the Sustainable Recycling Industries project as part of joint efforts with the MOE to manage e-waste effectively. Moreover, the MOE and the MOCIT launched E-Tadweer, an initiative to promote the safe recycling of outdated electronic items in collaboration with the private sector.36 34 Forti et al. 2020. 35 International Trade Administration 2021. 36 El Ghosbashy 2020. 25 Egypt Country Environment Analysis 25 © Adobe Stock LAND-BASED MARINE POLLUTION Across parameters and environmental indices, the Wastewater treatment level varies along the coast, with traces Mediterranean Sea is considered a major hot spot for of organic chemicals causing potential persistence, toxicity, pollution, marine and coastal environmental degradation, and bioaccumulation in the marine environment. This pollution biodiversity loss, and climate change vulnerability. can impact sustainable development tourism along the coasts. The urban coastal area along the Mediterranean Sea is highly Desalination plants can impact marine life at both ends of the eutrophic due to direct discharges of wastewater, mainly from pipe via sea water intake and the discharge of brine back into the agricultural drainage water, treated37 and untreated municipal sea. Moreover, the Mediterranean Sea receives annually about wastewater, untreated industrial effluents, and brine discharge 150,000–500,000 tons of macroplastics and 70,000–130,000 due to the multiplication of desalination plants along the coast.38 tons of microplastics from the contributing countries in the Additional pressure comes from aquaculture located in coastal region, ranking it as one of the most plastic-polluted seas in the lakes and ponds that discharge nitrogen and phosphorus world.39 Notably, plastic and microplastic pollution from Egypt effluents, which increase algae blooms. The cooling of coastal stems from waste mismanagement and through wastewater power stations, oil refineries, and other industrial factories treatment, as plastics and microplastics are not eliminated produce regular thermal shocks that can disrupt coastal habitats. during treatment.40 MARINE-BASED MARINE POLLUTION Marine traffic generates negative impacts on the marine These pressures could significantly affect protected areas (PAs) environment in terms of air, noise, and liquid and garbage and habitats, notably coral reefs. Shipping traffic in the Suez pollution. High traffic of vessels, tankers, and cargo ships Canal and the exploration and production of crude oil increase increase the levels of critical air pollutants, including GHGs; the risk of oil spills. the risk of collisions; oil and chemical spills (figure 1.3); and the release of illegal water ballast containing aquatic invasive species as well as wastewater and waste discharge. Figure 1.3: Oil Spill Density and Maritime Traffic in the Mediterranean Sea Source: El-Magd et al. 2021; Regional Marine Pollution Emergency Response Centre for the Mediterranean Sea 2021. 37 Treated to secondary level. 38 Ismael 2014. 39 Heger et al. 2022. 40 Habib et al. 2020. 26 EGYPT COUNTRY ENVIRONMENT ANALYSIS COASTAL EROSION Urbanization, coastal structures, sand dune removal, saltwater intrusion, and sediment sources in the coastal zone.42 and floodwater and sediment control are causing severe In the future, urban sprawl will spread along the coast while shoreline changes within the coastal zone that will be tourism, which is planned to grow exponentially as articulated exacerbated by climate change (figure 1.4). Erosion along in Egypt Vision 2030, will exacerbate coastal pressures. In both the Mediterranean coast of Egypt and migration of the sand cases, dredging, diking, and artificialization of the coast that spit inland along the Rosetta Nile branch show evidence of affect seabed and hatching areas will increase along with already these shifts.41 Shoreline instability along the Mediterranean serious coastal erosion occurring in these artificial lagoons43 and coast increased due to the construction of hard structures, growing flood-prone coastal areas. Protecting coastal lowland infrastructure, and building, as well as other human activities, and implementing ICZM are two of the main directions of Egypt’s which caused deterioration of sand dunes, fresh water leading to NCCS 2050 (figure 1.4). Figure 1.4: Physical Impacts of Climate Change on Egypt’s Northern Coast under Representative Concentration Pathway 8.5 Source: https://iczmegypt.ihcantabria.com/ LOSS OF MARINE BIODIVERSITY Overfishing in recent decades has affected the fish stock The Red Sea has one of the most unique and resilient coral (between 25 and 50 percent of the fish stock is overexploited reef systems, which is home to over a thousand species in Egypt),44 with artisanal fishing gradually being replaced by of fish and coral, 10 percent of which are endemic.46 large aquaculture investments along the coast. Recreational, This ecosystem has given Egypt the world’s largest reef tourism artisanal, and (to a lesser extent) industrial fisheries coexist in industry and attracts millions of visitors annually.47 Unsustainable Egypt, with artisanal fishing constituting the largest segment. The tourism development, pollution, anchoring of ships, and combined impact of marine pollution and overfishing has taken coastal and underwater construction can diminish the value its toll on fish stocks, and the catch per unit of effort is decreasing proposition and incur significant financial impacts.48 Further, for several species of fish. Moreover, bycatch is poorly studied climate change poses a severe medium-term threat to the Red (such as dolphins) and requires additional analysis. Several Sea’s ecosystems and biodiversity and, consequently, to coastal of these issues are tackled under the Egyptian Biodiversity tourism in Egypt. The expected loss of coral biodiversity will Strategy and Action Plan 2015–30,45 with the objective of render the tourism sector in the Red Sea unattractive to activities promoting the implementation of good fishing practices in both such as scuba diving, snorkeling, and yachting. The reduction the Mediterranean Sea and Red Sea, favorable to fish protection of yearly expenditure on coral reef recreation by tourists is and their habitats by 2027. estimated at US$3.3–US$4.5 million by 2030.49 Losses in tourism revenues are estimated at US$1.8–US$2.3 billion by 2030 and up to US$10 billion in 2060.50 41 El-Sayed El-Mahdy et al. 2021. 42 Iskander 2021. 43 See https://www.ciheam.org/pressreview/coastal-erosion-shocks-egypts-north-coast-environment-ministry-investigates/. 44 Lam and Sumaila 2021. 45 https://faolex.fao.org/docs/pdf/egy156958.pdf. 46 Dhenin 2020. 47 Sarant 2020. 48 MOE 2016. 49 Smith et al. 2014. 50 Smith et al. 2014. 27 EGYPT COUNTRY ENVIRONMENT ANALYSIS 1.2. Natural Capital and Cost of Environmental Degradation Egypt’s wealth per capita declined by half from 2014 to 2018, largely due to the depreciation of the Egyptian pound and the growing population as the wealth stock is valued in local currency by WAVES (figure 1.5). Wealth stock in 2018 constant prices decreased to US$18,271 (EGP 324,676) per capita for a population of 98.4 million comprising (per capita) US$12,958 human capital; US$3,501 produced capital; and US$1,945 natural capital, after adjustment.51 As urbanization encroaches on the stock of cropland and pastureland, the values of PAs and forest ecosystem services are being deflated by the national currency’s depreciation.52 These changes in natural asset values indicate that significant progress is still needed to move Egypt toward macroeconomic stabilization, sustainable development, and growth while building up a resilient natural stock. Figure 1.5: Egypt’s wealth and natural stock per capita, 2005, 2014, and 2018 Egypt Wealth Stock Per Capita Egypt Natural Stock Per Capita EP/Capita in 2018 constant prices EP/Capita in 2018 constant prices 635,934 650,000 150,000 139,251 136,453 550,000 467,482 125,000 450,000 324,676 100,000 EP/Capita EP/Capita 350,000 75,000 250,000 65,550 150,000 50,000 50,000 25,000 -50,000 0 2005 2014 2018 2005 2014 2018 Human Capital Produced Capital Non-renewable Pastureland Natural Capital Net Foreign Assets Cropland Protected areas Sources: Lange et al. 2011; Lange et al. 2018; World Bank 2021b. Note: Nonrenewable natural stocks include oil and gas. Protected areas valuation was introduced in 2014, mangroves and fisheries in 2018. Coral reefs and seagrass are not included in the natural capital calculations. The exchange rate of the Egyptian pound per U.S. dollar is as follows: 6.01 at the end of 2005; 6.97 at the end of 2014; and 17.77 at the end of 2018. A Pearson correlation between the natural capital and the exchange rate depreciation shows a very high R2 coefficient of -0.97 from 2009 to 2018, which means that as the natural capital is calculated in local currency and then denominated in U.S. dollars, 97 percent of the variation of the natural capital is attributable to the depreciation of the Egyptian pound. Air quality has improved in the Greater Cairo Region over the While comparison of the 1999 COED and the 2017 COED decades; however, it was outpaced by population growth, is limited due to the difference in location coverage, the resulting in an increase in annual deaths from ambient PM2.5. updated health risk factors associated with ambient PM2.5 According to the 2019 World Bank report that partially updated concentrations,54 and valuation methodologies, it can be the 2012 Cost of Environmental Degradation (COED) report, the concluded that environmental health risk air COED reached US$3.35 billion, equivalent to 1.35 percent of exposure levels in Egypt remain a concern, national GDP in 2016/17; the waterborne diseases associated and aggregate health effects and their with unimproved water and sanitation nationwide reached costs are substantial. US$2.2 billion, equivalent to 1.15 percent of national GDP in 2017; and mismanagement of municipal waste reached US$1.3 billion equivalent to 0.68 percent of national GDP in 2017.53 51 Wealth Accounting and Valuation of Ecosystem Services (WAVES) is a global partnership that aims to promote sustainable development by ensuring that natural resources are mainstreamed in development planning and national economic accounts. It includes buildings, manufactured assets such as the machinery used in factories, infrastructure such as highways and ports, and natural assets such as land, forests, fish, wetlands, minerals, and energy although archaeological, cultural, and religious assets are often not considered. WAVES is regrouped around three main categories: natural capital, produced capital, and human capital. Adjustments made include net foreign assets of US$1,708. 52 Change in the value of fisheries and mangroves is not included here, as these were only added to WAVES in 2018 and could not be compared to previous years. 28 EGYPT COUNTRY ENVIRONMENT ANALYSIS The 2021 Cost of Coastal Zone Environmental Degradation (CCZED) was calculated for the Mediterranean and Red Seas and reached US$5.9 billion in 2021, equivalent to a mean estimate of 1.48 percent of GDP, ranging between 1.2 percent and 3.0 percent. The Mediterranean Sea bears the brunt of the degradation, equivalent to 1.31 percent of GDP versus 0.17 percent of GDP for the Red Sea. The main consequences are: (i) substantial negative impacts to health from mainly ambient air pollution in the major coastal cities; (ii) waterborne diseases associated with poor water and sanitation provision, water quality degradation, and water quantity losses; (iii) waste, the management of which remains a problem, only accounting for the opportunity cost of treatment of organic and recyclable materials, notably plastic; and (iv) coastal zone degradation, including coastal ecosystem services and area losses due to increased pressures on the marine environment (table 1.2 and figure 1.6). Table 1.2: Selected National, Local, and Coastal Cost of Environmental Degradation as a Percentage of GDP CATEGORY National Greater Cairo Mediterranean Red Sea Total COED Air - National Sea CCZED 2021 CCZED 2021 1999 Water & Waste CCZED 2021 COED 2017 Air 2.1% 1.4% 0.37% 0.08% 0.45% Water 1.0% 1.15% 0.60% 0.06% 0.67% Land 1.2% Waste 0.2% 0.68% 0.18% 0.00% 0.18% Coast 0.3% 0.16% 0.03% 0.19% Total Equivalent to GDP 4.8% 3.2% 1.31% 0.17% 1.48% Source: World Bank 2002; Larsen 2019; Annex 2. Note: The National 1999 COED Air includes the Greater Cairo Region and Alexandria. The Egyptian July 1–June 30 fiscal year is considered for the 2017 COED calculations in Egyptian pounds that are denominated in U.S. dollars in the figure where the June 30, 2017, exchange rate of EGP 18.125 to the U.S. dollar is used. The CCZED waste category only accounts for the opportunity cost of not treating organic and recyclable materials. Figure 1.6: Selected national, local and coastal cost of environmental degradation valuation % of National GDP 5 Quantitative assessments of health impacts from 4.5 environmental pollution can help identify environmental Coast Land 4 Air Waste priorities, mobilize support to implement the priorities, 3.5 and, more broadly, advance environmental objectives. Water The 1999 COED, conducted as part of the 2005 CEA, was 3 effective in mainstreaming an environmental agenda into a % of GDP 2.5 national development strategy.55 Policy reforms and strategic 2 actions have been taken, as described in chapter 2. Further, the updated 2017 COED identified the serious economic burden 1.5 caused by air pollution, which has led to the development 1 of a World Bank–financed project focusing on Greater Cairo 0.5 Region air quality management and climate change.56 0 National Greater Cairo Mediterranean Red Sea COED Air – National Water Sea CCZED CCZED 1999 and Waste COED 2017 2021 2021 53 Larsen 2019. 54 Stanaway and GBD 2017 Risk Factor Collaborators 2018. 55 World Bank 2005. 56 More details available at https://projects.worldbank.org/en/projects-operations/project-detail/P172548. 29 EGYPT COUNTRY ENVIRONMENT ANALYSIS Evolution CHAPTER 2 of Egypt’s Environmental Agenda and Governance © Adobe Stock 30 Egypt Country Environment Analysis Egypt Vision 2030 considers governance, transparency, and accountability as the most important priorities for the country’s economy. The three focus CEA pillars call for good governance as a prerequisite for restoring Egypt’s ecological imbalance, controlling pollution, maximizing the use of its natural resources, and improving its economic and job growth. Environmental governance, which refers to the processes of decision making involved in the control and management of the environment and natural resources, has evolved toward attaining environmentally sustainable development. The fundamental parameters of good environmental governance that will be assessed are (i) the legal framework and justice of environmental management; (ii) institutional setup; (iii) effectiveness; (iv) efficiency; (v) participation, responsiveness, and consensus among stakeholders; and (vi) transparency. 2.1. Legal Framework and Justice of Environmental Management ENVIRONMENTAL LEGAL FRAMEWORK Environmental policy formulation in Egypt is an evolving Good progress was made in the last two decades to process that has gradually aligned with the concept of strengthen environmental policies and mainstream the sustainable development and climate change. Many of the environmental agenda into sectoral policies. The most 2005 CEA recommendations have been implemented. Important important of these are (i) the Environmental Protection Law achievements include (i) owning sustainable development, as (4/1994, amended by 9/2009 and 105/2015); (ii) Industrial opposed to environmental protection, evidenced by collaboration Licensing Law (15/2017); and (iii) Waste Management with other line ministries and the establishment of a sustainable Law (202/2020). Figure 2.1 summarizes the chronological development unit in the office of the Minister of Environment; development of environmental policies and regulations. (ii) mainstreaming environmental concerns into sector policies; (iii) adopting an integrated approach to municipal solid waste and agricultural waste management systems; (iv) environmental monitoring by the EEAA Environment Quality Unit using its central laboratories and online monitoring system; and (v) following up on all conventions in which the environment is a focal point. © Adobe Stock 31 EGYPT COUNTRY ENVIRONMENT ANALYSIS Figure 2.1: Chronological Development of Egypt’s Environmental Policies and Regulations Until 1994 Protection, Treatment and Safe Disposal of Sewage Waste Law No. 93/1962 General Public Cleaning Law 38 /1967 Potable water Law No. 27/1978 Protection of the River Nile and Waterways from Pollution Law No. 48/1982 Irrigation and Drainage Law No. 12/1984 Protected Areas law No. 102/1983 Fisheries Law No. 124/1983 Environmental Protection Law No 4/1994 1995-2000 National Strategy for Integrated Municipal Solid Waste Management (IMSWM) -2002 2000-2005 Economic Zones of special Nature 83/2002 Labour Forces No. 12/2003 2005-2010 Environmental Protection Law amendment 1 No. 9/2009 2010-2015 Protection of Workers and Vocational Health and Safety Law No. 12/2003 General Public Cleaning amendment 1 Law No. 106 of 2012 Industrial Energy Efficiency Policy and Strategy - 2015 Egypt Integrated Sustainable Strategy 2035 Environmental Protection law amendment 2 No. 105/2015 Electricity Law 87/2015 Sustainable Development Strategy Egypt Vision 2030 -2016 2015-2020 Industrial Development Strategy (2016-2020) - 2016 Egyptian Biodiversity Strategy and Action Plan (2015-2030) - 2016 Egypt Sustainable Energy Strategy 2035/2016 Industrial Licensing Law (No. 15/2017 Investment law No. 72/2017 Public Procurement Law No. 182/ 2018 Egypt National Energy Efficiency Action Plan 2018/2019 and 2021/2022 Egypt Renewable Energy Outlook - 2018 Egypt National Strategy for Agricultural Residues Management - 2019 Suez Canal Economic Zone No. 11/2019 Low-Emission Development Strategy (LEDS) - 2019 MSMEs Law No. 152/2020 National Hazardous Waste Management Strategy HWS -2020 Waste Management Regulation Law 202/2020 Egypt’s National Strategy for Construction and Demolition Waste Management, Action Plan 2020 Guidance Strategy – Reducing Single Use Plastic Bags Consumption in Egypt (2021-2030) - 2020 2020-2023 Water Resources and Irrigation Law 147/2021 Lakes and Fisheries protection development 146/2021 Hotels and Touristic Resorts Law 8/2022 Prime Minister decree 1775-983-982/2022 Investment incentives Capital Market Law 4664/2022 Waste Management Executive Regulation for waste Law 722/2022 Egypt National Climate Change Strategy 2050-2022 Source: World Bank staff 2023. 32 EGYPT COUNTRY ENVIRONMENT ANALYSIS The promulgation of the Waste Management Law 202/2022 Law 4/1994. It also requires the industrial waste generator to and its Executive Regulations is an important step toward keep a record of waste, called the industrial waste registry, integrated solid waste management and could be a game which includes the actions taken in accordance with the changer if implemented. The law designates the WMRA as mitigation hierarchy of waste management, the classification of the national regulatory authority to oversee waste management nonhazardous wastes, their quantities, and types, and how to planning, monitoring, evaluation, and improvement of everything dispose of them. In general, the waste law is expected to improve related to integrated waste management, in collaboration with the efficiency of the system across the waste value chain and other governmental entities and with local and international valorization of waste through materials and energy recovery to stakeholders. The law also aims to attract investment in the decrease the amount of waste directed to the landfill (figure 2.2). collection, transfer, treatment, and disposal of waste. It has However, to date, recycling rates have fallen short of the target. introduced incentives for investors in the waste sector and Article 40 of the Investment Law 72/2017 was amended based seeks to integrate formal and informal workers in the waste on a dialogue between the MOE and the General Authority of management system. The law brings new reforms into the waste Investment and Free Zones to compel facilities operating in free management sector and introduces the use of a mitigation zones to properly treat, manage, and discharge their effluents hierarchy that was not required by the Environment Protection and wastes within the country. Figure 2.2: Targeted Collection Efficiency and Municipal Solid Waste to Sanitary Landfill, 2017–35 100.0% 100.0% 95.0% 90.0% 87.9% 90.0% 85.4% 88.4% 83.3% 81.4% 80.0% 87.8% 80.5% 80.0% 69.8% 70.0% 75.3% 70.0% 64.6% Ton per day (TPD) 59.8% 69.8% 60.0% 77.4% 60.0% 55.4% 51.3% 50.0% 47.5% 50.0% 75.3% 40.0% 40.0% 73.8% 30.0% 57.5% 30.0% 47.3% 36.9% 34.6% 32.1% 29.2% 25.5% 25.0% 25.0% 24.1% 20.0% 20.0% 10.0% 10.0% 0.0% 0.0% 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 Year Collecting Efficiency MSW to Landfilling Source: WMRA 2023. The new Industrial Licensing Law 15/2017 and its A listing of the industries that require permits, namely Category C Executive Regulations issued by Decree 1082/2017 (high-risk) projects, is included in the law’s executive regulations. streamlined industrial permitting and established More activities were added in the high-risk category by the the Industrial Development Authority (IDA) within the MOTI Decree 30/2018. According to the law, low-risk facilities Ministry of Trade and Industry (MOTI) as a one-stop-shop are inspected by the IDA for violation of licensing requirements for licensing. The law states that the IDA is the competent that include environmental compliance. High-risk facilities are administrative authority solely responsible for permitting the inspected by a team of inspectors from the IDA and EEAA. establishment, management, operation, expansion, change The IDA also receives CAPs from noncomplying facilities of activity, or relocation of industrial establishments. The new and sends those related to high-risk facilities to the EEAA for processes establish the licensing of industrial facilities either technical advice. through (i) simple notification, which applies to industries of limited hazards, or (ii) prior approval for industries that pose significant health, security, safety, or environmental hazards. 33 EGYPT COUNTRY ENVIRONMENT ANALYSIS Although increasingly stringent laws, rules, procedures, Within this context, the MOE is preparing a revised and regulatory measures are introduced over time, their environmental law, and it is essential that this law remove enforcement faces limitations and constraints. Some overlaps with other sectoral laws and interinstitutional overlapping functions and responsibilities exist between the divergence to further improve effectiveness. The revised Environmental Law 4/1994 and other laws. For example, law will reform the current environmental governance at the Articles 42, 43, and 44 of Law 4/1994 overlap with Law 12/2003 national level; update existing Environmental Protection Laws of Protection of Workers and Vocational Health and Safety in 4/1994, 9/2009, and 105/2015; integrate Law 102/1983 for PAs; limits and standards for work environment and safety measures. incorporate sustainable and improved approaches for better However, in principle, the new law supersedes former legislation environmental management; and harmonize environment- and cancellation of articles, in particular laws that govern specific related activities with other recent laws to avoid overlap subject matters prevail over older general laws. of environmental responsibilities.58 It will also support the development of a verifiable baseline, including assessments of socioeconomic conditions and the development of an environmental permitting system, under which upgrades to inspection, laboratories, monitoring, compliance, and enforcement are integral to its implementation. In line with international good practice, the Environmental Impact Assessment (EIA) system will be upgraded based on risks and impacts consistent with international organizations. ENVIRONMENTAL JUSTICE Environmental justice is integrated into Egypt Vision 2030, Environmental litigation struggles to enforce the which states, “Environment is integrated in all economic sectors environmental law in a timely and effective manner to preserve natural resources and support their efficient use calling for the need for more experience with complex and investment while ensuring the next generations’ rights. environmental issues. In accordance with Law 4/1994, the A clean, safe, and healthy environment leading to diversified Minister of Environment, as the Chair of the EEAA Board of production resources and economic activities supporting Directors, represents the EEAA before third parties and the competitiveness, providing new jobs, eliminating poverty, and judiciary for civil and administrative cases. In case of violations, achieving social justice.”59 Egypt Vision 2030 includes justice the law forces the violator to remedy such violations and submit as a social dimension and recognizes a governance challenge. a time-bound CAP but does not clear him from responsibility Egypt Vision 2030 requested collaboration with the MOE to and legal action. Furthermore, Article 18 of the Code of Criminal review and develop laws and legislation related to social justice Procedure regulates reconciliation in environmental crimes as and integration and to institutionalize the partnership between it is not included in the environmental law. It is a discretionary the state and civil society. system left to the competent judicial authority represented by the public prosecution and the competent administrative Egypt has achieved near-universal access to electricity and authority but still governed by regulations. The collected fines basic water services yet has urban–rural divergences. Since are deposited in the account of the Environment Protection 2020, 99 percent of the urban and rural population has had Fund. Environmental litigation needs to be enhanced to better access to electricity and basic water services. The Hayat Karima protect the environmental and health rights of the Egyptian (Decent Life) Presidential Initiative aims to increase the quality population, including reconstituting articles (under Law 4/1994 of life in 4,658 of the poorest villages through improvements to that were amended by 9/2009) to guarantee the public right to water and sanitation access, education and health services, be compensated for environmental harm. decent employment, and women’s empowerment. Currently, an estimated 90 percent of urban households have public sewage access, compared to 18 percent in rural areas. However, in rural areas, 70 percent of the collected wastewater is treated, though much of the treatment falls below Egyptian effluent standards.60 57 Prasad 2020. 58 EIB 2014; Guelil 2020. 59 See http://sdsegypt2030.com/environmental-dimension/environment-axis/?lang=en. 60 World Bank n.d.a. 34 EGYPT COUNTRY ENVIRONMENT ANALYSIS 2.2. Institutional Setup Egypt has gradually strengthened its institutional Beyond the MOE, it is essential to mainstream environmental framework for environmental governance. The Ministry management as well as green and BE development of State for Environmental Affairs became the MOE in 2014, objectives across all ministries and agencies to create an responsible for climate and environmental mainstreaming, enabling environment. Ownership of the environmental agenda organization, policy planning, and creating specialized should be encompassed by all ministries, notably the MOPED, regulatory agencies (such as the WMRA). The MOE increased Ministry of Finance (MOF), Ministry of Foreign Affairs (MOFA), the regional branch offices of the EEAA (18 total offices) to MOTI, Ministry of International Cooperation (MOIC), MWRI, cover all 27 governorates and a number of its air and water and Ministry of Agriculture and Land Reclamation (MOALR). It quality monitoring stations. Prime Ministerial Decree 1912/2015 is important to note that environmental governance cannot be established the National Council for Climate Change chaired achieved by enforcement alone; it requires all ministries and by MOE, which was reformulated to be chaired by the Prime departments beyond the MOE to act. MOE collaborated with Minister by the decree 1129 for 2019. the MOPED to establish environmental sustainability standards, with the aim of incorporating sustainable development standards Inadequate manpower and physical resources in the field into development plans and tripling green public investments curtail MOE, EEAA, and WMRA activities at decentralized to 30% in 2022 and planned to reach 100% by 2030. As a levels. In 2020, the WMRA was established based on a result, the updated version of Egypt vision 2030 include the modification of Law 38 for 1967. The WMRA is still in its early establishment of an integrated and sustainable ecosystem as phase of hiring its manpower to complete its organizational one of its main strategic goal. structure. It relies mainly on the EEAA and its reginal branch offices for implementation of some activities such as inspection. Furthermore, the EEAA with its departments has insufficient employees with respect to the environmental challenges and the increased responsibility. Therefore, the GOE needs to quickly ramp up human resources in the EEAA and WMRA. The EEAA had success utilizing university experts to inspect the performance reports of cement industries and shipping companies with the participation of NGOs. The MOE, EEAA, and WMRA should increasingly consider shifting to subcontracting service providers. The MOE needs to ensure the core functional areas related to major environmental priorities are clearly reflected in its organogram. There are encouraging signs for undertaking institutional restructuring for the MOE, EEAA, and WMRA, for which the MOE is in the process of modifying its organizational structure to include (i) financing and investments; (ii) international cooperation and international agreements; (iii) research, development, and environmental awareness; and (iv) strategy. Such departments will allow the Office of the Minister to focus primarily on policies, planning, and innovation rather than on the day-to-day operation, management, and regulatory functions of the ministry, which should be carried out by its two regulatory agencies. © World Bank 35 EGYPT COUNTRY ENVIRONMENT ANALYSIS 2.3. Effectiveness The effectiveness of policy/governance refers to the Reliable data and its timeliness are crucial for strengthening extent to which a given goal is reached. More specifically, effectiveness of the inspection system. Article 22 of Law environmental effectiveness refers to the extent to which a policy 4/1994 requires all industrial facilities to maintain an annually is likely to achieve environmental improvements in the sense updated environmental register. The register includes production of sustainable use of resources, protection of ecosystems and data, pollutants concentrations and loads in stack emissions human health, and prevention of environmental degradation. and wastewater, waste generation, and occupational health and safety. A separate register for hazardous substances Although MOE and EEAA policies require the protection of and wastes is also required according to Law 202/2020. An human health and prevention of environmental degradation, additional legal requirement applies to industrial facilities the impact of these policies was not reflected in the actual that use coal as fuel to submit their performance reports with environmental status. The COED remains a concern, as environmental measurements. This is mandatory for renewing illustrated in table 1.2 and figure 1.6. Within the MOE, the the license every two years. Currently, the EEAA is in the EEAA inspection system faces implementation barriers mainly process of establishing a digitalized system to facilitate the related to poor quality of legal inspection documents and the reporting of the environmental register and EIA studies. The EIA capacity at the regional level. In addition, gaps persist in new law is recommended to consider mandating the industries cooperation and coordination between EEAA departments to perform self-reporting. Moreover, the online monitoring (inspection, monitoring, and EIA).61 Lastly, the depreciation of system for stack emissions connected to the EEAA, referred the Egyptian pound has, in part, impacted the effectiveness of to as the Continuous Emission Monitoring System, enabled the environmental legal and regulatory framework. Penalties for continuous monitoring of pollutants. This network extended to not maintaining an environmental register or not complying with other large industries and reached 93 industrial establishments standards are listed as imprisonment for a period not exceeding in 2022 and the Decree 1095/2011 mandated these industries to one year and/or a fine of EGP 5,000–100,000 in 2023. However, connect to the online network as a condition for EIA approval.62 the law permits reconciliation in specific violations by paying one Finally, the monitoring networks established by the MOE for third of maximum fine and comply with the law. ambient air, industrial emissions, and marine and coastal Efforts have been made to improve the correlation between water quality have extended to include industrial wastewater environmental inspection and effective compliance to discharge. However, there is a need to mainstream and integrate reduce transaction costs and better coordinate different all monitoring data produced with other agencies conducting rules and procedures. In June 2020, the EEAA (MOE) and IDA monitoring, such as the MWRI and MOHP. This will lead to more (MOTI) signed a memorandum of understanding (MoU), under effective environmental performance in Egypt. Furthermore, Law 15/2017, to streamline industrial licensing procedures and implementing environmental management systems in industries determine industry’s compliance with licensing requirements. and obtaining International Organization for Standardization The June 2020 MoU articulates the tasks and responsibilities (ISO) certification have improved the quality, efficiency, and of both entities for implementing the law’s provisions. It clearly international recognition of the companies. states that high risk (prior approval) inspection is conducted by a committee headed by the IDA with a member of the EEAA carrying out tests and analysis using EEAA laboratories. As for the ambient monitoring, the EEAA informs the IDA of deviations. Accordingly, there is high-level coordination between the EEAA and IDA regarding inspection and EIA approval through a committee formed of members of concerned parties and consultants. Further, the Ministry of Housing, Utilities and Urban Communities, in collaboration with the EEAA, enforces Law 93/62 (Decree 44/200) regarding discharge of industrial effluent to the sewer network, and in the event of serious environmental risks, its sources must be stopped by all necessary means. 61 Environics n.d. 62 Environics 2020. 36 EGYPT COUNTRY ENVIRONMENT ANALYSIS 2.4. Efficiency Efficiency refers to the extent to which an intervention Building the capacity of technical staff in green accounting, delivers in an economic and timely manner. Egypt Vision environmental economics, social sciences, and policy, 2030 aims to improve efficiency in all its pillars and programs to as well as using automated software, can expedite meet the UN SDG indicators. At the national level, policies and decision making and improve operational efficiencies. programs have improved the efficiency of natural resource-reliant Filling expertise gaps in the MOE/EEEA/WMRA and the sectors. The gradual removal of price subsidies from energy and MOTI/IDA and increasing the number of professionals can water resources since 2016 has reduced fiscal pressure on the considerably improve efficiency by delegating key activities Treasury and enabled the government to invest in basic services (such as inspection visits) to a broader range of professionals. and key infrastructure like water and wastewater treatment plants, Five Egyptian universities offer bachelor’s degrees in highways, bridges, and roads, and to complete a third metro line, environmental sciences and engineering,64 and 10 universities a new monorail, and an electric train network. offer postgraduate degrees.65 These education centers can provide training for government and agency staff. Moreover, There is still considerable work to be done to make pollution the use of ICT can stimulate cooperation between departments management more efficient in Egypt. The following measures by standardizing criteria among inspection, compliance, and have not been integrated into a pollution control strategy: auditing. ICT can also improve monitoring and evaluation (i) operationalizing the user- and polluter-pays principles capacity across governmental bodies, unifying compliance to define prices of water and energy resources, reflecting goals and objectives and the development of performance not only the inclusive value of the resource but internalizing indicators, which are key for better management, transparency, nonfinancial depletion and/or pollution costs and feed-in tariffs; and increased participation. Improved efficiency in operations (ii) using LCA63 in products (ISO 14040) to allow resource would also reduce management costs, conserve resources, and consumption to be tracked (for example, water, energy, and benefit the productivity of industries. materials (chemicals)) to establish resource efficiency-related benchmarks; (iii) applying cleaner production technologies instead of end-of-pipe treatment; (iv) including “soft domains” in terms of analytical capabilities, such as cost/benefit analysis, © World Bank / Flickr prospective and strategic environmental studies; and (v) reducing the environmental damages caused by local and global pollutants, which should be addressed simultaneously as reducing the pollutants of air pollution (PM10), nitrous oxides (NOx), and sulfur oxides (SOx) to improve energy efficiency. Furthermore, the EIA system still needs to be reformed based on international best practices to be robust and objective, which should be tackled in the new environmental law. The accreditation of EIA consultants and EIA reviewers plays an important role in the effectiveness of the EIA. At present, accreditation is based on past professional experience conducting/reviewing EIAs and personal interviews. The current system needs to be strengthened. A Strategic Environmental and Social Assessment (SESA) is a powerful tool that needs to be utilized whenever national visions, strategies, policies, and programs are developed. Moreover, it is recommended to widen the scope of the EIA to include social aspects and to become the Environmental Social Impact Assessment (ESIA). It is also recommended to mandate the SESA for urban planning, new communities, industrial cities, special economic zones, road networks, railway networks, and mega agriculture projects to comply with the international standards. 63 A life cycle is generally understood as starting at the growing and harvesting or mining of raw materials and ends when a product is disposed of as waste. 64 King Salman International University, Zagazig University, Tanta University, Port Said University, and Zewail City of Science and Technology; private communication from Dr. Mohamed Hasan Khalil. 65 Cairo University, Ain Shams University, American University in Cairo, University of Alexandria, Sadat City University, Suez Canal University, Egypt-Japan University, Assiut University, Beni-Suef University, and the Arab Academy of Science Technology and Maritime Transport; private communication from Dr. Mohamed Hasan Khalil. 37 EGYPT COUNTRY ENVIRONMENT ANALYSIS 2.5. Participation, Responsiveness, and Consensus among Stakeholders Participatory processes are prescribed by law, yet more Stakeholder participation is presented to the public as a diverse stakeholders need to be included in the formulation validation step instead of active stakeholder involvement of environmental policies.66 Although the EEAA Board of in the formulation of strategies. There is also a need to Directors includes two environmental experts, representatives tackle the widespread misconception that the EIA is a technical of three NGOs, and academics from two universities, the process to be entrusted entirely to professionals. Irrespective of perspectives of stakeholders need to be better reflected in the limitations that it places on decision-making processes, the pollution management and industrial licensing inspection. lack of openness in the Egyptian EIA limits its own effectiveness Environmental NGOs participated in working groups to review by restricting coordination between government departments, the first National Energy Efficiency Action Plan 2002–17, Egypt the awareness of public concerns, the use of public knowledge, Vision 2030, and the NCCS 2050; however, the decision- and actions to improve EIA quality.68 The EEAA has recently making process should be more inclusive, and inputs provided started to publish the executive summary of the type C EIA by different stakeholders, particularly those who could be on its website, however, the full disclosure of EIA needs to be negatively affected and who are more vulnerable, should be encouraged as required in the EEAA environmental guidelines systematically considered and incorporated, as appropriate. A of 2009. mechanism should be introduced to ensure that stakeholders are getting regular feedback on the process, including on how their views and contributions are integrated. Egypt can look at good practice for workable examples of robust stakeholder engagement. The donor funded programs67 introduced participatory approaches and were successful in engaging with citizens and NGOs in developing environmental action plans and in implementing community- based environmental projects. Benefiting from those helpful models and best international practices, participation should be designed as an ongoing process that engages systematically with affected communities and other stakeholders. So far, the involvement of affected communities has been limited to a specific task for which they were required to advise. © Freepik 66 The Environmental Laws (4/1994 and 9/2009), Waste Management Law (202/2020), and Industrial Licensing Law (15/2017). 67 Examples include the Egyptian Italian Environmental Cooperation Project Phase III and the Support for Environmental Assessment and Management Programme financed by the UK Department for International Development in 1994–2004. 68 Prasad 2020. 38 Egypt Country Environment Analysis 2.6. Transparency Transparency is a core principle in environmental The EEAA has a public grievance system that allows governance. Information quality and availability are key to affected persons to express complaints regarding any increasing accountability and enhancing the commitments pollution issues and that mandates the EEAA to take action made by Egypt Vision 2030 in which the MOE is requested in coordination with the relevant entities. The national unified to “develop efficient, transparent, and accountable monitoring electronic complaint portal was established through Presidential and environmental performance assessment systems for the Decree 314 of 2017 to receive, examine, direct, and respond various ministries.”69 Transparency in the field of environment to all complaints electronically, as hosted by the Office of the needs strengthening through measurement, reporting, and Prime Minister. Its scope of work extends to all ministries, verification. The MOE has taken steps to enhance environmental departments, government agencies, local administration units, transparency by developing different public outreach and public bodies, and other government agencies. The portal has a communication tools, and regularly publishing environmental clear referral system to the concerned entities who receive their reports.70 These reports, however, focus more on disclosing relevant complaints, address them, and either respond directly data in a statistical format to show the government’s efforts to to the complainants or through the unified system. The EEAA achieve its goals and targets, rather than providing the public also has its own hotline, phone number, and WhatsApp number with information needed to support certain decisions related to receive complaints from the public, particularly on pollution to environmental concerns. As part of the requirements of the issues. Good international practices mandate more transparent EIA process, the high-risk projects are mandated to conduct sharing of information to ensure that stakeholders’ concerns public hearings and disclose the EIA executive summary to seek are adequately addressed and incorporated in project design feedback from key stakeholders. The EIA executive summaries and implementation. An inclusive, transparent, information- and public hearing session minutes should be disclosed on disclosure process also calls for sharing all relevant information the EEAA website well in advance, as per the environmental in a timely, understandable, accessible, and appropriate guidelines of 2009. manner and format to various groups of stakeholders. More openness beyond environmental technical staff will support the EEAA in its efforts to advance an ESIA system using a transparent consultation and disclosure process, which incorporates general public concerns, stakeholder interests, and technical environmental aspects into more inclusive and integrated process.71 69 MOPED 2020. 70 These include annual State of the Environment reports (since 2008), Egypt’s biennial update report, the annual report for solid waste management in Egypt, and other thematic reports. 71 Prasad 2020. 39 Egypt Country Environment Analysis CHAPTER Circular 3 Economy and Pollution Management © Freepik 40 Egypt Country Environment Analysis 3.1. Overview of Egypt’s Industry and Pollution Issues The industrial sector in Egypt is an important contributor to the country’s economic growth, composing 16.8 percent of GDP in fiscal 2022.72 The sector employed 12.4 percent of Egypt’s total employment, equivalent to 3.8 million citizens in fiscal 2022.73 The sector’s growth averaged at 2.6 percent during fiscal 2017–20, which overlaps with the first phase of the macroeconomic reforms that enabled Egypt’s economic resilience in the face of the pandemic shock. In fiscal 2021, the sector recorded negative real growth of 5.9 percent due to the impact of the COVID-19 pandemic before rebounding in fiscal 2022 and recording 9.6 percent growth (figure 3.1). Leading indicators are reflecting early signs of a slowdown in Egypt’s economic activity. In April 2022 the Industrial Production Index contracted on a monthly and annual basis by 8.7 percent and 0.1 percent, respectively, according to the Central Agency for Public Mobilization and Statistics (CAPMAS). Figure 3.1: Key Indicators for the Manufacturing Sector Sector contributing Sector Private Total Sector share in to economic Growth Rate Investment employment FDI Inflows growth 16.8%a 2.6%b 21.3 billion 12.4%d 26.5%e (10.6%)c Source: World Bank staff 2023. a. MOPED 2022. b. MOPED 2022. c. CBE 2021. d. CAPMAS 2022. e. CBE 2022. Rapid industrialization could generate environmental The latest State of the Environment Report issued by the MOE pollution, further adding pressure to limited resources. There in 2020 indicates improvement in industrial environmental are currently more than 159 industrial zones that vary greatly performance through compliance with the country’s thresholds in scale, characteristics, and governance structure. In 2020, for air quality indicators. Yet manufacturing is a resource- Egypt earmarked EGP 8.5 billion (nearly US$541 million) for the intensive sector with a heavy environmental and carbon creation of 13 new industrial parks. Several informal industrial footprint. In 2015, the sector accounted for 37 percent of the areas are considered pollution hot spots, mainly concentrated country’s total energy consumption and 12.5 percent of its in the Greater Cairo Region and consisting of micro-medium national GHG emissions (40,664 gigagrams of carbon dioxide workshop aggregations, such as Akrasha in Qalyoubeya, equivalent (Gg CO2e)).74 The Industrial water use increased from Al-Basatein, Mansheyet Nasser, Osim (Giza), andAl-KomAl-Ahmar. 1.2 billion cubic meters in 2012 to 5.4 billion in 2018 with about 10% of total water consumption. 72 MOPED 2022. 73 CAPMAS 2022. 74 UNFCCC 2019. 41 EGYPT COUNTRY ENVIRONMENT ANALYSIS 3.2. The Circular Economy and its Importance for Egypt The CE promotes sustainability and competitiveness Scarce resources, competition for natural resources, while decoupling economic growth from natural resource accelerating effects of climate change, and repercussions consumption. A CE is regenerative by design, aiming to retain from geopolitical and economic crises have countries as much value as possible and to extend product lifespan through rethinking their strategies to meet fundamental water, improved design of materials, products, systems, and business food, energy, and habitat needs. In recent years, European models while striving to achieve zero loss (of energy, water, and Union (EU) countries, Japan, South Korea, and China have material) by relocating waste from the end of the supply chain adopted CE practices as a strategy to achieve climate neutrality to the beginning.75 The CE comprises biological and technical under the Paris Agreement while simultaneously achieving the materials flows and extends beyond pollution abatement and SDGs (box 3.1). For instance, the Ellen MacArthur Foundation law compliance, though the latter are also typically achieved estimates that the circularity scenario could reduce annual net as an aftereffect. Technical materials could be converted into European resources spent in 2030 by as much as 32 percent, a closed loop system through sharing, maintaining, reusing, not to mention the economic multiplier effect, the reduction remanufacturing, and recycling of products. Biological materials in externalities, and the creation of new jobs.77 Further, in the are cascaded through extraction, production of bio-based Arab region, Jordan, Qatar, and United Arab Emirates are materials, energy recovery, and returning nutrients to the members of the Global Green Growth Institute and are exploring biosphere. or currently integrating the CE into their national policies. To avoid irreversible and costly environmental degradation of Circular design is one of the most promising approaches to fast industrialization, Egypt should prioritize CE strategies to meet sustainability goals. Such design is characterized by its achieve sustainable economic growth. process and strategic approaches. These include extending the technical service of a product, using circular material choices to recycle material, dematerializing/reducing the use of materials and energy in manufacturing, and improving modularity to optimize individual components to form a complete product.76 BOX 3.1: EU CIRCULAR ECONOMY INITIATIVE In late 2015, the European Union (EU) adopted an ambitious Circular Economy Action Plan, including goals for food, water, and plastics reuse. In March 2020, the European Commission approved a new Circular Economy Action Plan— one of the main building blocks of the European Green Deal, Europe’s new agenda for sustainable growth and climate neutrality by 2050. According to the Ellen MacArthur Foundation, circular economy (CE) activities generated almost €147 billion in value- added in 2016 in the EU while accounting for around €17.5 billion worth of investments.a This led to a 6 percent increase in jobs in the recycling sector, repair and reuse sector, and rental and leasing sector between 2012 and 2016. The Dutch government, as one of the most ambitious European countries in terms of striving to establish a 100 percent CE, adopted a strategy—CE in the Netherlands by 2050—to achieve the latter goal. Source: a. Ellen MacArthur Foundation n.d. 75 Ellen MacArthur Foundation n.d. 76 See https://peschke.at/blog/circular-design/?lang=en. 77 Ekins et al. 2009. © Adobe Stock 42 Egypt Country Environment Analysis A CE not only tackles economic and environmental benefits but also adheres to social inclusivity by establishing new business opportunities, income, and jobs and creates a safe and equitable work environment for employees and the community. Circularity could provide a competitive edge to Egypt’s export-oriented manufacturing sectors and boost opportunities to meet growing consumer demand for environmentally friendly products worldwide. Europe is an important market for these products, as about 30 percent of Egypt’s exports are directed to the EU. The sources of foreign direct investment for Egypt with high CE potential are tourism, agriculture, and manufacturing.78 According to an EU-led study,79 the anticipated economic and social benefits to Egypt from adopting CE approaches are substantial, as this helps to save energy, expand export opportunities, create jobs, and strengthen inclusive society by engaging informal workers, especially in waste collection and recycling, in the transition to a CE (figure 3.2). Figure 3.2: Benefits of a Circular Economy Egypt’s society, economy and environment can greatly benefit from this transition 23% energy savings Improved ecosystem resilience Decreased GHG emissions 1.0% increase of GDP (+$5.94bn) compared to business as usual An improvement of the trade balance, through a reduction in imports worth $782M and an increase in exports $242M; 101,000 additional jobs would be created compared to business as usual, which is equivalent to an increase of 0.3% Stronger economic position of (informal) waste workers Source: World Bank staff 2023. a. Maamoun 2021. b. Mahmoud et al. 2020. 3.3. Industrial Green Policies and Programs Egypt’s Industrial Development Strategy 2016–20 highlights Waste Management Law 202/2020 has extended producer the need for a “green economy development project that responsibility (EPR) provisions, whereby the producers of aims to support industries” under its Industrial Development certain goods and products are responsible (financially and/or Pillar. The circularity concept also has been indirectly embedded physically) for the treatment and disposal of such goods and in different national policies and strategies (figure 2.1). products post consumption. Assigning such responsibility will The Egypt National Cleaner Production Center was established provide incentives to prevent wastes at the source, promote in 2005. It has implemented projects to promote green industries, environmentally friendly product design, and support the resource efficiency, energy efficiency, renewable energy, and achievement of public recycling and waste management industrial waste reduction with donor support, however, without goals. Green or eco-labeling is another provision issued in the specific targets or action plans for implementation. executive regulations of the law that is expected to address the challenge of the increasing quantities of industrial waste by clearly marking environmentally friendly industrial products and goods with a green label. However, the incentives to promote green manufacturing are still fragmented and need to follow an integrated framework. 78 Smith and McGovern 2020. 79 Smith and McGovern 2020. 43 EGYPT COUNTRY ENVIRONMENT ANALYSIS Egypt has been working with the support of international In the third phase, additional funding has been added to support partners to pave the way for mainstreaming a green SMEs and to finance subprojects in energy efficiency and CE economy and sustainable consumption and production- (box 3.2). Since 2015, the European Bank for Reconstruction related policies as tools to achieve sustainable and Development (EBRD) provided financing for small- and development. The promotion of cleaner production was medium-sized green projects in different sectors through initiated through the Support for Environmental Assessment and Sustainable Energy Financing Facilities, Green Economy Management (SEAM) Programme, Transfer of Environmental Financing Facility I and II, and the Green Value Chain. However, Sound Technology in the South Mediterranean Region innovative policies and strategies to upscale the CE are needed, (MEDTest) I and II, and SwitchMed I and II. The EPAP has been especially to support recycling projects. implemented through three phases, starting in 1997 and closing in 2025 (box 5.1). A total of 100 subprojects have been supported through the three phases to control air and water pollution. BOX 3.2: ENVIRONMENTAL POLLUTION ABATEMENT PROJECT PHASE III FINANCING OF CIRCULAR ECONOMY INITIATIVES The Environmental Pollution Abatement Project, an initiative of the Ministry of Environment, has financed circular economy projects in industry, including the following: • Solvent recovery and reuse in rotogravure printed flexible packaging companies • Ammonia recovery from wastewater to produce ammonia sulphate fertilizer • Fiber recovery from wastewater in pulp and paper companies for reuse as feedstock • Treatment and recycling of industrial wastewater • Treatment of municipal sewage for reuse in industry • Recycling of postconsumer plastic, such as polyethylene terephthalate waste, for use in the production of food-grade packaging • Waste reuse as refuse-derived fuels in cement plants © World Bank 44 Egypt Country Environment Analysis 3.4. Circulatory Potential Egyptian industries have significant room to improve resource efficiency. Industrial activity consumed 28.6 percent80 of Egypt’s total energy in 2018. For most Egyptian industries, the final energy consumption per unit of output is typically estimated at 10–50 percent higher than the international average.81 A study82 prioritized five industries in Egypt for circularity potential (40–80 percent): (i) plastics (polyethylene terephthalate packaging); (ii) glass; (iii) electric and electronic equipment (durable consumer goods); (iv) textiles; and (v) construction. The time frame is 5–10 years, and the evaluation parameters include the relative size of the sector within the national economy (market size), expansion rate of the sector (sector growth), material and input consumption of the sector and volume of output (resource intensity), investment required to make an impact on the sector (CE investment), and potential of the sector to impact waste output (CE potential). Table 3.1 summarizes the energy-saving and circularity potential for various industrial sectors. Table 3.1: Energy saving and circularity potential for selected industrial sectors in Egypt in comparison to international benchmarks Energy-saving Average Energy International potential for all Circularity No. Sector consumption in Data source benchmark the sector in potential Egypt (2012) Egypt 129 MJ/kg virgin 75 MJ/ kg virgin UNIDO Egypt Cotton 1 Textile 204 MJ/ kg virgin yarn 40 - 42% yarn yarn (37%) Project WBCSD-CSI Getting the Construction 3,020 MJ/t 4,040 MJ/t Cement 52 PJ83 annually Numbers Right (GNR), 2 Cement sector = cement (total = 187.9 PJ) (28%) UNIDO Egypt BAT 43–47% Cement Benchmark Iron & 2,600–17,800* 11 PJ annually UNIDO Egypt BAT Steel 3 (total = 40 PJ) Steel MJ/t liquid steel (28%) Benchmark https://www.iea.org/ data-and-statistics/ 13,260 MJ/t 4 Aluminum charts/energy-intensity- Alumina of-alumina-refining-by- region-2000-2020 Fertilizers 23,800 MJ/t 38,200 MJ/t ammonia 37 PJ annually UNIDO Egypt BAT 5 (ammonia) ammonia (total = 96.7 PJ) (38% savings) Fertilizers Benchmark Benchmarks are Glass 6 6,000 MJ/t melt 60–63% provided for flat glass (flat) regenerative furnaces 3,310 MJ/t 6,760 MJ/t ceramic 23 PJ annually UNIDO Egypt BAT 7 Ceramics ceramic tiles tiles (total = 44.5 PJ) (52%) Ceramics Benchmark Polyethylene terephthalate 8 Plastics packaging = 58–70% Source: World Bank consultant background report 2022b Note: UNIDO = United Nations Industrial Development Organization. *Depends on the technology of the furnace. MJ/kg = megajoules per kilogram; MJ/t = megajoules per (metric) ton; PJ = petajoules. 80 As per the Statistical Portal for Market Data, Consumer, Company, and Ecommerce Insights; see https://www.statista.com/. 81 MOE and EU SwitchMed 2016. 82 Note: Based on a background note prepared for the International Finance Corporation. 83 1 petajoule (PJ) = 1,000,000,000 MJ (megajoules). 45 EGYPT COUNTRY ENVIRONMENT ANALYSIS There is great potential to leverage waste management Eco-industrial parks (EIPs) offer solutions for efficient and symbiosis in industrial waste to create new business management of industrial waste. Estimates show that opportunities, increase employment and resource unutilized waste presents 25–30 percent of total generated efficiency, and reduce waste disposal. Within this context, industrial waste, with still-wider opportunities for beneficial the Egyptian National Cleaner Production Center piloted use.84 The EIPs are manufacturing communities and service a sustainable and integrated industrial waste exchange businesses located together on a common property, where system in the industrial sections of the 10th of Ramadan City members collaborate for collective environmental, economic, and 6th October City. This pilot was positioned as a Green and social impacts that are greater than the sum of the individual Entrepreneurship Hub, linking industrial wastes generators with benefits each company would realize on its own.85 The EIP potential users and recyclers to improve cross-industry resource approach decreases potential impacts on the environment and efficiency, promote the development of new innovative SMEs, enhances the well-being of workers inside a park as well as create green job opportunities, reduce environmental impacts surrounding communities. In December 2017, the first version of industrial waste, and improve the lives of Egyptian citizens. of the International Framework for Eco-Industrial Parks was launched as a result of collaboration between the World Bank Group, the United Nations Industrial Development Organization (UNIDO), and Deutsche Gesellschaft für Internationale Zusammenarbeit GmbH (GIZ). A second version in January 202186 improved the practicality of the framework and fine-tuned EIP performance requirements and indicators. Since its first release, many industrial park practitioners have used it as the definitive reference for EIP development (figure 3.3). Figure 3.3: Key Components of EIPs Park management Park and company Industrial Healthy and Spatial planning Collective level resource symbiosis and integrated work and zoning park level efficiency and synergies force, local infrastructure cleaner production community, and utility natural services Material use – Energy – environment Water waste – Emissions Key components of Eco-Industrial Parks Source: UNIDO 2021. There have been several attempts to establish sustainable The UNIDO Global Eco-Industrial Parks Programme (GEIPP),88 industrial zones compatible with Egypt Vision 2030 that launched in 2021, aims to scale up resource efficient and cleaner focus on compliance with environmental laws, yet more production approaches to EIPs in 12 countries, including in needs to be done. The GIZ and UNIDO have conducted EIP Egypt. UNIDO recently documented 33 examples of industrial assessments according to the EIP requirements set by the park development and noted that environmental and resource International EIP Framework for over 12 zones in Egypt. Various conservation benefits were largely achieved in all, confirming industrial parks in Egypt have shown success according to the the viability of the EIP concept in developing and emerging benchmarking, as they have EIP road maps. Ten industrial zones economies to scale up and mainstream resource efficient and were preselected because they fulfilled the minimum criteria.87 cleaner production. 84 NSWMP 2018. 85 Lowe 2001. 86 World Bank 2021a. 87 UNIDO 2021. 88 The objective of the project is to demonstrate the viability and benefits of scaling up resource productivity and improving economic, environmental, and social performances of businesses, thereby contributing to inclusive and sustainable industrial development in Egypt. The project will target three industrial parks as demonstration: Robbiki Leather City in Cairo, Orascom Industrial Park in Sokhna, and Polaris Industrial Park in Giza. 46 EGYPT COUNTRY ENVIRONMENT ANALYSIS An integrated framework for green manufacturing practices across supply chains would facilitate uptake and progressive expansion of the CE. This includes © World Bank / Flickr eco-design, alternative materials, renewable energy sources, and resource efficiency throughout manufacturing operations, notably by leveraging new technologies. Crucial to this strategy is the promotion of new business models that drive the CE, shifting focus from manufacturing processes and traditional linear supply chain approaches to product life cycle approaches that would build sustainable synergies into supply chains. This means moving beyond the simple promotion of renewable energy use and including CE promotion (both through regulation and waste management strategies), green manufacturing, and eco-innovation support (through regulation, financing, green investment, and sustainable procurement). It also requires linking more effective environmental policies and other policy areas, such as education (by focusing on jobs and skills needed for green transitions) or SME support (by providing targeted support to overcome constraints in terms of access to information and financing, among others, to meet environmental requirements). 3.5. A Closer Look: The Food and Beverage Sector The food and beverage (F&B) industrial sector89 is one The F&B industry is a substantial contributor to of the oldest and most important pillars of the Egyptian environmental pollution across the value chain, from economy. The F&B sector (including tobacco) represented crop production to processing, retailers, consumption, 21 percent of the value added in the manufacturing sector in and waste. Water consumption and wastewater generation Egypt in 2019.90 The sector is characterized by private ownership are critical environmental issues, as F&B processing ranks and dominated by microenterprises, which are largely informal first in water pollution load and second in industrial waste in and constitute around 94 percent of total companies.91 Within the the Greater Cairo Region.94 Untreated wastewater is usually country’s manufacturing export sector, F&B is ranked fourth.92 high in both chemical oxygen demand and biological oxygen It is concentrated in the “downstream” segments of the supply demand content, and could reach 10–500 times higher than chain (that is, assembly of imported inputs into final goods), in domestic wastewater.95 Moreover, high concentrations of mainly due to the country’s reliance on imported intermediate fats, oils, and greases could be an issue from the untreated manufactured goods (which constituted 44.1 percent of Egypt’s effluents of meat, fish, dairy, and vegetable oil production. In F&B imports in 2020, compared to the world average of 24.6 terms of air pollution, the key pollutants from the F&B industrial percent). Only 29.8 percent of F&B intermediate manufactured processes are dust and volatile organic compounds. In terms goods are exported, indicating that Egypt’s capacity to provide of resource consumption intensity, water-saving opportunities inputs for F&B production to foreign economies is limited in F&B companies were significant mostly above 25 percent and that the desired upscale to the Ministry of Trade and up to 90 percent and energy savings above 10 percent up to Investment’s export target set under the second phase of the 70 percent (figure 3.4). Waste that is generated from postharvest National Structural Reform Program 2021–2393 is constrained. losses, organic waste, and packaging materials is another critical concern. 89 The F&B sector is composed mainly of nine product groups under the Chamber of Food Industries in the Federation of Egyptian Industries. They are (i) milk and dairy products; (ii) oils and vegetable fats; (iii) juice, beverages, and water; (iv) fruits and vegetables products; (v) sugar, confectionary, and chocolates; (vi) meats, poultries, and fish; (vii) specialty food, yeast, and food additives; (viii) various food products (that is, grinding and flour, rice polishing, and pasta); and (ix) tobacco and cigarettes. 90 World Bank n.d.b. 91 Said and Mamdouh 2018. 92 UNIDO n.d. 93 The National Structural Reform Program 2021–23 focuses on addressing the root causes of imbalances in the real sector to achieve a well-balanced, green, and inclusive growth under the Fourth Industrial Revolution. The priority sectors selected are manufacturing, agriculture, and ICT. The reforms include higher integration in value chains, deepening local production, and increases in the share of industrial exports through improved competitiveness and linking up with global supply chains. 94 PIP 2022. 95 Santonja et al. 2019. 47 EGYPT COUNTRY ENVIRONMENT ANALYSIS Figure 3.4: MEDTEST II Case Study, El Marwa for Food Industries Company, Potential Savings 144,204 € p.a. Total savings 5% p.a. 52% p.a. 1% p.a. Energy Water Material savings savings savings Saving opportunities1 Action Economic key figures Resource savings & enviromental impacts per year Investment PBP Water and raw Pollution Savings euros/yr. Energy MwH euros years materials reduction 1,171 Steam optimization 10,270 21,945 0.5 13,992m3 of water - Optimization of water use 5,500 41,539 0.15 145,752 m3 of water 960 Utilization of process heat 50,000 14,720 3.4 Total: 430t - of C02 1,200m3 of water Product push techniques 267,500 66,000 4 66 t of product 160,944 m3 of Total 333,270 € 144,204 € 2.3 water 66 t of 2,131MWh recovered products 1 Numbers based on production value from 2016. Source: EU SwitchMed 2019. 48 EGYPT COUNTRY ENVIRONMENT ANALYSIS The GHG emissions of F&B upstream activities constitutes The transition from a linear to a CE can reduce environmental 71.5 percent of the total impact of the F&B supply chain, impacts while strengthening competitiveness. The MOE contributing to 34 percent of the total global GHG launched its Bio-based Economy Strategy during COP27. emissions.96 These emissions largely represent methane and According to the United Nations Food and Agriculture nitrous oxide from livestock production, manure management, Organization, food loss and waste in the fruit and vegetable agricultural waste disposal practices, rice production, fertilizer industries amount to 60 percent of total production. This is due use, and nutrient mismanagement. Additionally, upstream to lack of modern logistics infrastructure with integrated cold activities strain natural resources such as fresh water. In Egypt, chain solutions and customized fast-track transportation. The the agricultural sector consumes about 80 percent of the organic waste produced in factories is also underutilized and country’s total water budget. With the sharp decline in the annual disposed of in ways that risk fire by self-ignition, GHG emissions, freshwater resources available per capita (1,972m3 in 1970, and water and land contamination. Additionally, food packaging 570m3 in 2018, and an expected 390m3 by 2050), the country has become an essential component of the modern F&B value is quickly approaching the severe water scarcity threshold. chain, and it is easy to overlook its harmful impacts. This applies particularly to plastic packaging, which requires natural resource extraction, energy consumption, and polluting manufacturing processes, used only once and then disposed in landfills or the marine environment. Minimizing waste and using its by-products in other industries (such as pharmaceuticals and chemicals) is important for the F&B sector’s CE. Reducing the use of natural resources and reusing by-products enhances the economic growth of industries through saving operational costs and complying with environmental standards that are essential for export competitiveness. 3.6. Circularity Opportunities in the F&B Sector and Its Value Chain Egypt’s F&B sector faces growth challenges, and recent requirements related to food safety and hygiene, customer crises have magnified preexisting weaknesses across requirements, and product-specific constraints. Additionally, its value chain. Focused attention and dedicated response water prices have been generally low in Egypt, which has not measures to structure the market are vital for the transformation incentivized water conservation measures. This has begun of Egypt’s food system in the medium and long terms, making to change with the increase of water consumption tariff for it more inclusive, sustainable, and resilient. Cost savings are industries (EGP 4.55/m3) according to Prime Minister’s Decree the main force for the food industry to implement resource 1012/2018. efficiency measures to enhance their competitiveness. Circular opportunities across the food value chain are discussed below. Waste valorization. Companies often underestimate expenses resulting from material losses and saving opportunities. Organic Water conservation, reuse, and recycling. Water consumption waste could be utilized as feedstock for manufacturing other in the F&B sector typically occurs in food processing, products and as a waste-to-energy input. For example, orange equipment and floor cleaning, washing of raw materials and peels can be used to produce pectin, which is currently imported packaged goods, firefighting, and feed-in water for equipment by Egypt.98 Another promising technology is anaerobic digestion, (that is, boilers, cooling circuits, refrigeration, and chillers). It a process in which biodegradable material is broken down by is best practice to treat wastewater after process-integrated micro-organisms, in the absence of oxygen, to yield biogas for operations have minimized the consumption and contamination energy and slurry for soil nutrient improvement. The quantities of water (that is, chemicals). Water efficiency measures include of organic waste produced by the F&B industry would not good housekeeping, preventive maintenance programs, generally be sufficient at a factory level to be economically viable reuse of water in industrial processes or other applications, for biogas technology. Additionally, there is a lack of organic implementation of monitoring and control systems for water waste aggregators or dedicated locations in the industrial areas consumption, dry cleaning of floors, and improved techniques for centralized anaerobic digesters. There is also an absence for washing equipment. The use of treated wastewater is limited of databases or platforms on industrial waste, with detailed in Egypt, compared with its use as an alternative source of water information on types of waste, quantities, and specifications to supply as guided by European and national strategies.97 There allow exchanges between companies and attract investors for are several issues to consider in this sphere, including legal waste valorization. 96 Nako Kobayashi and Richards 2021. 97 Santonja et al. 2019. 98 Smith and McGovern 2020. 49 EGYPT COUNTRY ENVIRONMENT ANALYSIS Packaging. CE leaders are rethinking F&B packaging by Renewable energy (photovoltaic [PV] and solar thermal). designing for reuse and recyclability, incorporating renewable SMEs account for 11 percent of the country’s total electricity materials, eliminating harmful materials, reducing overpackaging consumption,102 and a significant portion are in the F&B sector. and packaging waste, and avoiding packaging when possible. In addition to energy efficiency measures, solar PV systems The WMRA is developing an EPR system for packaging to under a net-metering scheme could replace part of the electricity reduce the use of packaging materials. For Egyptian products to purchased from the grid and/or be exported in the case of surplus be sold in the EU market, EU Directive 94/62/EC99 on mandatory generation. Renewable energy potential from solar thermal essential requirements includes preventing the production systems is also critical as industrial process heat represents of packaging waste, reuse and recycling, and recovery of 33 percent of the energy consumption in the food industry.103 packaging waste.100 Corporate initiatives for plastic packing Egypt’s second NDC update (2023) mentions plans to increase recycling, such as Dawar for Tomorrow by PepsiCo, Dawarna the share of solar heating in the industrial processes of relevant for Nestlé in collaboration with the EEAA, and Plastic Bank, sectors and to promote rooftop PV systems. However, solar incentivize plastic waste collectors. However, Egypt still lacks thermal applications for industry face barriers indicated by the a holistic strategy to address circularity in packaging in general UNIDO Solar Heat for Industrial Processes Systems Project.104 and the use of specific types of materials in particular plastics These include the project’s relatively high costs and the absence and foam. of economic incentives to make this technology competitive compared to its fossil alternatives, low awareness of decision Energy efficiency and waste heat recovery. The F&B and policy makers, mistrust of industrial investors in this new sector consumes both electrical and thermal energy for driving technology, and lack of education and training programs. machinery, heating, refrigeration, lighting, and each step of the manufacturing process. In parallel, there is significant loss of The CE in the F&B value chain. Most of the F&B industry’s heat from the various processes and exhaust gases. Onsite environmental impact occurs outside of manufacturing and is combined generation of heat and power is a valuable alternative spread across the value chain. Agricultural waste, for instance, that balances heat and power loads. Their overall fuel utilization is a major cause of air pollution, despite being considered latent factor is typically about 85 percent, and energy efficiency could national wealth of materials that could generate useful products. reach up to 90–95 percent when the exhaust gases from a The F&B industry could strongly influence other players through waste heat recovery system, such as a steam boiler, are used partnerships with farmers and cooperatives, collaboration for other drying purposes.101 Combined generation of heat and with traders and aggregators of agricultural commodities, power is a convenient and competitive source of energy given cooperation with suppliers (that is, packaging), and alignment concern for rising fossil fuel prices and could generate additional with the government to act together toward the common goal of a revenue streams if surplus electricity/heat can be sold to other circular food system. This could include supporting regenerative neighboring users. Other energy efficiency opportunities could agriculture practices that prioritize closing the nutrient cycle, include reducing heat loads, reducing head pressure, improving encouraging circular approaches to water reuse in agriculture, part load performance, and reducing power consumed by reducing food loss and waste, increasing investments and motors, pumps, and fans. On this last energy efficiency measure, incentives for waste reduction, reframing waste as valuable the MOTI Ministerial Decree 463/2020 mandates producers resources, reusing by-products in other industries, and and importers of electric motors comply with the Egyptian increasing information accessibility and data analysis to ensure specification for minimum energy performance standard. traceable and transparent supply chains.105 99 See https://www.europarl.europa.eu/RegData/etudes/BRIE/2022/734698/EPRS_BRIE_734698_Revision_Directive_Packaging.pdf. 100 EC 2023. 101 Santonja et al. 2019. 102 Sustainable Energy Egypt 2020. 103 See https://open.unido.org/projects/EG/projects/120073. 104 OME 2010. 105 See https://pacecircular.org/action-agenda/food. 50 EGYPT COUNTRY ENVIRONMENT ANALYSIS The CE of fertilizer. The circularity and efficient use of fertilizer are crucial to reduce the cost of production, particularly given price volatility. The President has directed the Ministries of Agriculture and Industry, as well as specialized research entities, to assess the fertilizer production process to guarantee availability in the domestic market. The utilization of agricultural wastes and food wastes to develop organic fertilizer should be considered, as it is a transition from fossil fuel–based to bio-based products. Other considerations to close the nutrient cycle include rationalizing the fertilizer consumption in agricultural land through modern fertilization and irrigation. Finally, use of fully water-soluble fertilizer combined with irrigation water, which provides plants with nutrients and water, conserves both fertilizer and water, and mitigates the pollution, nutrient loss, and soil deterioration associated with fossil fuel– based fertilizer. This will prevent the dissipation (and thus waste) of nutrients into the environment; however, it requires the government to set incentives to encourage farmers to rationalize fertilizer consumptions. The EU fertilizer regulation has set a goal of 30 percent reduction of nonrenewable resources in fertilizer production to be produced from bio-based (agriculture waste and food processing). 3.7. Role of Green Entrepreneurship © Adobe Stock Transitioning to a CE creates demand for green products and services that can be launched by entrepreneurs because the start-up ecosystem is very active in Egypt (see Supply-Side Green Financing in chapter 5). The International Labour Organization estimates that global employment could add 6 million jobs by transitioning to a CE that includes reducing, reusing, repairing, recycling, renting, and remanufacturing, replacing the traditional economic model of “extracting, making, using, and disposing.” In terms of policy, the commercialization of green technology and green entrepreneurship are beginning to receive more attention, shifting the dialogue away from green growth policies that focused on identifying technological innovations to reduce human impacts on the environment, climate change, and biodiversity loss. © Freepik 51 Egypt Country Environment Analysis CHAPTER Blue Economy 4 Opportunities and Challenges © Adobe Stock 52 Egypt Country Environment Analysis 4.1. Overview Egypt’s coastal and marine economic activities are diverse, The BE is neither explicitly articulated in Egypt Vision 2030108 with the bulk being concentrated along the Delta, the Suez nor mentioned in other sectoral strategies. Still, in 2011, Canal, and offshore. Coastal and offshore oil and gas extraction Egypt’s National Strategy for Adaptation to Climate Change provides 80 percent of the country’s energy needs.106 Egyptian and Disaster Risk Reduction recognized the vulnerability of the ports facilitate international commerce and offer routes for Mediterranean coastal zone due to sea level rise.109,110 This issue imports/exports of commodities, while the revenue-generating is reemphasized in the NCCS 2050,111 which calls for, under Suez Canal is a global strategic route for international maritime Objective (2.d), resilient infrastructure and services in the face transport and transit as well as 22 underwater telecommunication of climate change impacts, the protection of coastal lowlands, cables linking Southeast Asia to North Africa, Europe, and North and the implementation of an ICZM. Egypt’s first (2022) and America.107 Coastal mass and ecotourism is an important source second (2023) updated NDC expand on the issue by calling of income, where the Red Sea coral reefs attract year-round for the development of a climate resilient ICZM plan for the visitors from all over the world. Offshore fishing activities are Mediterranean coast that links land-use development plans with gradually being replaced by aquaculture, as seafood is a key the costly coastal protection works over the next 10–15 years. component in food security and an important source of protein for the population in the coastal governorates. The MOE launched the Enhancing Nature-based Solutions for an Accelerated Climate Transformation initiative with Such economic potential mainly relies on resources and the Government of Germany and International Union for ecosystem services provided in the coastal and marine Conservation of Nature (IUCN) during COP27.112 The initiative environment. The ecotourism and PAs cannot be considered recognizes coastal and BE exposure to climate change and in isolation: competing uses of direct consumptive and recommends a comprehensive ICZM to coordinate planning and nonconsumptive resources and their ecosystem support in the management, budgetary savings, and the enhanced resilience coastal and marine environment are dynamic but not always of coastal infrastructure to climate risk. It also recommends the properly regulated and managed. If unchecked, they could coordination of marine activities using key MSP advisory and cause negative externalities and infringe on resource rights, as analytical tools that could help formulate the new Egypt Blue these pressures will also be exacerbated by future hazards and Economy Strategy based on the GOE 2023 draft framework. climate change. In parallel, Egypt plans to increase its reliance on coastal and offshore oil, gas, and mineral extraction and The World Bank defines BE as “the sustainable use of export, and vessel and tanker traffic through the Suez Canal ocean [and sea] resources for economic growth, improved and port hub and its development of coastal mega-industrial livelihoods, and jobs while preserving the health of ocean zones, aquaculture, ecotourism, and private, public, or public- [and sea] ecosystem.”113 The latter is fully aligned with SDG private participation in utility services by promoting renewable 1, on poverty; SDG 8, on decent work and economic growth; and nuclear energy and relying on more effective water supply, and SDG 14, on life below water, and the World Bank’s goals wastewater treatment, desalination, and waste management of ending extreme poverty and boosting shared prosperity on services, among others. a livable planet. The BE transitional process usually calls for responsible use of marine natural resources; reducing carbon emissions and carbon footprints; adopting a CE model; easing conflicts in the coastal and marine environment through ICZM and MSP to coordinate and balance the needs of different activities by gauging economic synergies versus trade-offs in conjunction with resource preservation versus degradation; enhancing blue investments, both public and private; and promoting innovative eco-smart technologies (figure 4.1).114 106 MPMR 2022. 107 See https://www.submarinecablemap.com/country/egypt. 108 More information can be found at https://www.mped.gov.eg/EgyptVision?lang=en. 109 UNDP and Egyptian Cabinet Information and Decision Support Center 2011. 110 See https://www.preventionweb.net/files/57333_egyptiannationalstrategyfordrrengli.pdf. 111 World Bank 2022a. 112 IUCN 2022. 113 World Bank and UNDESA 2017. 114 EC 2021. 53 EGYPT COUNTRY ENVIRONMENT ANALYSIS Figure 4.1: The Blue Economy Blue Economy The Blue Economy is sustainable use of ocean resources for economic growth, improved livelihoods and jobs, and ocean ecosystem health. The Blue Economy encompasses many activities. Ecotourism Fisheries Maritime Transport Ocean, sea and coastal tourism Marine fisheries contribute more Over 80% of international can bring jobs and economic than US$270 Billion annually goods traded are transported growth. Coastal, less developed to global GDP. More sustainable by sea, and the volume of countries and small island fisheries can generate more seaborne trade is expected developing states receive more revenue, more fish and help to double by 2030 and than 41 million visitors per year. restore fish stocks. quadruple by 2050. Protected Areas Climate Change Waste Management Safeguard and foster the The impacts of climate 80% of litter in oceans biodiversity of coastal and change on oceans and and seas from land-based marine ecosystems to seas — rising sea-levels, sources. Better waste preserve natural heritage, coastal erosion, changing management on land can wildlife, and culture, e.g., ocean current patterns help oceans recover. coastal dunes, mangroves, and acidification — are seagrass, coral reefs, etc. staggering. At the same time, oceans and seas are an important carbon sink and help mitigate climate change. Source: World Bank, www.worldbank.org/oceans. 54 EGYPT COUNTRY ENVIRONMENT ANALYSIS Six principles were recognized to help deliver a prosperous, sustainable, resilient, and equitable BE. It should be gauged to derive cumulative effects, ecosystem health, future potential, equitable opportunity distribution with different-sized sectors, equitable opportunity distribution with different historical claims, and equitable distribution of public resources (figure 4.2). The first three principles require assessing coastal and marine conservation versus pollution, drawing natural capital stock baselines, calculating the BE value-added, and identifying opportunities, respectively. The second three lean into the BE governance framework that includes instruments such as ICZM and MSP for efficient and equitable planning as well as judicious green financing, implementation, and management to secure a prosperous, sustainable, and equitable coastal and marine environment. Figure 4.2: Six principles of the Blue Economy Prosperous Sector is detrimental to How does it contribute to the cumulative many other sectors Blue Economy? Sector creates synergies with many other sectors Sustainable Sector is detrimental to Does it ehance or erode ecosystem health? ecosystem health Sector help enhances ecosystem health Sector destroys Sector enhances the potential for Does it enhance or reduce future potential? opportunities for future use future use Equitable Sector pushes out Does it equitably distribute opportunities small-scale operators in Sector creates synergies with small- with different sized sector? its own or other sectors scale operation Sector creates synergies or small Sector prevents new Does it equitably distribute opportunities opportunity costs for future actors actors from gaining access with different historical claims? and innovations to resources Sector does not share Does it equitably distribute the gain from Sector makes benefits publicly available benefits with the public public resource? Source: Crona et al. 2021 55 EGYPT COUNTRY ENVIRONMENT ANALYSIS Coastal and marine resources could contribute to what With a coastal population that includes the administrative is needed to diversify and transition to a BE. Looking at coastal urban areas that account for 7.3 percent of the the BE synergies and trade-offs is necessary to secure the total population, Egypt’s BE value-added is conservatively quality and resilience of coastal inclusive growth, livelihoods, estimated at 19.6 percent of GDP in 2021.116 Conversely, the and the commons in the future. This chapter complements the official GDP of the entire coastal governorates ranges between Egypt Vision 2030 strategy with its economic, social, and 24 and 28 percent in 2021.117 This BE value-added is preliminary environmental pillars and the World Bank Group’s CCDR by and based on the available value-added of some coastal and bringing about and expanding the scope of Egypt’s BE to help marine activities: Suez Canal maritime traffic; port traffic; oil and increase efficient blue opportunities while preserving coastal gas extracted, pipelined, and refined; coastal tourism; coastal and marine PA, pristine areas, and the commons. The GOE is utility production and services; coastal economic activities planning to strengthen the engagement of different stakeholders such as aquaculture; and fisheries. Data on industrial zones, in the stewardship of PAs and their environs. Moreover, coastal agriculture, coastal mineral extraction, underwater synergies and trade-offs of key sectors are analyzed to promote telecommunication cables, and PA value-added are not readily Egypt’s BE; green financing of GOE priorities for the BE will be available and should be considered in the future. These covered in the next chapter. results distribution among both seas mainly show that the oil and gas activities represent the major share of the blue GDP The BE scope in this chapter is restricted to the coastal (43.5 percent), and oil production is tilting the overall blue GDP area delimited by the coastal road in nonurban areas weight toward the Red Sea: 10.9 percent with a population of and the marine environment as well as coastal urban 1.49 million against 8.7 percent for the Mediterranean Sea with areas (such as Alexandria, Port Said, resorts, and tourist a population of 5.92 million. venues) and economic activities (such as ports, oil and gas hubs, industrial zones, fisheries, and aquaculture).115 The prerequisites for developing Egypt’s BE strategy lie with determining its geographic scope and its share in the economy and valuing coastal and marine natural capital. The former helps determine the BE pathway and set goals for the future, while the latter allows to help shape GOE policies to preserve and even increase the renewable natural capital while using the nonrenewable capital such as oil, gas, and mining for the green and blue transitions. The coastal and maritime capital is vulnerable to short- to long-term pressures, as evidenced by the CCZED results (see chapter 1), which could erode over time, hence reducing resources, ecosystem services, and economic rents provided by this natural stock, leading to knock-on effects on the tourism and seawater fishery sectors. 115 Environmental Law 4/1994 (Article 39) and the amended Law 9/2009 (Article 1, paragraph 39) clarify the spatial extent of the coast, continental shelf, and the exclusive economic zone, and shoreline of up to 10 km inland in densely populated areas and up to 30 km inland in the desert. 116 World Bank staff estimates based on official published data on coastal economic activities. 117 See GDP data provided by MOPED at https://mped.gov.eg/Governorate/Index?lang=en). © Freepik 56 Egypt Country Environment Analysis 4.2. Strategic Marine and Coastal Management There is no overall framework that governs the marine Environmental Law 4/1994 does not include strategic environment in Egypt, although Environmental Law 4/1994 environmental assessments (SEAs) as a process of regulates ICZM and an ICZM strategy was formulated in evaluating the effects of certain plans and programs on 2010. Although ICZM programs in Egypt have been fragmented the environment. However, they have been carried out in Egypt and driven by the international development community and as a prerequisite for the ICZM Plan for Matrouh-Sallum. More academic institutions (in coordination with the MOE and recently, a SEA study was conducted in the Southern Red Sea, EEAA), they have helped to inform an ICZM strategy, improve the North Coast and Siwa regions with a specific focus on the preparedness, build capacity, and enhance coastal resilience. tourism sector’s plans and strategies. This effort was led by the In terms of strategy, several ICZM processes have been Mainstreaming Biodiversity into Egypt’s Tourism (MBDT) project, launched since the early 2000s118 covering the Mediterranean funded by the GEF and implemented by UNDP and EEAA.124 Sea and the Sinai Peninsula, and the European Union funded a National Integrated Coastal Zone Management Strategy for MSP analyzes and allocates the spatial and temporal Egypt 2008–10 with the aim of Egypt ratifying and signing the distribution of human activities in marine areas.125 Its Barcelona Convention ICZM Protocol. However, Egypt did not approach is similar to, but wider than, an ICZM. In Egypt, ratify or sign it.119 In terms of international development and its scope extends from the coastal zone to the exclusive academic implementation of ICZMs in coordination with the economic zone, an area estimated at 263,451 square EEAA, the examples are numerous. For instance, a Framework kilometers (km2). The process supports all important concerns for ICZM Plan for Fuka-Matrouh to rationalize land use was in the transition to a BE, such as citizen engagement, climate prepared under the MAP Coastal Area Management Programme change mitigation, and biodiversity. The process also forges and the University of Alexandria.120 An Adaptation to Climate partnerships between the public and private sectors, civil Change in the Nile Delta through ICZM 2009–17, funded by society, and academia and relies on financial and advisory the GEF, was implemented by the UNDP and executed by and analytical instruments that help gauge synergies and the MWRI in coordination with the Coastal Research Institute trade-offs by bringing clarity to societal (such as vulnerable and the Egyptian Shore Protection Authority to integrate the communities and gender), economic (such as efficiency and management of sea level rise risks into the development shared prosperity), and environmental (such as biodiversity of Egypt’s Low Elevation Coastal Zone in the Nile Delta.121 and ecosystem services loss and climate change) challenges. Moreover, the Alexandria ICZM Project 2010–17, funded by As illustrated in figure 4.3, designing and implementing an MSP the GEF, implemented by the World Bank, and executed by the entails four steps: (i) making the case by justifying the benefits; EEAA was meant to contribute to the reduction of land-based (ii) reviewing the enabling conditions that increase the chances sources of pollution entering the Mediterranean Sea through of success; (iii) formulating an integrated plan with goals and the identified hot spots in the Alexandria area, especially Lake objectives; and (iv) implementing, monitoring, and evaluating Mariout.122 Enhancing Climate Change Adaptation on the North the MSP to allow for the calibration of the process.126 Coast and the Nile Delta, initiated in 2018 and funded by the Green Climate Fund, implemented by UNDP, and executed by the MWRI in coordination with the MOE, has a critical objective to implement the coastal protection measures in five governorates of the North Delta that are vulnerable to sea level rise.123 118 Borhan, Farouk, and Hamdy 2003. 119 See https://www.unep.org/unepmap/who-we-are/barcelona-convention-and-protocols. 120 UNEP and MAP n.d. 121 See https://www.thegef.org/projects-operations/projects/3242. 122 See https://iwlearn.net/iw-projects/2602. 123 See https://www.undp.org/egypt/projects/enhancing-climate-change-adaptation-north- coast-and-nile-delta-egypt. 124 UNDP and Environics 2022. © Adobe Stock 125 See https://ioc.unesco.org/index.php/topics/marine-spatial-planning. 126 Alder and Castaño-Isaza 2022. 57 EGYPT COUNTRY ENVIRONMENT ANALYSIS Figure 4.3: MSP Process Marine Spatial Planning Process Adjustments Enabling Making the case Planning Implementation conditions review Economic/ Regulatory Define goals Various studies Investments social benefits and objectives and analyses • Sectoral • Ecosystem • Socio-economic Prepare Coordination and endorse and intergration Entry points Institutional Define study area the plan Trade-offs, modelling, conflict analysis Ecological Funding Monitoring Compile data and evaluation Cross-cutting considerations: gender, climate change, biodiversity Source: Alder and Castaño-Isaza 2022. 58 EGYPT COUNTRY ENVIRONMENT ANALYSIS 4.3. Coastal and Marine Resources Natural Stock and Status The Egyptian land-sea coastal and marine environment interface provides a rich array of natural resources with varying ecosystems and habitats, notably coastal dunes, sandy beaches, coastal lagoons, mudflats, and seagrass beds in the Mediterranean that are complemented by mangroves and coral reefs in the Red Sea. Moreover, at the end of 2022, Egypt’s 2,800 km coastline hosted about 22 percent of its 104.4 million population,127 contributing to coastal and offshore economic activities as well as the preservation of the commons in terms of ports and maritime transport; oil and gas activities; industrial zones; electricity production; mangroves; wastewater plants; desalination plants mainly associated with resorts, tourism venues, hotels, and ecotourism lodges; PAs; groves; aquaculture; and offshore and coastal lake fisheries. © Freepik 127 S ee www.capmas.gov.eg. 59 Egypt Country Environment Analysis GEOMORPHOLOGY The geomorphology of the Mediterranean Sea coast, refineries, and pipelines; the extension of coastal aquaculture which extends about 1,100 km, has been changing. to the detriment of offshore fishing; and the establishment of The coast boasts a highly diversified coastal clastic morphology industrial zones. Conversely, the geomorphology of the Red interspersed with the open-coast Nile Delta and coastal lagoons, Sea coast, which extends about 1,700 km, including the coasts thanks to a sediment-supply regime.128 While a rocky coastline of the Suez Gulf, the Aqaba Gulf, and islands, is twinned with from the Libyan border to Marsa Matrouh remains pristine, a mainland coastal plain constituting the edge of the Eastern the recent development of ports, marinas, resorts, artificial Desert. The water and sediments brought down by wadis during lagoons, desalination plants, and the construction of a nuclear the rainy season nourish the coastal habitat, mangroves, and power plant in Debaa along the partially sandy coastline from coral reefs. The coral reefs constitute an offshore strip that is Marsa Matrouh to Alexandria is affecting the coastal dunes and 50 m and 100 m wide that protects coastal areas against wave creating coastal erosion. Substantial dredging and diking to build action, storms, and erosion, and contributes to the formation coastal infrastructure and black sand mining are altering the of the sandy beaches and sheltered harbors.129 The coast also geomorphology of this coastal stretch. Similarly, the Alexandria harbors Egypt’s main tourism and ecotourism infrastructure, Sinai coastal ongoing artificialization is being exacerbated by the while areas along the southern coast as well as parts of the Sinai enlargement of ports due to increasing maritime transit through Peninsula are protected. the Suez Canal; the development of oil and gas terminals, FISHERIES Mediterranean marine pollution and overfishing is gradually reducing the fish catch in sea waters and is exacerbated by Red Sea invasive nonindigenous species that directly impact the marine ecosystem.130 Conversely, the Red Sea’s naturally nutrient-enriched waters in the south have a higher productivity than those of the north, although the sea is not a very productive system; the impact on the stock is not negligible, and the catch per unit of effort is decreasing for several fishes. Oil spills most affect sediments, including reefs, crawling species (such as lobsters), and hatching areas. ©Freepik CORAL REEFS IN THE RED SEA The reef flats of the fringing reefs comprise some 1,760 km2 On average, coral diversity is greater in the northern part of of the Egyptian Red Sea coastline, with an average width of the Egyptian Red Sea than in the south, with nearly double 250 m. Seaward reef walls or faces have an average depth of 30 the number of coral species. In Marsa Abu Dabab, which is a m, which equates to a total area of 492 km2 of fringing reef in the popular diving site in Egypt’s southern Red Sea coast, 162 fish Egyptian Red Sea. Its tropical coral reefs represent 1.247 percent species including the dugong were recorded, with the highest of the world’s reefs.131 Coral diversity varies quite considerably abundance reaching 1,119 fish per 1,000 square meters (m2) in the Egyptian Red Sea due to changes in water temperatures, (box 4.1).134 Still, some coral reef communities are deteriorating salinity, sediment load, and light and anthropogenic impacts.132 due to a combination of land-based and natural pressures (such Patchy form reefs around the islands total 156 km2, making for as temperature, pH, and change in salinity due to release of a total reef area of 733 km2. Red Sea coral reefs are home to desalination brine) resulting in the increase of bleaching, algae approximately 120–125 soft coral species and 209 hard coral overgrowth, higher incidence of crown-of-thorns starfish and species, whose cover declined by 13.6 percent on average snails, homogenization of the coral reef community due to coastal between 2005 and 2019 at the 10 most affected sites.133 development, in addition to recreation-prone damages (such as anchors and scuba diving) when enforcement is relaxed. 128 Anthony, Marriner, and Morhange 2014. 129 Shaltout, Allah, and Banna 2005. 130 FAO 2018. 131 Souter et al. 2021. 132 Pilcher and Zaid 2000. 133 Souter et al. 2021. 134 Alwany 2011. 60 EGYPT COUNTRY ENVIRONMENT ANALYSIS BOX 4.1: THE ZAKI REEF RESILIENCE The Zaki Reef, which is a small, shallow, fringing reef 55 kilometers south of the Suez Canal in the Red Sea, is under local pressure from fishing, shipping, and coastal development. Local fishermen cross the reef daily and anchor directly on the beach behind the reef, causing noticeable coral damage. After a major oil spill and bleaching event in 2005, there was a marked increase in coral disease, water turbidity, organic nutrients, and sedimentation levels, all signifying a decrease in reef health. Between 2004 and 2007, dead coral cover increased by 50 percent. However, data from 2008 point to signs of improved reef health, possibly indicating that the reef is rebounding from the 2005 oil spill and bleaching event. Incidences of coral disease decreased in 2008, and the growth of new corals was documented over major portions of the reef. Recent data from Zaki Reef suggest that this ecosystem may be adapting to new stressors by shifting dominant corals and accessory reef populations. Determining the reasons this ecosystem manages to survive despite extreme environmental conditions and additional stressors may hold the key to the preservation of reefs elsewhere. Source: Moustafa n.d. MANGROVES These important trees help stabilize and protect There are both gray (Avicennia marina) and red (Rhizophora beaches from erosion during fluctuating tides through mucronata) mangroves, with the latter considerably less their intertwined roots that clamp the ground together. common and found only in areas south of Shalateen. Red Sea They also filter the waters, help reduce the excess salt of the mangroves were declared protected in 1986 before the start of surrounding area, provide natural homes to birds and other unsustainable and intensive development along the shoreline. animals, and act as fish, mollusk, and crustacean habitats However, threats to their existence persist despite efforts to (e.g., crabs) or nurseries (e.g., grouper and lobster). They create nurseries to implement reforestation programs since 2002, also store carbon and can support the bee population.135 due to the understaffing of these PAs, mangrove deforestation Twenty-eight mangrove sites exist and covered a 700 hectare due to development and pollution.137 Indigenous mangroves also (ha) area in 2007, compared to 525 ha area in 2002.136 exist in small areas in Marsa Matrouh on the Mediterranean Sea. SEAGRASS In the Mediterranean, among the 64 species of seagrass, However, between 1959 and 2009 (a 50-year period) there has Posidonia oceanica is an endemic species that can been a 34 percent decline or degradation in the plant distribution only grow in clean, unpolluted waters. It (i) covers the area all over the Mediterranean.140 Conversely, in the central sea bottom at a depth between 0 m and 40 m; (ii) stabilizes and northern Red Sea, of eight species of seagrass, all but one seabeds; (iii) breaks swells and waves; (iv) encourages the originated from the Indian Ocean are observed. These flowering deposit of sedimentary particles; (v) ends up on shore during perennials tend to grow on sandy or muddy bottoms, usually wintertime, acting as a beach dune system that protects the between 2.5 m and 10 m depth, primarily in sheltered areas. coastline; (vi) supports a wide variety of animal species (about A few species are also found on the reef. Endangered species 20 percent) that use these habitats for breeding, feeding, and (such as turtles and dugong)141 as well as fish, crustaceans, sheltering; (vii) is more efficient at producing oxygen (14–20 and birds depend on seagrass. However, the shallow location liters of oxygen/m2 /day) than the Amazon rainforest; and (viii) of seabed makes them susceptible to pressures from urban, is most effective in carbon fixation and storage (average rate of industrial, tourism, fishing, and existing and planned desalination 83 grams of carbon/m2/year), where Posidonia meadows store activities, as well as water quality, dredging, diking, boating, 11–42 percent of carbon dioxide emissions from Mediterranean tourism, and so forth.142 Conversely, the substrates seem rich countries.138 Posidonia oceanica and a few other meadows and diverse, and it is important to provide food for humans, fish, are present along the western Egyptian Mediterranean coast and birds, while they are very important for carbon sequestration down to the Abu-Qir Bay, as the eastern part is free from the and chemical cycles. Indeed, algae communities are highly meadows due to a decrease in water salinity and freshwater diverse, consisting of over 500 described species and many input from the Nile Delta. Although the mapping of the new species, where in the northern and central Red Sea, algae meadows has so far been neglected, a very high probability of consist primarily of filamentous green algae and small brown Posidonia oceanica occurrence was suggested in open deeper algae species. Still, scientific gaps need to be bridged to better waters between Marsa Matroush and Alexandria in 2016.139 capture all the functions of substrates. 135 Abo-Taleb 2019. 139 Chefaoui, Duarte, and Serrão. 2017. 136 Shaltout and Eid 2017. 140 Marbà, Díaz-Almela, and Duarte 2014. 137 Tamraz 2017. 141 El Kafrawy et al. 2020. 138 See https://medwet.org/2017/10/mediterranean-posidonia/. 142 Nour et al. 2018. 61 Egypt Country Environment Analysis COASTAL AND MARINE PROTECTED AREAS While keen in fulfilling its international commitments, Marine PAs mainly comprise areas with coral reefs, mangroves, Egypt is falling short of meeting the Convention on and breeding and nursing grounds of sensitive species, Biological Diversity’s Aichi Biodiversity Target 11: “at making them intrinsically valuable as providers of ecosystem least 17 percent of terrestrial and inland water areas and services as well as economically valuable in the short term as 10 percent of coastal and marine areas.” Under ministerial tourist attractions. Most coastal and marine PAs fall under the mandates and managed by the EEAA, 11,715.8 km2 or 4.9 Red Sea with 50,780 km2 (when considering the land area percent of Egyptian territorial waters include 12 marine PAs143 extension not accounted for under the Aichi guidelines to avoid recognized by the Aichi Biodiversity Target 11, although less double counting under the terrestrial areas) as compared to than 1 percent are implemented and highly/fully protected only 1,959 km2 (including the coastal lakes) under the from fishing.144 Moreover, 48 percent of all PAs are governed Mediterranean Sea. by national ministry or agency with no reported private PAs. 4.4. Coastal and Marine Resources Natural Stock and Status Egypt’s coastal and marine natural resource capital stock a disaggregation of this wealth by asset and by sea over was estimated at US$233.4 billion in 2021 (table 4.1 and 25 years. These preliminary results need to be expanded and figure 4.4). The coastal and marine capital stock, which is constantly updated to help decision makers identify priorities calculated for the Mediterranean and Red Sea, is equivalent to the and eventually simulate the use of each asset that will help sum of active crude oil extraction, active natural gas extraction, decision makers design, prioritize, and implement efficient, fish catch, existing coral reefs, existing mangroves, and existing judicious, and transitional policies in the future to preserve these seagrass over 25 years (equivalent to one generation) and assets.145 Still, when looking at the coastal and marine resource discounted at 3 percent. Although salt, pearls, black sand, and CCZED results, the flows of natural resources and ecosystem other minerals extraction occur, they are not considered in the services derived from these stocks are all negative (see chapter analysis due to a lack of data. The nonrenewable fossil fuels 1) and equivalent to 0.3 percent of the GDP in 2021. Although dwarf renewable natural resources, with US$209.7 billion for this figure is very conservative, the fisheries, coral reefs, and the former and US$23.7 billion for the latter, or almost ninefold. seagrass degradation and depletion trend is also evidenced in Interestingly, the Red Sea is more endowed with nonrenewable the literature reviewed. The resources and ecosystem services (US$133.6 billion) and renewable (US$21.9 billion) resources derived from these stocks are therefore being eroded, leading than the Mediterranean Sea, as the Red Sea’s active oil and gas to diminishing flows in the future. To this end, the natural capital fields and the coral reefs represent most of this natural capital stock tool could be an important decision support system that stock (98 percent). Hence, this preliminary analysis allows for a allows for the simulation and calibration of the value of future quantitative estimate of the marine stock of wealth and provides stocks while considering climate change models. 143 CBD and UNDP 2021. 144 See https://mpatlas.org/countries/EGY/map. 145 For a detailed description of the methodology, see Lange et al. (2011). 62 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table 4.1: Egypt Marine Natural Resource Capital Stock 2021–45, in 2021 Prices Mediterranean Sea Red Sea Total Marine Natural Resource Stock US$ billions US$ billions US$ billions Nonrenewable Resources 76.1 133.6 209.7 Active offshore oil fields 3.2 119.9 123.1 Active offshore gas fields 72.9 13.7 86.6 Other extraction (e.g., black sand) Not Calculated Not Calculated Not Calculated Renewable Resources 1.83 21.88 23.71 Fisheries 0.43 0.19 0.62 Coral reefs Not Applicable 18.70 18.70 Mangroves Not Applicable 0.01 0.01 Seagrass 0.80 Covered Under Reefs 0.80 Coastal protected areas 0.60 2.98 3.57 Total 77.93 155.48 233.41 Note: Coastal protected areas and fisheries are based on the 2021 Wealth of Nations’ protected area and fisheries that are broken down by land and coastal/ marine seas for the former and seas for the latter. Instead of the Wealth of Nations’ 4 percent discount rate over 100 years, 3 percent is applied over 25 years due to shorter timescales after deflating the amounts. Wealth of Nations’ fisheries calculation is based on the Sea Around Us and does not include land-based aquaculture and freshwater fish. Source: Preliminary results and calculations are available in Annex 2. Figure 4.4: Egypt Marine Natural Resource Capital Stock 2021–45, in 2021 Prices Marine Natural Resource Stock by Sea Marine Natural Resource Stock by Resource 160 160 140 140 120 120 100 100 80 80 60 60 40 40 20 20 – – Mediterranean sea Red sea Oil Gas Fisheries Coral Mangroves Seagrass Coastal Reefs Protected Areas Oil Gas Mediterranean sea Fisheries Coral reefs Red sea Mangroves Seagrass Coastal protected areas Source: Preliminary results and calculations are available in Annex 2. 63 EGYPT COUNTRY ENVIRONMENT ANALYSIS 4.5. Potential Conflicts and Opportunities for Stimulating Ecotourism and Fisheries TOURISM Coastal tourism is estimated to account for about half The SEA prepared in 2022 to help define a strategic policy for of Egypt’s tourism, which attracted a total of 13.6 million sustainable tourism development for the Southern Red Sea tourists and constituted about 12 percent of Egypt’s GDP Coastal Belt151 articulated clear trade-offs between mass tourism in 2019.146 After a sharp decline in the number of tourists versus ecotourism: ecotourism not only preserves the commons to 3.7 million in 2020 following the COVID-19 pandemic, but also improves the livelihoods of local communities (box 4.2). 11.7 million tourists visited Egypt in 2022, and tourism Moreover, Egypt already has experience securing community revenues bounced back from US$4.9 billion in fiscal 2021 to engagement for mangrove reforestation152 and developing US$10.7 billion in fiscal 2022, equivalent to 2.3 percent of PAs for tourism purposes, especially in the Red Sea: the Ras GDP.147 The tourism sector value-added contribution to the BE Mohamed National Park and the Wadi Rayan Protectorate are is estimated at US$7 billion in 2021 thanks notably to the quality prime examples. In addition, Egypt has several destinations of the coral aesthetic. However, pressures on coral reefs— that participate in environmental protection programs, with the such as diving rates exceeding the optimal globally recognized goal of calculating their footprint and increasing sustainability, capacity levels, boating (anchors), sunscreen released during such as the Egyptian Sustainable Tourism Portal,153 while bathing, and site carrying capacity for diving and illegal mining the Green Globe Certification has members across Egypt.154 reefs—have affected the state of the coral reefs,148 not to The MBDT is a multisectoral project funded by the GEF and mention effects from solid and liquid waste pollution. Sustained executed by the UNDP, where guidelines for best environmental deterioration of these resources and ecosystem services could practices in tourist restaurants and eco-hotels as well as tourist affect both the tourism and seawater fishing sectors, especially facilities bearing eco-labels, are some of the actions that will since the regional competition could increase as the Kingdom of boost development of the ecotourism market in Egypt and Saudi Arabia started promoting tourism, especially along the increase investments in and outside nature reserves.155 Also, Red Sea coast. a homegrown Coral Damage Index was developed to monitor diving sites that could be monitored by hospitality managers.156 Still, Egypt has a geographical advantage in terms of The promotion of ecotourism coupled with the acquired the opportunities it may harness for blue ecotourism. knowledge in managing fragile coastal areas are essential A fast-emerging alternative to mass tourism is ecotourism, ingredients for the transition toward a BE. Yet ecotourism is which places special emphasis on environmental management, self-designated in Egypt and often exerts some pressures on reduction of environmental degradation, a skilled workforce, resources and ecosystem services.157 and community engagement. However, Egypt has been promoting private investment to develop tourism projects and resorts across the Mediterranean coast,11 where the degradation of coastal dunes and erosion were evidenced due to encroachment as well as substantial dredging and diking, as thoroughly illustrated and mapped in the 2017 ICZM in the Northern Coast of Egypt149 scoping study. In the Red Sea, some coral reef communities have deteriorated due to a combination of land-based and natural pressures.150 146 EEAA 2016. 147 CBE 2023; CAPMAS 2022; GOE 2023. 148 Gladstone, Curley, and Shokri 2013. 149 IH Cantabri and Environics mimeo. 150 MOE 2016. 151 UNDP and Environics 2022. 152 Temraz 2017. 153 See https://estportal.org/. 154 See https://www.egyptgbc.org/. 155 SIS 2022. 156 Jameson et al. 1999. 157 Gohar and Kondolf 2020. 64 EGYPT COUNTRY ENVIRONMENT ANALYSIS The GOE has clear goals to promote ecotourism. Egypt certification for ecotourism needs to be introduced and should Vision 2030 states goals to create eco-friendly resorts and be compatible with international certification, such as The transform the tourism sector to a green economy. By embracing International Ecotourism Society.159 In addition, the GOE seeks ecotourism, the blue tourism industry must become nature to create new and expand existing PAs under the Egyptian positive, low impact, and low carbon. In 2018, Egypt’s Ministry Biodiversity Strategies and Action Plan 2015–30160 in line with of Tourism and Antiquities (MOTA) launched the Tourism Reform the Convention on Biological Diversity’s Aichi Biodiversity Target Program, which seeks to create a sustainable tourism sector 11 commitment. Indeed, at COP27 in November 2022, the GOE through structural reforms. In partnership with the MOE and committed to designating the entire Red Sea Great Fringing MBDT project, notable programs that have emerged from Reef as a PA. Beyond the central government initiatives, these policy initiatives include a green certification system for governorates play an important role in making tourism more hotels (Green Star Certification), the Green Fins Program to sustainable. For example, in 2019, the governor of the Red Sea improve management of diving and snorkeling activities, and Governate banned the production and use of single-use plastics the ECO EGYPT campaign to promote PAs.158 Still, a national to reduce plastic pollution from the tourism industry.161 BOX 4.2: RED SEA MASS TOURISM VERSUS ECOTOURISM, TRADE-OFFS The current traditional market resort development model has very little positive economic impact on Red Sea communities. Hotels in the region operate on very thin profit margins, and a significant share of profits are retained in source markets, by the foreign tour operators. Ecotourism models can promote local economic development that will require much less significant investment in infrastructure and help the Red Sea region and Egypt retain more of the benefits of tourism investment and spending. Roughly 27,000 eco-resort guests per year would produce the same level of direct spending, and significantly more local jobs and economic impacts than 180,000 traditional-market resort guests (2,000 rooms, five-night stay). Source: UNDP and Environics 2022. © Adobe Stock 158 UNDP 2020. 159 See The International Ecotourism Society, https://ecotourism.org/. 160 MOE 2016. 161 Dhenin 2020. 65 Egypt Country Environment Analysis FISHERIES Aquaculture production is overtaking artisanal fishing. be harmonized with Law No. 146 of 2021 for the Protection Total fish production in 2021 is estimated at 2.2 million tons, and Development of Lakes and Fisheries and with the Prime with the aquaculture share reaching 77.3 percent (1.7 million Minister’s Decision No. 706 of 2023 regarding its executive tons of total production) and steadily increasing over the years, regulations.163 For instance, MOALR strategic objectives while the remaining share includes freshwater fish catch, lake overlooked important issues of the law that defines the role fish catch, and seawater fish catch whose share is constantly and responsibility of the private sector, private financing, and shrinking. Egypt has a promising plan to raise fish production especially microcredits targeting artisanal fishermen, as the to 3 million tons by 2025, almost reaching self-sufficiency. 162 development of the new aquaculture farms is mainly led by Overfishing and degradation of the coastal environment were the GOE.164 Conversely, important sustainable development gradually depleting the fish stock in both seas and in the northern issues, such as protecting shores from erosion and reducing lakes. As a result, the GOE cleaned and developed the lakes land-based and marine-based pollution sources, are not under of Manzala, Burulus, Mariout, and Bardawil, which led to the the purview of the MOALR. Yet a sector-wide approach such increase in fish landings in the lakes. Moreover, about nine as the ICZM has been considered as an entry point for the aquaculture plants were constructed along the coast, and more BE multisectoral planning and monitoring to help revive and are planned to raise food security and improve nutrition. promote these coastal activities that could show clear As fish farming is more productive than the same opportunities again. area of land farming, farmers are switching to fish farming that is also considered as an Regarding the northern Red Sea and efficient alternative adaptation to climate the Gulf of Suez and Aqaba, the MOE change. Still, seawater fish production is leading an effort to preserve the suffered not only from overfishing natural heritage and the artisanal but also from the water quality, a fisheries in the areas that could be reduction in phytoplankton, an replicated in the Mediterranean alteration of hatching grounds due Sea. The MOE is coordinating this to coastal artificialization, diking and effort with all the relevant authorities dredging, land- and marine-based (MOE, MOALR, MOTA, Ministry of solid and liquid waste pollution, Petroleum and Mineral Resources including microplastics, oil spills, [MOPMR], South Sinai Governorate, harmful algae bloom events, ballast LFRDA, Cooperative Union for water, and more. These pressures are Aquatic Resources, Chamber of reducing and contaminating seafood, Diving and Watersports, and Marine © Adobe Stock Activities). To replenish the fish stock and which prompts fishermen to sail further from the coast to catch fish that could prove stop ecosystem deterioration, measures were unprofitable and eventually not competitive with taken, such as banning fishing during the fish fish farms, as it translates into more time, effort, and breeding periods to ensure the preservation of species. variable costs such as fuel costs. This effort could eventually be extended to the mariculture of nontraditional species such as bivalves, oysters, clams, The newly established Lakes and Fish Resources seaweeds, and multitrophic culture systems that could also be Development Agency (LFRDA), formerly known as General upscaled for habitat restoration as well as for targeting export Authority for Fish Resources Development (GAFRD), markets. The fishermen were to be compensated through the is responsible for managing fish resources in Egypt. establishment of an account (Sustainable Development Fund for The transformation of GAFRD to LFRDA has brought about Fish Resources in the Red Sea, Gulf of Suez, and Gulf of Aqaba) significant changes: under the tutelage of the Prime Minister, opened under the Cooperative Union for Water Resources LFRDA is an economic agency that must rely on mobilizing that is provisioned by all relevant authorities. Roles and financial resources to fulfill its extended attributes. The main responsibilities for all the relevant authorities were well-defined objective of the agency is to (i) protect, develop, and exploit the in terms of bringing awareness, building consensus, securing lakes, their streams, tourism, beaches and sanctuaries; and funds to fishermen during the ban, buying new gear, and for (ii) protect and develop fisheries and aquatic life with a view to supervision. Yet this effort requires fish stock and ecosystem developing the national economy. Yet the MOALR formulated monitoring, and the National Institute for Oceanography and strategic objectives and a developmental plan for fisheries and Fisheries could be an ideal partner to carry out these tasks.165 aquaculture sectors over the 2020–30 period that needs to 162 USDA 2022. 163 FAO 2021. 164 Aly 2019. 165 See https://niof-eg.com/enodc/. 66 EGYPT COUNTRY ENVIRONMENT ANALYSIS © Adobe Stock 67 Egypt Country Environment Analysis CHAPTER Mobilizing 5 Green Financing to Support the Transition © Adobe Stock 68 Egypt Country Environment Analysis 5.1. General Definition and Specific Scope of Green Finance Typically, the definition of green finance set by financial Some of Egypt’s CE and BE environmental priorities could tap institutions, governments, and international organizations into existing or planned climate finance and dedicated green is influenced by their underlying motivations. The G20 finance: (i) in the former case, these priorities could reap both Green Finance Study Group166 provides a general definition of local and global environmental benefits, such as CE industrial green finance which is the financing of investments that “provide energy efficiency and reduction of local and global pollutants; environmental benefits in the broader context of sustainable and (ii) in the latter case, other priorities will require existing or development” over different timescales. In this general definition, suggested policies and dedicated green finance mechanisms, climate finance is a subset of green finance that focuses on as they will only reap local environmental benefits, such as de-risking financing for climate change mitigation and hazardous waste treatment. Hence, tapping existing green adaptation. Conversely, in this specific context, the scope finance in this context should be opportunistic when CE and BE of green finance complements the World Bank Group’s mutual local and global benefits accrue. Alternatively, existing 2022 CCDR objectives167 by focusing on relevant policies or new policies and dedicated green finance conduits should be as well as financial flows. The latter include flows to support considered for Egypt’s CE and BE local benefits. Egypt’s CE and the BE environmental priorities over short to medium timescales, such as official development assistance (ODA), development finance institutions (DFIs), international financial institutions (IFIs), the Egyptian public sector, and the private sector. 166 The group aims to identify institutional and market barriers to green finance and, based on the experiences of countries, develop ways to enhance the ability of the financial system to mobilize private capital for green investment. 167 WBG 2022a. 69 EGYPT COUNTRY ENVIRONMENT ANALYSIS 5.2. Egypt Green Finance Architecture Egypt has been developing a green finance architecture for climate action, Egypt Vision 2030, and the SDGs. The MOPED, MOE, Central Bank of Egypt (CBE), and Financial Regulatory Authority, among others, have targeted the public sector, the banking sector, and the financial sector by spearheading the effort covering green financing supply, demand, gaps, and leveraging. Moreover, a series of initiatives were launched at COP27 to bolster the green financing drive. MINISTRY OF PLANNING AND ECONOMIC DEVELOPMENT In line with the NCCS 2050,168 the MOPED has formulated In line with the GOE’s Green Financing Strategy and the three Green Financing Principles. These cover (i) mobilizing 12 climate action initiatives in Africa launched at COP27, green finance through multistakeholder platforms to cover mobilizing green financing within the scope of CE and BE the environment-carbon spectrum of green financing; (ii) ODA environmental priorities complements the World Bank SDGs mapping by fostering transparency and embedding a Group’s 2022 CCDR. It focuses on fine-tuning policies and long-term approach to address financing gaps; and (iii) global harnessing green financing to achieve the CE’s prioritized partnerships narrative by establishing a common narrative industrial and waste sectors as well as the BE’s PAs, tourism, to ensure that environmental factors are mainstreamed into and fisheries that fall under SDGs 1, 8, 9, 10, 11, 12, 13, 14, and financial decision making and that banks offer a range of green 15.172 Of these, the most notable are SDG 12 on sustainable financing products and incentives for their corporates to increase production and consumption and SDG 14 on life below water as sustainable activities.169 well as the GOE’s associated objectives in Egypt Vision 2030 (figure 5.1). The three Green Financing Principles apply to both environmental sustainability (achieving Egypt Vision 2030 and the SDGs targets) and climate adaptation and mitigation with a transitional decarbonization stance: achieving Egypt’s first (2022) and second (2023) updated170 NDCs and the NCCS 2050. The World Bank Group’s 2022 CCDR171 provides a road map that goes beyond 2030 to boost public climate investment, which consists of improving government tiers coordination; greening and streamlining public finance; seeking PPP opportunities; and providing a clear and predictable regulatory framework to build the needed confidence to attract de-risked green financing from ODAs, DFIs, IFIs, and the private sector. 168 MOE 2022a. 169 See https://mmd-moic.s3.eu-west-1.amazonaws.com/files/ENGLISH-Moic-Report-2021-Digital-Spreads-pages_1.pdf. 170 UNFCCC 2022. 171 WBG 2022a. 172 UNSD n.d. © Adobe Stock 70 Egypt Country Environment Analysis Figure 5.1: The CE and BE in SDGs and Egypt Vision 2030 UN Sustainable Development Goals Egypt Vision 2030 Sub- Sub-objectives Strategic Strategic Principles Pillars objectives Principles Pillars Targets and/or Objectives Objectives Targets Indicators SDG1 No Poverty 7 Social Justice 3 SDG2 No Hunger 8 SDG3 Good 13 Health 12 For the Health Social People Dimension SDG4 Quality 10 Education and 7 Education Training SDG5 Gender 9 Culture 1 (Tourism) Equality SDG6 Clean Water 8 Environment 8: Water use; & Sanitation (sectoral Water available; integration); and PM reduction; SDG12 11 Waste collection Responsible Embodiment of the and Management; Consumption and new Constitution Hazardous Production (setting welfare Waste Disposal; and prosperity as Biodiversity in terms the main economic of Protected Areas; objectives, to Ozone Depletion For the be achieved Environmental Substances; and Planet via sustainable Dimension GHG (but no targets) development, Universality; SDG13 Climate 5 social justice Urban 12 Inclusiveness; Action and a balanced, Development Participatory; geographical and (spatial land Integration; SDG14 Life Below 10 sectoral growth) and resource and Water Participatory development Transparency management to and SDG15 Life on 12 In line with UN ensure quality Accountability Land SDGs 2015-30 of life) and Africa Union Agenda 2063 SDG7 Affordable 5 Energy 4 Energy Meets our own needs without SDG8 Work & 12 compromising the Economic 16 Economic Growth ability of future Development generations to SDG9 Industry, 8 meet their needs Knowledge, 6 For Innovation & Innovation Prosperity Infrastructure & Scientific Economic Research SDG10 Reduced 10 Dimension Inequalities SDG11 10 Transparency 5 Sustainable Cities & Efficient & Communities Government Institutions SDG16 Peace, 12 For Peace Justice & Strong Institutions SDG17 19 For Partnerships for Partnership the Goals Source: World Bank staff. Note: Based on UNSD (n.d.) and MOPED (2016). 71 EGYPT COUNTRY ENVIRONMENT ANALYSIS MINISTRY OF PLANNING AND ECONOMIC DEVELOPMENT AND MINISTRY OF ENVIRONMENT In 2021, the MOPED-MOE developed the Framework of the into the Sovereign Fund of Egypt (TSFE) projects, (c) observing Environmental Sustainability Standards Guide (FEDDG) or green purchases in the allocations of Procurement of Goods and the Strategic Framework for Green Recovery. The framework Services in the state’s general budget, (d) granting tax incentives charts down the Legislative and Regulatory Framework for for private sector green projects, (e) granting funding incentives Environmental Sustainability Standards and articulates the for small and medium-sized green projects, and (f) relying on mechanisms for integrating environmental sustainability green bonds in funding eco-friendly development projects. standards into the Sustainable Development Plan for each Moreover, the framework provides environmental sustainability sector, from planning to operations. This guide is retained as practices for the private sector, notably: (i) preparing a common thread since it covers the CE and BE prioritized sustainability reports and disclosure forms for the Framework categories: (i) eco-friendly industrial clusters and sustainable of Environmental, Social, and Corporate Governance (ESG)/ industrial cities, (ii) proper management and treatment of waste, Corporate Social Responsibility (CSR), as well as CSR programs (iii) marine reserves, (iv) green tourism and environmental to achieve SDGs; (ii) sustainable consumption plans and tourism, (v) sustainable fishery management, and (vi) public procedures; (iii) waste management (separation/recycling) and and private green financing. The latter notably prioritizes (a) reduce the use of plastics; and (iv) rating suppliers’ compliance granting priority to green projects, (b) integrating green approach with environmental sustainability standards. CENTRAL BANK OF EGYPT AND FINANCIAL SYSTEMS The Central Bank of Egypt (CBE) mandated Egypt’s banks This is in addition to preparing periodical reports including a to support the UN SDGs by channeling funds to more quarterly report on sustainable finance activities, and a yearly sustainable economic activities through sustainable sustainability report and finally consulting an environmental finance. In light of Egypt Vision 2030 towards achieving the expert to assess the large corporate projects from an UN SDGs and the conviction in the pivotal role of sustainable environmental perspective. finance in supporting financial and banking stability, the CBE introduced the Guiding Principles for Sustainable Finance In parallel, financial systems are being targeted by IFIs/ through the Circular of July 2021, which sets the foundation DFIs/ODAs to develop market for climate finance and for sustainability and sustainable finance concepts among Environmental and Social Risk Management System in Egyptian banks. It is anchored on six main pillars: (i) building Egypt. For instance, the “Transforming Financial Systems for and developing the capabilities of all the bank employees on Climate” (TFSC) program was launched by Agence Française sustainable finance; (ii) applying the concept of sustainable de Développement (AfD) in 2018. This project is an Egypt-wide finance and working to integrate environmental and social implementation of a multi-country program set up in 17 countries elements and governance rules in the banks’ financing activities; in Africa and Latin America and co-financed by AfD Group (€413 (iii) enhancing cooperation with the ministries, government million) and the Green Climate Fund (€240 million). The specific bodies, and all stakeholders on the national and international objectives of the TFSC in Egypt are to: (i) Support Egyptian level; (iv) laying the foundation for identifying and managing financial institutions in adopting a climate finance strategy and climate change risks, in addition to encouraging financing tools; (ii) Provide support for the promotion of green sustainable projects that contribute to addressing the issue of climate growth in different sectors, leveraging both public and private change; (v) applying sustainability principles on the bank’s financing; (iii) Consolidate the application of market-based internal procedures and activities; and (vi) preparing periodic instruments for environmental/climate-smart investments; and reports on the bank’s sustainable finance activities.173 Timed (iv) Improve the competitiveness and growth of cleaner business before COP27, the Guiding Principles for Sustainable Finance opportunities that lead to job creation.174 was followed by the issuance of binding sustainable finance regulations through first the Circular of June 2022 on carbon footprint reporting for bank’s headquarter building and branches. Then the Circular of November 2022 which encompass several pillars, including the establishment of an independent department for sustainability and sustainable finance within each bank, as well as binding banks to integrate policies and procedures for sustainable finance within their credit and investment policies. 173 See https://mmd-moic.s3.eu-west-1.amazonaws.com/files/ENGLISH-Moic-Report-2021-Digital-Spreads-pages_1.pdf. 174 See FP095: Transforming Financial Systems for Climate | Green Climate Fund. 72 Egypt Country Environment Analysis FINANCIAL REGULATORY AUTHORITY The Financial Regulatory Authority has been proactive in mandating sustainability disclosures. In July 2021, Egypt’s Financial Regulatory Authority introduced Decrees 107 and 108 requiring companies listed on the Egyptian Stock Exchange and companies in the nonbanking financial sector with minimum issued capital or net shareholder equity of EGP 100 million to report on ESG disclosures. Companies with minimum issued capital or a net equity of EGP 500 million and above should additionally report climate- related risks and opportunities, in line with the recommendations of the Task Force on Climate-Related Financial Disclosures (TFCD). The ESG and TFCD disclosures were first included in the companies’ annual Board of Directors Report at the end of the 2022 financial year. Additionally, quarterly reports have been required since January 2022 to outline the procedures that each company has taken or will take in relation to the required disclosures. The first African voluntary carbon market175 within the Egyptian Stock Exchange for carbon trading was launched in the context of COP27. Under the voluntary carbon market platform enacted by Prime Ministerial Decree 4664/2022, emissions reduction certificates are to be issued and registered by the Financial Regulatory Authority. SELECTED INITIATIVES LAUNCHED AT COP27 Other green financing efforts launched at COP27 could support Egypt’s CE and BE environmental priorities.176 Friends of Greening National Investment Plans in Africa and Developing Countries Initiative seeks to improve the process of planning and designing economic policies related to climate change. Reducing the Cost of Green and Sustainable Borrowing intends to attract private sector financing in Africa through green social and sustainable bonds. Enhancing Nature-based Solutions for Climate Transformation promotes nature-based solutions in sync with the Rio Conventions. Finally, the Sharm El Sheikh Guidebook for Just Financing177 supports the maximization of the effectiveness and efficiency of the existing climate finance system in the short term. © Freepik 5.3. Green Finance Policy Instruments and Programs in Egypt: Stocktaking, Opportunities, and Weaknesses Green policy instruments have been used and fine-tuned over time by the GOE, and new ones could be considered to improve the regulatory and policy framework for CE and BE green financing priorities. In this section, existing and suggested green instruments are mapped and broken down between regulatory, fiscal/budget, incentive, and moral suasion-based, with the most relevant ones analyzed. The policy framework of green instruments to target the prioritized CE and BE categories is unpacked in Annex 3, which complements governance aspects covered in chapter 2. 175 See Africa Carbon Markets Initiative announces 13 action programs - Climate Champions (unfccc.int). https://climatechampions.unfccc.int/africa-carbon-markets-initiative-announces-13-action-programs/. 176 See COP 27 : The 12 initiatives to follow for climate action in Africa | Climate Chance (climate-chance.org). https://www.climate-chance.org/en/comprehend/blog-observatory-global/ cop27-12-initiatives-climate-action-africa/. 177 See https://guidebookforjustfinancing.com/wp-content/uploads/2022/11/Sharm-El-Sheikh-Guidebook- for-Just-Financing.pdf. 73 EGYPT COUNTRY ENVIRONMENT ANALYSIS REGULATORY AND INCENTIVE POLICY INSTRUMENTS FOR THE CIRCULAR ECONOMY In 1997, a hybrid regulatory/incentive instrument was Green Sustainable Industry (GSI) is EPAP’s next generation devised under the World Bank EPAP Phase I to support large of green financing that is managed by the EEAA; it supports enterprises to comply with industrial emissions, effluents, Egypt’s industry transition by focusing on local and/or global and/or waste generation standards. Under this compliance environmental impact to reap mutual benefits. Modeled after system, a CAP was introduced to help enterprises phase their EPAP, GSI provides soft loans through the intermediary banks compliance. Backed by appropriate use of financial incentives with a technical assistance and a nonsovereign guarantee (soft loans) as well as by complementary administrative/ where the CE is one of the categories considered for green legal technical advice (environmental enforcement actions), financing (box 5.1). Still, EPAP-like schemes through a long- the approach was internalized by the EEAA and scaled up term concessional line of credit provided by ODAs, DFIs, and under EPAP II and III to work beyond compliance into cleaner IFIs through the banking sector should gradually be taken over production and resource efficiency. The EPAP approach by the banking sector under the purview of MOF or CBE when the became the standard in programs funded by ODAs, DFIs, macroeconomic stabilization policies that are underway with the and IFIs. Indeed, the European Investment Bank (EIB)’s new International Monetary Fund (IMF) support will reach their targets. BOX 5.1: ENVIRONMENTAL POLLUTION ABATEMENT PROJECT AND GREEN SUSTAINABLE INDUSTRY GREEN FINANCING The Environmental Pollution Abatement Project (EPAP) tendered one of the first soft green loans in Egypt in 1996 by using a “carrot and stick” approach consisting of setting up the Egyptian Environmental Affairs Agency (EEAA) compliance system; building the EEAA compliance system capacity; securing industrialists’ buy-in by offering soft loans through the banking sector and free technical assistance; ensuring a quasi-budget-neutral financing mechanism as the Ministry of Finance (MOF) had to only cover the sovereign loan guarantee; reinvesting loan repayments and incentives thanks to international financial institution (IFI), development finance institution (DFI), and official development assistance (ODA) lending on various terms; and more importantly introducing the compliance action plan (CAP). The latter is an agreement between the EEAA and the polluter, and the polluter commits to implementing the CAP within a specified timeframe. This allowed the polluting industry to benefit from an initial soft loan with a blended rate to be provided by the MOF and/or IFI, DFI, and ODA that could be followed by a bridge loan to implement the full CAP. An Apex bank (that is, the National Bank of Egypt) oversaw on-lending to participating public and private banks, which in turn provided subloans to creditworthy polluting industries that had committed to reduce their pollution or to implement the CAP. EPAP I (1997–2005, US$40.7 million) funded by the World Bank, European Investment Bank (EIB), and Government of Finland. EPAP II (2006–14, US$166 million) funded by the World Bank, EIB, Agence Française de Développement (AFD), Japan International Cooperation Agency, and European Union (EU). EPAP III (2015–25, €140 million equivalent to US$153.1 million) funded by EIB, AFD, EU, and Kreditanstalt für Wiederaufbau, with the EEAA as overall manager; National Bank of Egypt (NBE) as the Apex Bank; and Commercial International Bank, Qatar National Bank Alahli- Egypt, and Banque du Caire as participating banks. The three phases of EPAP have directly triggered over €550 million (equivalent to US$600 million) investments in green technology, demonstrated solutions for replication by other companies and supported several national banks to strengthen sustainable financing in their bank operations. The Green Sustainable Industry (forthcoming, €271 million equivalent to US$290 million), which is funded by EIB, AFD, and the EU through the Neighbourhood Investment Platform, is a framework loan managed by the EEAA. Building on the success of and modeled after EPAPs, the financial mechanism provides funding to public and private industrial companies through the banking sector and technical assistance. It focuses on pollution abatement, decarbonization, and energy and resource efficiency so that borrowers comply with national environmental regulations. The guarantees are provided under the Global Europe Neighbourhood Development and International Cooperation Instrument and the European Fund for Sustainable Development Plus. Source: EIB 2014, 2022. 74 Egypt Country Environment Analysis The UNIDO and SwitchMed technical assistance is modeled The scaling up of green financing to MSMEs cannot be after the EPAP compliance setup, with a focus on the achieved without credit guarantees, as 90 percent of adoption of Resource Efficient and Cleaner Production MSMEs in Egypt are not creditworthy.180 CBE and some ODA, approaches. Initially, technical assistance was directed to DFIs, and IFIs provide credit guarantees to MSMEs through the identify cleaner production opportunities in companies where Credit Guarantee Company (box 5.2). There also are hybrid demonstration projects proved successful (see chapter 3). credit guarantees provided by the private sector and ODA, DFIs, The future mobilization of public, private, and/or ODA, DFI and IFIs, such as the EU, the Dutch FMO bank, and the Dutch and IFI green financing could be the turnkey to a more holistic government that have provided a US$50 million credit guarantee approach by moving the scope of cleaner production and agreement to Commercial International Bank. Yet relevant actors resource efficiency to the CE and then to scale up the CE to need to pool their efforts and resources to monitor and evaluate industrial zones (that is, EIPs). That way, local technical CE MSME green financing outcomes to distill, adapt, and scale up solutions can be calibrated, promoted, and leveraged by start- green financing best practices. ups and academia. Within the TA tools, the Resource Efficient and Cleaner Production Assessment suggested by the UNIDO should be expanded and adopted as a CE tool by the industrial subsector and across sectors. Similar ODAs, DFIs, IFIs, public sector setups are intermediated mainly by the banking sector with soft loans and grants. These are offered with or without TA to MSMEs and households to reduce their local environmental footprint and/or carbon footprint (table 5.2). Furthermore, building on the success of the 2011–16 Industrial Energy Efficiency,178 UNIDO launched the Industrial Energy Efficiency Fund in 2019 in cooperation with the Regional Center for Renewable Energy and Energy Efficiency and the EEAA to support the delivery of technical services to industrial facilities in Egypt to achieve energy efficiency.179 BOX 5.2: SELECTED EGYPTIAN CREDIT GUARANTEES The Credit Guarantee Company (CGC), which is a private joint stock company established in 1989, assists in facilitating access to finance micro, small, and medium enterprises (MSMEs) in Egypt through the application of different credit guarantee products (portfolio, individual, and wholesale) and programs. The CGC offers guarantees for MSME programs relevant to the blue economy and circular economy, such as the following: • Small and Emerging Business Program covering the microenterprise industrial, service, and commercial sectors since 1999 with cofinancing from the U.S. Agency for International Development and the Ministry of International Cooperation. Target and/or terms: Poor women without or with little income. • Small and Medium Enterprises Program covering all sectors since 1991. Target: new and existing small and medium enterprises according to the Central Bank of Egypt (CBE) definition for MSMEs. • CBE Program covering all MSME sectors with a special focus since 2018: creditworthy. • CBE Tourism Program covering the MSME tourism sector (hotel, tour, transport, and restaurants) since 2020 to mitigate the COVID-19 effects on the sector with the CBE and Ministry of Finance: creditworthy or uncreditworthy. Source: Credit Guarantee Company, https://cgcegypt.com/; MENA Transition Fund, www.menatransitionfund.org/documents/green-growth-industrial-waste-management-and-sme-entrepreneurship-hub. 178 See Microsoft Word - ToR_EGY_100349_finaldraft.docx (unido.org). 179 See Industrial Energy Efficiency fund (IEEF) - RCREEE. 180 See https://euneighbours.eu/. 75 EGYPT COUNTRY ENVIRONMENT ANALYSIS Ongoing programs for climate action, energy efficiency, and renewable energy build on the EPAP blending approach with or without TA and could be tapped for selected CE priorities (table 5.2). Despite this diverse green finance supply in the Egyptian market, most funds are directed to energy and climate change mitigation. The Egypt—Accelerating Deployment of Solar Energy in Industrial SMEs initiative is a critical example of how grants can leverage up to 1:10 national capital. Still, limited international and national finance is available for waste management and symbiosis, EIPs, water efficiency, and other CE wholistic approaches. © Freepik 76 Egypt Country Environment Analysis Table 5.2: Selected Supporting Donors, Private Sector, and Government of Egypt Green On-Lending, Technical Assistance, and Grants IFIs/DFIs/ODAs/Private Institutions/ Mechanism Amount Objective/Scope Target GOE On-lending through local Support renewable energy, energy efficiency and Industry, participating financial Green for Growth Fund (GGF) NA resource efficiency projects agriculture institutions (LPFI) On-lending through local Egypt Sustainable Energy Financing €140 Promote energy efficient and renewable energy Private participating financial Facility (Egypt SEFF)’s EBRD – AFD million technologies, appliances, and equipment sector institutions (LPFI) €150 Industry, On-lending through LPFI Green Economy Financing Facilities million Improve use of energy, water and land resources commerce, + TA (GEFF) I’s EBRD -EIB – AFD – CBE -EGP200 agriculture million Provide ECO-loans for investments in a wide range of technologies leading to improved competitiveness: Improve • for Businesses: Capital expenditure investments use of leading to energy, water, and resource efficiency, On-lending through LPFI SMEs, energy, circular economy, or the use of + TA + EU grant (10- GEFF II’s EBRD – EU – GCF – AFD water, renewable energy. households 15%) and land • for households: certified green buildings, resources solar water heaters, solar PV, investments in rehabilitation of existing buildings and energy efficient appliances. . Industry, Promote targeted investment in sustainable US$100 commerce, On-lending through LPFI Green SME Loan I’s EBRD energy and climate change mitigation, in the highly million transport, diversified private sector agriculture Support SMEs invest in climate mitigation and On-lending through LPFI Value Chain Financing Facility (VCFF)’s €111.1 adaptation solutions and technologies that improve Industry, + TA EBRD million competitiveness and enhance the development of commerce green value chains Unlock the potential in the industrial MSME sector Grant and Private-Public Egypt – Accelerating Deployment of by removing the barriers and operationalizing an SMEs, Industry leveraging Solar Energy in Industrial SMEs enabling framework that allows solar PV business models to become financially self-sustainable Support SME lending, entrepreneurship, and On-lending through LPFI Dutch Entrepreneurial Development US$50 innovation, including a TA through the risk-sharing SMEs + TA Bank (FMO) – EU – Dutch Government million facility to be provided by the Frankfurt School of Finance and Management On-lending through LPFI €140 Egypt EPAP III EIB – EU – AFD – KfW Support Environmental and pollution control Industry + TA + grant million Support Egypt’s industry transition to a green On-lending through LPFI Green Sustainable Industry’s (GSI) EIB €271 economy, including actions for climate change and Industry + TA + grant – AFD – EU million environmental sustainability EU – Federation of Egyptian Industries’ On-lending through LPFI Revol-ving Support for renewable energy, energy efficiency and (FEI) Environmental Compliance and Enterprises + TA grant environmental compliance and cleaner production Sustainable Development Office (ECO) Industry, MSMEDA World Bank NA Support renewable and energy efficiency commerce, agriculture Bioenergy foundation for Sustainable Small holder MSMEDA Grants NA Biogas to small holders Development affiliated to MOE farmers Finance shredders and equipment for collection and Waste MESMEDA Grants MOE NA baling of rice straw contractors Finance shredders and equipment for collection and Waste MSMEDA Grants MOE NA baling of rice straw contractors Source: See https://www.ebrd.com/egypt.html; Egypt and the EIB; Green for Growth Fund (ggf.lu); www.eeaa.gov.eg; www.fmo.nl; Egypt and the EIB; GEFF Egypt II – Welcome to the Green Economy Financing Facility (ebrdgeff.com) Eligibility – Environmental Compliance and Sustainable Development Office (eco-fei.org); EU has been financing projects in Egypt at 500 million euros: MENA – Egypt Today – See https://euneighbours.eu/. 77 EGYPT COUNTRY ENVIRONMENT ANALYSIS REGULATORY POLICY INSTRUMENTS FOR THE BLUE ECONOMY Integrated Coastal Zone Management programs in Egypt The MSP could build upon ICZMs as well as SEAs, such as the are mainly financed by ODA, DFIs, and IFIs in conjunction one carried out for the Southern Red Sea tourism sector182 and with GOE budget allocations. The ICZM process sometimes could be complemented by the ongoing ICZM process. Although lacks continuity while prerogatives across sectors and such planning tools have been funded by ODA, DFIs, and IFIs government tiers often overlap. For instance, two ICZMs and implemented by governments, the GOE should create were implemented almost in parallel by the MOE and MWRI enabling conditions for marine financing and reprogram public for the Mediterranean Sea. Moreover, the ICZM scope lacks green financing to help the process.183 As a first step, government a strategic perspective when considering the coastal and budget allocations toward the MSP process should be funded marine environment to promote BE growth: Resources are by earmarking a share of existing rights, permits, charges, and/ in competition, while land-based and marine-based pollution or taxes collected by the GOE from all maritime activities (such degrades resources and ecosystem services. Marine spatial as offshore oil and gas extraction and pipelines, and maritime planning can help public and private marine sectors contribute traffic). Hence, the GOE’s MSP process, management, and to green and inclusive development as its process181 cuts across monitoring could initially require some ODA, DFI and IFI funding, different coastal and marine sectors, issues, or opportunities but it should be fully financed by the government budget and be where economic tools allow for determining a full range of sustainable over time with the redirected focus on BE. synergies and trade-offs among competing uses (figure 4.3). FISCAL POLICY INSTRUMENTS FOR THE CIRCULAR ECONOMY Thanks to successive IMF programs, the GOE gradually Experiences with the German Dual system are relevant, and removed the fuel and electricity subsidies and is trying clean cut in terms of roles and responsibilities, and can be to reduce water consumption by increasing charges and adapted and replicated to cover different categories of waste. tariffs and introducing penalties.184 These policies ultimately However, the financial burden will be fully borne by the private feed into the CE economy in terms of market prices that will sector, meaning the consumer, as producers, distributors, reduce consumption. Conversely, the EPR is the first green and importers will have to build the waste management cost fiscal instrument introduced in Egypt with the support of into prices (figure 5.1). The implementation of the industrial GIZ185 based on the Waste Management Law 202/2020 and waste EPR in Egypt will have to consider critical factors to its Executive Regulations Decision 722/2022. Although some be successfully scaled-up to reach various segments of private voluntary EPR initiatives are ongoing with the support the industrial waste value chain: (i) full enforcement and of the MOE (e-waste), a compulsory hybrid EPR system completeness of the EPR regulation which are fully aligned derived from the German Dual system has started for single- with other relevant regulations; (ii) time bound EPR targets, use plastic bags and e-waste, with an EPR fee collected by comprehensive and reliable data, self-reporting, existence of the MOE/WMRA from producers and distributors. The WMRA an EPR registry and verification regime by third parties; and is overplaying its role as a regulator and will seek the services (iii) effective collection system, infrastructure and capacity, of producer responsibility organizations (PROs) to allocate ideally industrial waste source separation and integration of funds to manage the full chain of waste, including collection, the informal sector in the scheme. Moreover, the process of recycling, treatment, and disposal. Lessons learned from transferring waste services to the private sector should also implementing the single-use plastic bag EPR will help the devolve liabilities stemming from waste transport, treatment, WMRA design more efficient EPR systems targeting EIPs and disposal to waste management operators who will have to and industrial zones where waste synergies could be reaped. subscribe to an environmental liability insurance. Based on waste volume, the market can sustain several private, specialized PROs to increase competitiveness and efficiency.186 181 Alder and Castaño-Isaza 2022. 182 UNDP and Environics 2022. 183 World Bank 2022a. 184 See IMF Executive Board Approves 46-month US$3 billion Extended Arrangement for Egypt. 185 GIZ 2021. 186 See www.gruener-punkt.de. 78 Egypt Country Environment Analysis Figure 5.2: German Dual System EPR Setup Regulations and Controlling Cash flow Producer Responsibility Importers, fillers, Producers Organisation Organisation of all system tasks Packaging flow Communication Cash flow Consumers Packaging flow Waste management Operators Purchases through distributor and collection, recycling later disposal Source: GIZ 2018. FISCAL POLICY INSTRUMENTS FOR THE CIRCULAR AND BLUE ECONOMIES The MOPED-MOE Framework of the Environmental schemes.188 The IMF suggests that the swap be an integral Sustainability Standards Guide is a commendable initiative part of a macroeconomic and budget framework with strict that should be mainstreamed and enforced to green the macroeconomic and environmental conditionalities to reduce budget, the TSFE, and the issuance of sovereign bonds. the debt and increase the environmental impact (box 5.3).189 Moreover, if the GOE is planning to issue environment impact Debt-for-project swaps were already used in Egypt by ODA, bonds in the future, repayment is usually indexed to forecasted notably the Italian-Egyptian Debt Swap Program190 that proved and/or realized environmental benefits. Considering CE and BE successful. The latter was however wider in scope and less criteria in results-based indexation could therefore help achieve efficient as it covered several sectors although some of the CE and BE outcomes. Conversely, the MOE’s Environment previous proceeds were allocated toward green financing; Protection Fund that is funded through EEAA resources, for example, €6 million (equivalent to US$6.8 million) of the penalties, and fees could be used to increase CE and BE Italian Cooperation were allocated to CE for the establishment outcomes by providing judicious incentives: provision of green of the Robbiki Leather City.191 Hence, the swap instrument incentives toward coastal conservation; complementing MSME should be pursued with ODA within an overall framework of loans obtained through various ODA, DFIs, IFIs, and the Micro, macroeconomic stability while targeting BE natural resources. Small, and Medium Enterprises Agency (MSMEDA) windows; and/or target direct entities. For instance, the EEAA provided incentives through MSMEDA to traders to collect rice straws that were transformed into profitable products, hence increasing circularity of this agricultural waste and marginally reducing the black cloud.187 Moreover, the debt-for-climate or debt-for- nature swap instrument, or bilateral swap was reemphasized at COP27 as an instrument for forgiving part of a nation’s debt and investing it in conservation and/or climate action 187 See www.eeaa.gov.eg. 188 See https://cop27.eg/assets/files/days/COP27%20INNOVATIVE%20FINANCE-DOC-01-EGY-10-22-EN.pdf. 189 Chamon et al. 2022. 190 See https://ilcairo.aics.gov.it/home/country/debt-swap/#:~:text=The%20Program%20was%20established%20in,fifty%2Dthree%20initiatives%2C%20operating%20in. 191 For more information, see https://indiplomacy.it/en/egypt-cairo-ita-leather-italian-companies-2021/; https://cid-egypt.com/about-robbiki/; https://impa.gov.eg/en/project/to-catch-a-moon-fish/; https://cid-egypt.com/about-robbiki/; and www.investinegypt.gov.eg/english/pages/project.aspx?projectid=165. 79 EGYPT COUNTRY ENVIRONMENT ANALYSIS BOX 5.3: DEBT SWAPS TO BE BOUND BY MACROECONOMIC AND ENVIRONMENTAL CONDITIONALITIES Debt-for-climate swaps are worth promoting, so long as they (i) expand the fiscal resources of debtor countries that cannot shoulder climate investments based on loans alone and (ii) are designed to maximize the benefits to the debtor. Specifically, they should be structured to ensure that the funds generated by the reduction in debt service are spent on the desired investment rather than general debt service. The recent debt swap targeted to marine conservation in Belize followed this approach. Belize restructured US$553 million in outstanding bonds through a financing arrangement with U.S.-based Nature Conservancy and pledged to protect 30 percent of its ocean, enforce regulations for fisheries, and draft a framework for blue carbon projects. Furthermore, to the extent that the debt swap involves a buyback of commercial debt in the secondary market, the buyback should be conducted by a donor/creditor rather than the debtor, as a third party may be able to purchase the debt at a lower price than the debtor country. Source: Chamon et al. 2022; Chauvin 2023. © Freepik The State Ownership Policy of 2022192 clarified the Law © Adobe Stock 67/2010 and its Executive Regulations issued through Prime Ministerial Decree 238/2011, and could attract the ecotourism sector private investors to consider concession or partnership responsibilities for PA management.193 From now on, all PPP contracts in Egypt will be governed by the State Ownership Policy. Egypt has successful ongoing PPP projects ranging from renewable energy projects to green hydrogen projects where a MOU was signed between the GOE, TSFE, and multinational private sector companies. For instance, the MOF PPP Central Unit has prequalified 17 consortia for the tendering process to develop several desalination plants powered by renewable energy. The State Ownership Policy considers all categories of PA management ranging from partnership responsibilities to concessions where the ecotourism sector together with private investors could contemplate right, license, leasing, and concession options (table 5.3). 192 CARE 2022. 193 Hazzaa, Shehata, and Seif 2019. 80 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table 5.3: Options for Partnership Responsibilities and Concessions for PAs Options Description Period Examples A concession is the right to use land or other property for Accommodation, food a specified purpose, granted by a government, company, and beverage, recreation, Concession 10-40 years or other controlling body. It can include a commercial education, retail, and operation and/or a piece of land. interpretive services. A contractual agreement in which one party transfers Use of fixed infrastructure an estate (i.e., land and facilities) to another party for a such as accommodation, Lease specified, limited period. The lessor retains ownership 5-30 years airports, restaurants, of the property while the lessee obtains rights to use the shops etc. for a rental fee. property. Typically, a lease is paid for. Gives permission to a legally competent authority to exercise a certain privilege that, without such Means of authorization, would constitute an illegal act. Often seen transportation-based by the public as a form of quality control and requires tours (e.g., hot-air License due diligence by the competent authority, in contrast to Up to 10 years ballooning, boat cruise) a permit. Possession of the land is not granted through using operators the license. Licenses give protected area authorities the own equipment. ability to screen applicants to ensure that they fulfil a set of conditions. A temporary form of permission giving the recipient Activities such as approval to do a lawful activity within the protected area. guiding, boating, Permits normally expire within a short period. Usually, Permit Up to 10 years canoeing, fishing, and the number of permits is large and limited by social or climbing using operators’ environmental considerations. In most cases, permits own equipment. are given to anyone who pays the corresponding fee. Source: Adapted from Spenceley et al. 2017. 81 EGYPT COUNTRY ENVIRONMENT ANALYSIS INCENTIVE POLICY INSTRUMENTS FOR THE CIRCULAR AND BLUE ECONOMIES Fiscal CE and BE incentives should be overseen by the Improving the enabling environment and targeted MOF in conjunction with relevant institutions to increase financing for ecosystem services and artisanal fisheries consistency, efficient greening, and accountability. should be promoted. The EBRD carried out an assessment This will allow investments to be gauged on clear global and for natural capital valuation in the Red Sea to determine gaps local environmental merits, notably with regard to CE and BE and weaknesses that should be addressed.199 Egypt recently outcomes. Under the drive of greening public finance, most of became a member of UNDP’s Biodiversity Finance Initiative that the following incentives should be adjusted to include clear CE includes the development of a national biodiversity financing and BE criteria: strategy and a set of financial solutions to bridge the biodiversity financing gap in the country.200 The only instrument currently • Article 11 of the Investment Law 72/2017 provides an used by the MOE to improve PA management is PA entrance and incentive in terms of profit tax deduction to projects operating concession fees; 75 percent of these revenues are deposited under the agricultural waste recycling industry; in the MOE’s Environment Protection Fund. Promoting the • Prime Ministerial Decree 56/2022 allows investments creation of markets is also warranted by introducing and (notably industrial, housing and utilities, tourism, environment, scaling up new payment or ecosystem services that will help and agriculture) fulfilling certain criteria to be considered bridge the biodiversity financing gap. Indeed, the EBRD and national or strategic and therefore benefit from a Single UNDP are leveraging these efforts to create these markets Authorization Process, while the Public Planning Law and targeted financing schemes for ecosystem services and 18/2022 reinforces collaboration between the public and traditional fishermen. private sectors to implement the country’s National Plan for The perequazione urbanistica201 instrument developed Sustainable Development; and used in Italy allows transferring building exploitation • Prime Ministerial Decree 20/2022 and subsequent Decrees coefficient rights from one area to another. Hence, coastal 981, 982, and 983 allow green hydrogen and ammonia conservation or non edificante in coastal areas could be manufacturing projects (including chemicals and chemical promoted by exchanging an exploitation coefficient right (mainly products, rubber and plastics products, and other nonmetallic in terms of height) that will be used in urban areas. This right mineral products) to benefit from special incentives to be could also be traded on the secondary market and could be processed by the General Authority for Investments and Free bought and sold by developers, investors, and others for future Zones (GAFI); urban development. This instrument could inspire an alternative instrument where the GOE could auction exploitation coefficient • The CBE provides loans guarantees and credit facilities rights in new urban development areas such as the New Capital, directed to MSME projects and to manufacturing, agricultural, with the proceeds earmarked for coastal conservation and PAs. and construction sectors that were discontinued in November 2022 after it adopted a restrictive monetary policy;194 • Several governorates provide discretionary tax exemptions as incentives to new enterprises operating within industrial zones or industrial parks; the Special Economic Zone provides incentives for new enterprises in terms of tax and nontax benefits;195 • GAFI provides general, special, conditional, and additional condition incentives mostly derived from those provided under Investment Law 72/2017, notably targeting industries (such as packaging, chemical, pharmaceutical, furniture, and agri-food industries) and SMEs;196 the IDA allows land payments in instalments and provides procedural incentives to MSMEs;197 and • The MSMEDA, which collaborates with IDA on industrial parks, grants a series of incentives, such as nontax financial incentives, tax-related financial incentives, and nonfinancial incentives (table 5.2).198 194 See https://www.cbe.org.eg/. 198 See https://www.msmeda.org.eg/. 195 Badawy 2020. 199 Lammerant and Van Ham 2023. 196 See www.gafi.gov.eg. 200 UNDP 2023. 197 See http://ida.gov.eg/webcenter/portal/IDA. 201 See https://elibrary.fondazionenotariato.it/articolo.asp?art=34/3402. 82 EGYPT COUNTRY ENVIRONMENT ANALYSIS MORAL SUASION POLICY INSTRUMENTS FOR THE CIRCULAR AND BLUE ECONOMIES Egypt’s enterprises are keen on earning international public and private recognition for the quality of their goods and services through certifications that would increase local and export markets for their goods and services. For instance, the integrated platform for social responsibility and sustainable development certified 146 responsible enterprises in Egypt.202 The 2021 MOPED-MOE Environmental Sustainability Standard Guide adopts the ISO 14030-3 Environmental Performance Evaluation. This specifies the environmental safety standards for each economic sector addressed by the specification, based on a set of basic pillars, in addition to environmental risks management methods.203 Moreover, in 2019, about 83 hotels in Egypt received Green Star Hotel Certification, which is reported on and provides updates on CSR advancement in the country.204 Egypt also uses 14 international eco-labels.205 © Adobe Stock 202 See https://www.csregypt.com/en/responsible-companies/. 203 See https://www.mped.gov.eg/DynamicPage?id=95&lang=en. 204 See https://www.csregypt.com/en/responsible-companies/. 205 See https://www.ecolabelindex.com/ecolabels/?st=country,eg. 83 Egypt Country Environment Analysis 5.4. Green Financing Opportunities Capital sources of green financing could be local, international, or a hybrid of both. Table 5.4 lays out Egypt’s green financing opportunities by the national and international public sector, private sector, ODA, DFI, IFI and hybrid green financing. Egypt’s enterprise, banking, and insurance sectors include publicly owned and private entities, while both publicly owned enterprises and banks are run on a commercial basis. Table 5.4: Green Financing Opportunity Matrix Capital Source National Classification International Classification Budget, CBE, Green/Blue Bond ODA + Debt/swaps Export Credit Guarantee of Egypt Trade finance Government Environment Protection Fund Environmental funds MSMEDA Social funds TSFE Sovereign wealth funds Foundations (innovation) Private philanthropy Nonprofit groups Private philanthropy: donor-advised funds NGOs (micro-credits/ conservation management) NGOs (help in debt/swaps) International Multilateral and regional development banks/ Financial funds (IFIs) Cooperation Development finance institutions (DFIs) Self-financing Self-financing Commercial banks Commercial banks Selling off ownership stakes Selling off ownership stakes Private equity investors Private Finance Private equity investors Venture capitalists Venture capitalists Crowd funding Crowd funding Institutional investors Impact investors Blending, such as ODAs/DFIs/IFIs and/or public or private apex institution for financing (NBE, Blending Hybrid MOE/EPF, MSMEDA, etc.) PPP PPP such as setting up a private trust fund 84 EGYPT COUNTRY ENVIRONMENT ANALYSIS © World Bank / Flickr 85 Egypt Country Environment Analysis NATIONAL GREEN FINANCING The national green financing in Egypt is partly driven by the GOE. Government budgeting, CBE, debt-for-nature or debt-for- climate swaps, and TSFE were reviewed in section 5.3, where CE and BE criteria need to be mainstreamed into the greening process that was just initiated by the MOPED and MOE. Nonprofit groups include micro creditors that need to include CE and BE criteria in their greening portfolio drive, especially when they target artisanal fisheries. An enterprise (industrial and tourism, large enterprise, or MSME) or start-up has various sources of financing but does not always qualify for financing (table 5.3): • Self-financing is where the accumulation of retained • Egyptian markets do not have sufficient volume and earnings could be used by the enterprise to improve its CE diversity (depth) to support capital market borrowing. and BE stance on a voluntary basis or to comply with CE and Selling ownership stakes publicly is a common financing BE regulations introduced by the GOE. mechanism, where 254 companies are listed on the stock exchange with a 4.8 percent dividend yield weighted average. • Egyptian banks are playing an increasingly active role Fifty-three producer manufacturing, industry services, and in resilient sustainable development, where 12 out of 33 process industries are listed with a market capitalization of banks are offering homegrown green financing that targets EGP 107.4 billion that could be targeted to improve their the renewable energy and housing sectors and will start CE and BE stance. Whereas the first two sectors show a offering climate-related green loans (see sections 5.2 and much better performance (6.02 and 11.5 percent dividend 5.3). EPAP-like schemes are needed where a TA could help yield, respectively), the latter sector seems to be lagging initially introduce CE criteria to green the banks’ portfolio (0.18 percent). Still, the market capitalization207 to GDP that could later be expanded to target BE (table 5.4). moved from being significantly overvalued in 2007 Only about 10 percent of Egyptian enterprises could borrow (106.8 percent of GDP) to significantly undervalued in 2020 private money. Egyptian enterprises do not have sufficient (11.3 percent of GDP)208 which is unattractive to investors. corporate ESG responsibility and practice.206 Most enterprises seek hybrid or blended green financing primarily to increase • Egypt has more than 19 venture capital firms that are profits by reducing their production cost structure, especially funded by foreign and local capital. There is a growing for energy efficiency, water recovery, and upcycling. Whereas demand for capital from a growing start up ecosystem homegrown green financing is a nascent but growing sector in Egypt. It is being met by growing venture capital firms that focuses on housing and energy efficiency, enterprises are (see Supply-Side Green Financing below). Indeed, Egypt more likely to borrow from banks on-lending ODAs, DFIs and is becoming the fastest growing start-up ecosystem in the IFIs hybrid or blended soft loans with very attractive terms, region. Most financing is directed toward ITC. Innovation, and and possibly backed by a TA. Some DFIs are circumventing thus financing, lags in the CE and BE sectors due to lack of the government and opting for a direct venture with the guidance (based on an Industrial Needs Assessment) and banking sector, where in addition to a possible grant for TA, focused incentives. an Apex bank receives the loan to be on-lent to participating banks that will provide soft subloans to enterprises. Yet local • Private equity firms. After a hiatus that lasted until 2014, banks are not allocating their own resources and realize a a new generation of private equity firms were driven by the small mark-up on the ODA, DFI, and IFI loans as they are DFIs, such as the EIB, the EBRD, the Dutch entrepreneurial unwilling to take the risk of providing the needed capital development bank FMO, and British International through traditional lending or leasing for green investments Investment.209 In addition to capital to large enterprises, with CE and BE priorities. private equity firms also provide expertise to help companies develop, institutionalize, and adopt best practices for ESG matters.210 These firms are essential to promoting CE and BE practices in the future. 206 See https://euneighbours.eu/. 207 Market capitalization is the share price of the company multiplied by the number of shares issued. 208 See https://data.worldbank.org/indicator/CM.MKT.LCAP.GD.ZS?locations=EG. 209 See https://www.edfi.eu/member/bii/#:~:text=British%20International%20Investment%20(previously%20CDC,for%20International%20Development. 210 Koh 2021. 86 EGYPT COUNTRY ENVIRONMENT ANALYSIS • Venture capital for established firms. Egypt has a few Hybrid local PPPs. The PPP mechanism could be used by active venture capital firms that provide US$0.5–US$2 million thoroughly addressing the legal, financial, environmental, and target SMEs, which is attributed primarily to the high- conservation, social, and other important aspects before risk nature of their investments. Venture capital firms that launching the tenders. Private sector contracts are already provide US$2–US$10 million are still developing in Egypt common for waste collection, treatment, and disposal, and and need better promotion,211 and they should be tapped to the MOE could rely on PPP contracts to manage PAs. The better internalize CE and BE practices. ecotourism sector can benefit from areas surrounding PAs as long as it manages them according to internationally • Venture capital for the start-up ecosystem. Egypt has the recognized criteria (such as the Convention of Biological fourth largest start-up ecosystem in Africa212 and strengthened Diversity). A revolving PPP agreement could be considered its start-up culture213 by promoting an angel investor network, to develop, manage, and transfer PAs. It would cover aspects as there is growing interest from angel investors and venture of conservation, including engaging communities, promoting capitalists to finance green start-ups. There are numerous sustainable artisanal fisheries, and involving academia in the success stories and there are traditional bottlenecks such as monitoring of the state of the PA and its surroundings. The SEA difficulties accessing early-stage financing and steady revenue prepared for the Southern Red Sea tourism sector could serve as despite attractive business proposals. Moreover, another main a prototype. The Al Ahrash PA located in North Sinai governorate issue of Egypt’s entrepreneurship ecosystem is the lack of and the various ICZMs prepared for the Mediterranean creative and novel ideas: most entrepreneurs are recycling coast could serve as a prototype for the Mediterranean. The ideas and trying to adapt them to their context. Incubators and forthcoming Egypt Coral Reef Initiative of the U.S. Agency for accelerators to support green entrepreneurs would overcome International Development (USAID) is implemented by the this obstacle, supporting the process from project idea to proof UNDP in conjunction with the Global Fund for Coral Reefs.217 of concept and early-stage operations (box 5.4). The USAID blended finance vehicle is used to set up a private • A public-private effort indicates growth opportunities in trust fund to mobilize additional private funds. It is planning to mobile, internet, social media, and e-commerce services, provide an initial seed funding (US$5 million) that should be with support from seed capital to incubation services, leveraged by corporations interested in improving their CSR/ business consultancies, and networking opportunities. ESG stance, such as oil and gas offshore companies operating After the MSMEDA creation in 2017, a venture capital unit in the Red Sea, maritime transport companies, international was set up to support start-ups through direct investments telecom companies managing underwater cables, and so forth. in venture capital companies, incubators, and accelerators, Although the trust fund modalities are still being developed, as well as loans to venture capital firms and early-stage the future fund revenues will help manage and increase the start-ups that partner with a strategic investor. In parallel, resilience of the Red Sea coral reefs that will be transformed the MOIC has partnered with the private sector to create into a PA as mentioned at the COP27 by the MOE. Egypt Venture (MOIC, GAFI and Free Zones, Saudi Fund for Development, and NI Capital)214,215 and EPG EV.216 The MOCIT, with the Technology Innovation & Entrepreneurship Center, provides a full chain of support directed specifically at boosting Industry 4.0 technologies. All these public conduits could be used to guide and support CE and BE start-ups, such as the MSMEDA for the BE and the MOIC for the CE. • Hybrid blended. In Egypt, public entities, public banks, and private banks all participate in blended finance. Hence, most MSME, enterprise, state-owned enterprise, project, or program could tap green financing that includes CE or BE criteria. The latter should be seen not only in terms of incentives provided for financial gains but also as a premium accruing to society that should be quantified in terms of social benefits. This approach could be adopted by all ongoing blending operations to promote CE and BE. 211 See https://www.ebrd.com/egypt_pevc.pdf. 212 Disrupt Africa 2021. 213 GEM and AUC 2021. 214 See https://egyptventures.com/. 215 See https://falakstartups.com/. 216 See https://www.efgev.com/. 217 See https://globalfundcoralreefs.org/. 87 EGYPT COUNTRY ENVIRONMENT ANALYSIS BOX 5.4: SELECTED VENTURE CAPITAL FOR START-UPS AND GREEN ENTREPRENEURS IN EGYPT The Ministry of Environment launched the National Selected successful green entrepreneurs in Egypt include Programme for Sustainable Entrepreneurs to support the following: the green economy in partnership with the Center for • Tagadod: pioneering waste management company Environment and Development for the Arab Region that usus innovative technology to collect and refine and Europe (CEDARE) and MedWaves. The Ministry used cooking oil into biodiesel. of Planning and Economic Development, in cooperation with other ministries, also launched the National Initiative • Go clean: encourages consumers to segregate for Green Smart Projects in Governorates. Projects and recyclable materials such as plastics, paper, and metals. programs also support green entrepreneurs through • Mobikya: green interior design studio and upcycling technical support and capacity building in incubation furniture firm. and acceleration programs like StartEgypt, ClimaTec • Greenish: designs and implements sustainable green Run 2020, Green Tech Projects Initiative, and the United solutions for schools, NGOs, retailers, and restaurants. Nations Industrial Development Organization’s Inclusive Green Growth in Egypt. • Recyclobekia: first formal company for electronic waste recycling. Accelerators, investors, and regional funds could be • Up-Fuse: transforms nearly 3,000 plastic bags a tapped to promote circular economy (CE) and blue month into fashionable and colorful fabrics, and economy (BE) innovations, such as RISE Egypt global produces backpacks, tot backs, wallets, cases, and enterprises and accelerators/investors; Flat6Labs and other products. industry groups and educational institutions; Changelabs • ZeroWaste: collects aluminum cans through their is supported by official development assistance (GIZ and projects, CanBank, and turns them into products Swiss Agency for Development and Cooperation, among by encouraging can donations in exchange for others); Scale Up to Green in partnership with the Green for phone credits. Growth Fund and the EU4Energy Initiative implemented by the International Energy Agency. The Green for Growth Sources: www.riseegypt.org; www.flat6labs.com/program/ Fund is a specialized impact investment fund that invests flat6labs-cairo/; https://green-energy-academy.com/; in measures to reduce energy consumption, resource use, https://changelabsme.org/; www.ggf.lu; https://www.iea.org/ and carbon emissions, but the CE and BE are not well programmes/eu4energy; https://egyptventures.com/; defined under the fund’s scope of work. https://falakstartups.com/; https://www.efgev.com/. © Freepik NATIONAL PRUDENTIAL FRAMEWORK The green financing of CE and BE activities should be Conversely, the Credit Guarantee Company (CGC), which is a backed by an adjusted prudential framework that includes private joint stock company established in 1989, helps facilitate environmental insurance, green loan guarantees, and an access to finance MSMEs and large enterprises in Egypt. This export credit guarantee. The Financial Regulatory Authority, is achieved through the application of different credit guarantee which supervises and regulates Egypt’s insurance sector, products (portfolio, individual, and wholesale) and programs has implemented new insurance and reinsurance executive and is financed by ODA, DFIs, and IFIs relevant to the CE and regulation decrees to regulate the sector that is governed BE (box 5.2). The CBE and EU have used the CGC218 to hedge by the Insurance Supervision and Control Law 10/1981. funds. More specifically, it has a credit guarantee mechanism The latter should soon be replaced by implementation of a to encourage banks to finance medium- and long-term credit comprehensive Insurance Act. The non–life insurance sector facilities with high credit risks, and this instrument could be also covers natural hazards and liabilities. However, it still extended to cover investments with CE and BE activities. needs to comply with international standards, as drafted Finally, the Export Credit Guarantee of Egypt219 provides in the new Insurance Act, before it can attract additional prudential services, including export credit guarantees; new resources such as: foreign insurance companies; draw rules are needed to strengthen current ESG. This should not foreign capital; and develop specific business lines targeting only include climate-friendly policies but also ESG, including environmental management (such as waste services, PA CE and BE incentives such as longer-term repayment loans or management, and environmental self-reporting liabilities). flexible repayment structures, as was innovated by the MOF with the new public credit line extended to the tourism sector with repayment terms linked to each borrower’s occupancy rate. 218 See https://cgcegypt.com/. © Source 219 See https://www.ege-eg.com/. 88 EGYPT COUNTRY ENVIRONMENT ANALYSIS SELECTED INTERNATIONAL GREEN FINANCING Six international green financing sources are worth mentioning as they could be an interesting vehicle to be tapped for CE and BE activities: • There are two main types of debt swaps—ODA and third- • ESG normalized scores are very important, as issues such party/trilateral swaps. The latter involves the participation of as climate change, loss of biodiversity, waste, and pollution another organization, typically an NGO, which purchases debt are now key topics for asset managers, banks, and other at a discount from face value from a creditor and negotiates financial services firms. For instance, the EU has a venture separately with the debtor government the cancellation of capital and business angel green financing guide to promote the debt in exchange for project funding (although the debtor the CE with investments in large, medium, and small market government still must put aside funds to cover any projects) capitalization companies. The CE is increasingly seen by (box 5.5). businesses, thought leaders, and policy makers to deliver long-term growth to investors while helping address the • Through their foundations, individual philanthropists provide green agenda, including climate change and other global donations based on their personal interests and typically challenges that will increasingly be assessed according to do not seek a financial return whereas additional funding is ESG normalized scores.221 offered by philanthropists through donor-advised funds, a sort of savings account for philanthropists. • International blending where regional (such as the Green for Growth Fund; see tables 5.3 and 5.4) and global platforms • Impact finance is an investment or financing strategy that dedicated to climate-related investments’ scope could be aims to accelerate the just and sustainable transformation extended to include mutual benefits where CE and BE criteria of the real economy by providing evidence of its beneficial could be considered to provide concessional loans to private effects. It is based on the theory of change model in line with enterprises in developing economies.222 the SDGs.220 • IFIs could help maximize concessional resource borrowing with guarantees such as the partial guarantees provided by the World Bank to support sovereign or subsovereign commercial debt financing.223 BOX 5.5 THIRD PARTIES ENTERING A DEBT-FOR-NATURE OR DEBT-FOR-CLIMATE SWAP AGREEMENT WITH A DEBTOR GOVERNMENT Low-lying island nations like the Seychelles depend on, and are at the mercy of, the seas. The Seychelles’ economy is based on tourism and tuna fishing, meaning it is in the country’s best interest to preserve the coral reefs and species that surround it, and it also has a significant financial incentive to sustainably catch fish. The government and nongovernmental organizations (NGOs) agree that the environment and the economy are part of the same ecosystem that is threatened by anthropogenic factors that will be exacerbated by climate change—notably, sea level rise in the future. An international NGO, The Nature Conservancy, brokered the US$22 million deal in 2016 to lower the Seychelles’ debt (US$2.6 billion in 2016) where the proceeds of the debt-for-nature swap were transferred to a newly created fund, the Seychelles Conservation and Climate Adaptation Trust. The fund supports adaptation to climate change through improved management of coasts, coral reefs, and mangroves. The financing will promote implementation of a comprehensive marine spatial plan for the entire Seychelles exclusive economic zone, a territory approximately 3,000 times the size of the country’s land mass. The deal will also ensure approximately 400,000 square kilometers will be managed for conservation as marine protected areas within five years. 220 Paris Europlace 2021. 221 See https://www.circularcityfundingguide.eu/funding-types-and-their-applicability/equity-and-quasi-equity/venture-capital-business-angels/. 222 See https://cop27.eg/assets/files/days/COP27%20INNOVATIVE%20FINANCE-DOC-01-EGY-10-22-EN.pdf. 223 World Bank 2017. 89 Egypt Country Environment Analysis © Adobe Stock Toward Green CHAPTER 6 and Resilient Growth © Adobe Stock 90 Egypt Country Environment Analysis Over the last decade, Egypt has improved its policy and systems for environmental and pollution management. Achieving cleaner and more resilient growth in Egypt will depend on further developing and strengthening complementary policies and systems as well as mobilizing financing for environmental protection, industrial development, and natural resource management. Moreover, institutional reforms and capacity building will be key to ensure effective implementation of adopted strategies and policies. Based on the analysis in this CEA, priorities for reform and investment should include the following: i. Strengthen environmental governance ii. Apply CE principles to reconcile environmental performance with competitiveness iii. Harness the power of the BE iv. Promote green financing to protect the environment and ensure sustainable use of resources v. Build capacities and raise awareness Key recommended actions, summarized earlier, have been prioritized in terms of impact (high or medium), timeline (short is one to three years, medium is three to five years), and responsible parties. Prioritization is based on consultation and assessment results. Table 6.1 highlights immediate steps the GOE can take while emphasizing the need for medium-term policy and institutional reforms and investments. Table 6.1: Recommended Actions Key message Action Impact Timeline Responsible parties I. I. Strengthen environmental governance Strengthen Promulgate the revised Environmental Law to national High Short MOE integrate climate change environmental law, policies, and national decision Revise EIA regulations in the new environmental law High Short MOE and IDA making to include social aspects and strategic assessments Mainstream environmental Mandate CE principals in sectorial strategies and MOE, MOTI, MOALR in coordination sustainability develop CE guidelines for industrial sectors (starting High Short with MOPED, private sector, and (including CE and with Food & Beverage) NGOs BE) in all national policies Strengthen local Decentralization: Support Cairo or Alexandra MOLD, Municipalities of Cairo and Medium Medium decision making Governorates implement their SDG Plans Alexandria and promote Enhance continuous public-private dialogue for partnership Medium Medium MOE and MOTI better waste recovery and recycling Enhance Restructure the MOE to reflect core functional areas institutional High Medium MOE (policies, planning and innovation) framework Outsource the follow up of environment and social management plans, regular inspections, and High Medium MOE (EEAA, WMRA) and IDA monitoring to certified party Strengthen Modernize environmental management with digital Medium Medium MOE efficiency and transition (e.g. digital monitoring system, self-reporting) effectiveness of Mandate reporting of resource use in license enforcement registration and self-reporting of industries during High Medium MOTI license renewal Enhance the Continuous Emission Monitoring High Medium MOE, EEAA, MOWRI, and MOHP System and integrate it with other ministries Improve data Require a third-party certification Medium Medium MOTI and MOE reliability, quality, transparency, and Improve public access to information and accountability participation in environmental matters and engage High Short MOE and empower NGOs and business community 91 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table 6.1: Recommended Actions Key message Action Impact Timeline Responsible parties II. Apply CE principles to reconcile environmental performance with competitiveness Set clear national standards for green products High Short MOTI Adopt and implement mandatory sustainable Medium Medium MOF and MOE public procurement practices Demonstrate Extended Producers Develop Responsivity (EPR) for priority products Medium Short WMRA and MOTI incentive (e.g. IT equipment, plastic) mechanism Continue to revisit water and energy pricing to MWRI, Ministry of Electricity and High Long gradually remove subsidies Renewable Energy and MOPMR Revise the categorization of recycling industries to enable more recycling industries High Short MOTI to obtain licenses Provide incentives and technical support for CE MOE, MOTI, MOPED, MSMEDA, and incubation and acceleration programs to nurture High Medium Private VC accelerators recycling industries Promote eco-industrial parks Promote technology transfer CE platforms High Medium MOTI among industries Promote waste exchange platform based High Short WMRA on pilot 92 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table 6.1: Recommended Actions Key message Action Impact Timeline Responsible parties III. Harness the power of the BE Transfer back overall coordination of all actors to MOE/EEAA through a Prime- Medium Medium Prime Minister’s office Strengthen the Ministerial decision coastal and marine governance system and policy framework Strengthen coastal and marine governance MOE/EEAA, Suez Canal Authority High Short by articulating a Blue Economy Strategy and other relevant stakeholders Launch MSP and ESW (in line with Adopt MSP to derive synergies between MOE/EEAA and all relevant the CCDR and other High Medium competing demand on marine resources stakeholders water-food-energy recommendations) Explore PA alternative funding such as PPP, creating markets for ecosystem Medium Short services, debt-for-nature/climate swaps and prequazione urbanistica MOE, MOTA, MOALR, MOF, and possibly EBRD Gauge short- to long-term costs and benefits to help MOE make informed choices when Medium Short Promote investments considering PPP or other conduits for PA to increase productivity of fish farming and continue conservation efforts Create markets and targeted financing for ecosystem services and micro-credits for Medium Short MOE and possibly UNDP artisanal fishermen Involve the private sector having economic activities with a risk to the marine environment in conservation through Medium Short MOE and possibly USAID contributing to the private trust fund for conservation Invest in Nature-Based Solution (e.g. reintroducing the Posidonia Oceanica Sea MOE, MOALR, NIOF, academia, High Medium Grass unique to the Mediterranean region) to and possibly IUCN reduce coastal erosion Increase resilience Integrate and update EO-based MOE and all relevant preparedness and response systems High Medium stakeholders across sectors 93 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table 6.1: Recommended Actions Key message Action Impact Timeline Responsible parties IV. Promote green financing to protect the environment and ensure sustainable use of resources MOF, CBE, MOTI, and possibly Scale up and mainstream EPAP-like green intermediation mechanisms High Short financing and TA facility financed by ODAs/DFIs/IFIs   Seek innovative financing to improve the stewardship of the BE natural capital: • Negotiate concession or partnership responsibilities to be granted to ecotourism, artisanal fishermen and Intermediation mechanisms financed communities to manage Protected Areas; by ODAs/DFIs/IFIs to be gradually High Short replaced by the national financial Promote • Consider debt-for-nature/climate system own resources innovative swap agreements; financing • Encourage the setting up of private mechanisms Trust Funds to preserve fragile and for CE and BE  unique resources Target start-ups and MSMEs to advance the CE and BE entrepreneurial ecosystem High Short MOTI and WMRA by providing grants, low-interest loans, and credit guarantees Build on experience of issuing Green bonds, promote Blue bonds to design investments to High Medium MOE, MOF, and MOPED protect coastal and marine environment Prepare guidelines for tendering and the High Short CBE and CGC MOE monitoring and verification regime Develop prudential Develop the new product lines in the Financial Regulatory Authority and framework for insurance sector to de-risk CE and High Short insurance sector CE and BE green BE investments financing Boost the CGC capacity to provide trade MOF and Export Credit Guarantee High Short guarantees for CE and BE export products of Egypt 94 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table 6.1: Recommended Actions Key message Action Impact Timeline Responsible parties V. Build capacities and raise awareness Establish national or regional knowledge Strengthen center of excellence to promote CE, specialized environmental management policies Medium Medium MOE and MOTI technical institutions and standards, and good international industry practices Encourage Encourage educational institutions to develop Ministry of Education and Technical High Medium education CE programs and environmental degrees Education and MOE Develop a communication strategy and Empower the public raising awareness campaigns to address the High Short MOE, EEAA, IDA, and WMRA major environmental and social issues © Adobe Stock 95 EGYPT COUNTRY ENVIRONMENT ANALYSIS References Abo-Taleb, Hamdy A. 2019. “Key to the Red Sea Labidocera BP (British Petroleum). 2022. Statistical Review of World Energy: (Crustacea; Calanoida: Pontellidae) Copepods, the Distribution 71st Edition. 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Gland, Switzerland: WWF International. https://www.wwf.de/fileadmin/fm-wwf/ Publikationen-PDF/Study_Silent_Invasion.pdf. © Freepik 103 EGYPT COUNTRY ENVIRONMENT ANALYSIS Annex 1: Cost of Environmental Degradation (CCZED) Methodology POPULATION The 2021 population was obtained from CAPMAS (2022) and the The benefit transfer involves transposing existing monetary WDI (2023). environmental values estimated at one site (study site) to another (policy site), usually with similar context or physical characteristics. There are two approaches for the benefit transfer: the unit value AMBIENT AIR POLLUTION transfer; and the transfer function. In this particular case, the • Risk factors from PMx and Ozone are used to derive DALY lost unit value transfer and more specifically the transfer of the unit are from the Institute for Health Metrics and Evaluation (IHME) for is used to adjust for differences in income value as described in year 2019 and used for 2021. However, it is important to note that Navrud (2009). the average PM2.5 as calculated below includes natural (desert dust, sea spray, etc.) and anthropogenic (human-produced) The transfer of the unit to adjust for differences in income value is pollutants. A new refined analysis to show the marginal ambient as follows: pollution impact from natural causes could be done in Egypt when the ongoing source attribution analysis will be officially WPp = WPs x (Yp / Ys)ß released. Population exposed is the coastal urban population in cities with more than 50,000 inhabitants. Although the rest of the Where: coastal population is exposed to a lesser extent to air pollution, it WPp = willingness to pay by household in policy country is not considered in the analysis. PM2.5 annual average levels WPs = willingness to pay by household in study country for coastal urban areas were provided by MOE. Yp = income in the country policy denominated in purchasing power • Monetization used is the Value of Statistical Life (VSL) as derived parity dollar (PPP$) from OECD (2012) and adjusted to 2021 prices is used for premature death using (Navrud, 2009) benefit transfer method, Ys = income in the country of study denominated in purchasing whereas the human capital approach is used for morbidity as power parity dollar (PPP$) follows: the GDP/capita/year in 2021 is used per Disability- ß = income elasticity for different environmental goods and services, Adjusted Life Year (DALY) lost (Murray and Lopez, 1996) which which are considered normal goods, are typically greater than 0 is a health metric equivalent to 1 lost year of healthy life. (perfectly inelastic which would have meant that the WPp = WPs • Navrud (2009) for the benefit transfer method. only adjusted by income where ß = 1.2). • GDP figures are available in WDI (2023). For Egypt, the income elasticity is assumed to be conservatively set at 1.2 (more inelastic), which means that the percentage Several epidemiological studies revealed even stronger correlations responsiveness of quantity demanded (in this case the resource) is recently between long-term exposure to PM2.5 and premature significantly and slightly lower to the percentage change in income. mortality (Apte et al., 2015; Brauer et al., 2016; Gakikou et al., Hence, the VSL for Egypt amounts to US$336,041whereas the 2017; Leliveld, 2019, among others). In this particular case, the DALY lost is equivalent to the GDP per capita and amounts to 3,876 Stanaway et al. (2017) dose response functions for 2019 are used in 2021. by IHME and were considered for Egypt. The Burden of air pollution per coastal urban area is illustrated in For the Valuation, the VSL is used for mortality whereas the GDP table A1.1. per capita is used in lieu of morbidity or the cost of illness. 104 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table A1.1: Egypt Annual Total Cost of Coastal Zone Environmental Degradation - Mean estimate, 2021 Avg Mortality Morbidity VSL GDP Mortality Morbidity Total Coastal PM2.5 Population Zone US$ / US$ / µg/m3 # DALY US$ US$ US$ Death DALY Med Sea 5,914,903 4,188 13,737 1,407,345,593 53,248,805 1,460,594,398 Al Arish 161,578 25 100 375 336,041 3,876 33,688,901 1,454,608 35,143,509 Alexandria 4,555,661 59 3,384 10,580 336,041 3,876 1,137,159,765 41,012,395 1,178,172,159 Damietta 327,448 17 184 760 336,041 3,876 61,971,539 2,947,855 64,919,394 Marsa 162,936 25 101 378 336,041 3,876 33,972,043 1,466,833 35,438,876 Matruh Port Said 630,528 18 360 1,464 336,041 3,876 120,941,180 5,676,153 126,617,333 Rashid 76,752 74 58 178 336,041 3,876 19,612,165 690,961 20,303,126 Red Sea 989,800 639 2,348 214,707,980 9,100,163 223,808,143 Ismailia 365,858 26 228 850 336,041 3,876 76,618,795 3,293,641 79,912,436 Sharm es 55,705 26 58 178 336,041 3,876 19,612,165 690,961 20,303,126 Sheikh Suez 568,237 25 353 1,320 336,041 3,876 118,477,020 5,115,561 123,592,580 Total 6,904,703 4,827 16,084 1,622,053,573 62,348,967 1,684,402,540 Sources: CAPMAS 2022; www.healthdata.org; Stanaway et al. 2017; PM2.5 annual average by urban area provided by the MOE. Note: PM2.5 annual average were used per coastal area (italicized in the table) and were used for urban areas without data (that is, Al Arish, Marsa Matruh, Ismailia, and Sharm es Sheikh). µg/m3 = one microgram of pollutant per one cubic meter of air. 105 EGYPT COUNTRY ENVIRONMENT ANALYSIS WATER, SANITATION, AND HYGIENE Unimproved Water, Sanitation, and Hygiene • Risk factors to derive DALY lost are from IHME for year 2019 and Water Resource Quantity used for 2021. Population exposed is the entire coastal population • Global Water Market. 2020. Published by Media Analytics Ltd., (see table A3.2). Oxford United Kingdom. • Monetization used is the Value of Statistical life as derived • For water resource quantity, the unaccounted-for-water (Alkholy, from OECD (2012) and adjusted to 2021 prices is used for 2021) for the water used for domestic and industrial use was premature death using (Navrud 2009) benefit transfer method considered as a proxy for accounting for the water that was (using adjusting for purchasing power for parity and elasticity extracted which affected environmental flow, ecosystem services, for preference) whereas the human capital approach is used for rising water table salinity and decreasing water table level. The morbidity as follows: the GDP/capita/year in 2021 is used per opportunity cost of water for desalination plant bids in the region DALY lost. is used (mid-point of US$ 0.5/m3). • GDP figures are derived from World Bank WDI (2023). Water Resource Quality • Ministry of Water Resources and Irrigation (2021). • Primary, Secondary, and Tertiary treatment cost based on COWI Consult (2010) levelized costs. • GDP figures are derived from World Bank WDI (2023). • For water resource quality, the improvement of all untreated or untreated to tertiary level of coastal wastewater plants is considered to improve the water quality of all coastal bodies. WASTE • Only treatment is covered under waste where the opportunity Coastal Disamenities: cost of all recyclables is considered to reduce the waste flow to • Navrud (2009) for the benefit transfer method. the coastal and marine environment and is based on Doumani et al. (2015). SWM model prepared for Sweepnet and funded • GDP figures are derived from World Bank WDI (2023). by GiZ. The Model was used to derive the degradation for each The coastal zone is under much stress due notably to untreated coast. The management efficacy reported in the 2020 EEAA wastewater and industrial effluents, fish farms, unchecked ballast SOE of 62 percent for municipal waste is used in the model. water release, harmful algae bloom events, thermal shocks, and Air pollution, leachate (water) and carbon dioxide (global risk of oil spills. However, environmental heath diseases associated environment) emissions were not considered as they are already with these forms of pollution are difficult to identify and some of them accounted for under air, water and global environment, nor the are not considered in the calculations. mismanagement of transfer stations, dumps and landfill was considered as mapping of these will require official data and/or Earth observatory analysis. Fisheries (Sea Around Us). and the fishery stock used to calculate Egypt’s WAVES in World Bank 2021 (Annex 2).- de Groot et al. (2012) for Marine environment and ecosystem services. 106 EGYPT COUNTRY ENVIRONMENT ANALYSIS The degradation and loss of habitat of coastal and marine • Rate of discharge of sewage, industrial effluents and agricultural ecosystems are mainly caused by (EEAA, 2016; Cesar, 2013; runoff in the Mediterranean and coastal lakes. Sewage and PERSGA, 2002; Burke et al., 2011; El-Askary et al., 2014): phosphate ore washing are the main sources of nutrient • Poor urban planning, rapid development and artificialization of enrichment in the Egyptian Red Sea. Sewage, high in nitrogen the northern coast and the center of the Suez Canal that is also and phosphorous causes primary production in the marine leading to beach erosion. Coral reefs in Egypt are under threat environment. Algal blooms then subsequently die off, reducing from high siltation and sedimentation rates due to poorly planned the amount of oxygen in the water causing eutrophication and and implemented construction of buildings, especially hotels and threatening marine organisms. resorts facilities associated with the tourism industry. Construction • Deterioration of seagrass and corals due to maritime traffic of hotels and other infrastructure often leads to the destruction of (anchor, etc.). The Suez Canal brings with it a large amount fringing reefs, which grow seaward directly from the coastlines, of international trade to be transported through the Red Sea. caused by the dredging or dumping of large amounts of sediment. Therefore, important coral reef ecosystems are under threat from Though this seems particularly a problem of past construction, ship groundings. Also, cruise ships and dive boats in reef areas the impacts of these activities continue. For instance, Hurghada’s have caused major damage. coral reefs are damaged, displaced, polluted, and stepped on. • Social pressure on the government to meet the population needs Corals near Hurghada (Barrania, 2017) have declined by as much (unemployment, the introduction of new patterns of development, as 50 percent over three decades. and competition for the utilization of available resources, and the • Oil production in general as well as reported and unreported oil lack of public awareness regarding resource use and depletion). spills are fragilizing coral reefs. • The implementation of planned projects including the bridge • Unsustainable practice regarding the use (deep water overfishing) linking Saudi Arabia to Sharm es Sheikh in Egypt through Tiran of marine resources. There are reports of some unsustainable and Sanafir islands could constitute additional pressure on fishing practices along the Egyptian Red Sea coastline, including coral reefs. the use of closed mesh nets, catching fingerlings and even blast • Corals are particularly sensitive to elevated sea surface fishing. Shark finning and sea cucumber collection have appeared temperatures, which can lead to coral bleaching. The Red as major additional threats to Egyptian reefs. Removal of sea Sea appears to have suffered less from coral bleaching than cucumbers could lead to increases in algae and bacteria in coral another major reef regions. However, thermal stress and ocean reef ecosystems with possibly disastrous consequences. acidification in the Middle East region are projected to increase • Deterioration and loss of spawning sites and the proliferation of threat levels to nearly 90 percent by 2030, while by 2050 these algae, especially in the Mediterranean and to a lesser extent in climate change impacts, combined with current local impacts, will the Red Sea due to existing PAs along the coasts and islands. push all reefs to threatened status, with 65 percent at high, very • Mining of coastal sand and black sand. high, or critical risk. • Thermal stress. Power plants usually release large quantities of Most compounds monitored by the EEAA along the Mediterranean hot water in the marine environment. (15 stations) and Red Sea (8 stations) coasts are above or just within the allowed limits in terms of physical, biological, and chemical • Tourism could also be a threat to coral reefs. Offshore coral measurements. Although significant progress was achieved to reefs have suffered damage from careless snorkelers and scuba reduce marine pollution, the composite index remains high in certain divers. Visitor numbers in diving areas have ranged from 10,000 areas of the Mediterranean but relatively in check in the Red Sea. to 60,000 divers annually. PERSGA (2002) suggests 10,000 For instance, demand for oxygen exceeds the allowed limits along dives per year to maintain the carrying capacity of coral reefs. both the Mediterranean Sea and Red Sea whereas total and fecal This is higher than the number of 4,000-6,000 that Dixon et al. coliforms exceed the allowed limits along Mediterranean coastal (1993) established for Bonaire in the Caribbean but lower than urban areas putting at risk swimmers and affecting coastal tourism. the 10,000-15,000 dives per site established under the Coral Monitoring Program in Hurghada, which is used by the EEAA as a guideline for coral health and sustainability. FISHERIES The trend of fisheries from 2004 to 2018 was derived from Lange et al. (2011), Lange et al. (2018), and World Bank 2021 WAVES results for Egypt, as it is derived from Sea Around Us where an extrapolation till 2021 was applied. 107 Egypt Country Environment Analysis COASTAL EROSION THERMAL SHOCK Coastal erosion focuses on the erosion associated with the There was no data available to assess the damage of thermal artificialization of the coast. Sea level rise and its effects on the shocks to the marine environment next to coastal power plants Nile Delta was covered in the World Bank Group’s CCDR. The and certain industrial facilities. coastal erosion annualization is derived from Iskander, 2021 where very conservative erosion areas associated with dredging and artificialization of the coast in coastal resorts and hotels were BRINE considered. Incidentally, the building of jetties in certain resorts are creatin accretion and erosion although only the latter is considered. All desalination plants use reverse osmosis in Egypt. The brine From Marsa Matruh to Alexandria, it is estimated that a length of 6.22 degradation cost is based on the opportunity cost of producing km with a width of 3.5 m was lost while in the Sinai, a length of 3.1 raw salt from the brine instead of releasing it back to the marine km with a width of 3 m was lost (Iskander, 2021). The unconstructed environment. An average 6,298 tons were calculated based on average cost per square meter in these resorts and hotels was volume produced and are released in the Mediterranean Sea while derived from several real estate online sites and a US$600/m2 is 4,822 tons are released in the Red Sea in 2021 given the current used. These are preliminary results that need to be firmed up by capacity and production of desalination plants. The opportunity cost using Earth observation to determine the actual area eroded due per ton of treated brine used for industrial purposes is set at US$230 to dredging and artificialization of the coast. per ton (Statista 2023). CORAL REEFS BALLAST WATER The degradation value of the coral reef ecosystem services is based The disposal of ballast water in coastal areas is undertaken when on the negative trend flows over the last 10 years as calculated and the tankers reach the shipping ports. This is a source of oil residues reported in Annex 2 regarding the Natural Capital where De Groot that can pollute the waters of the marine environment as well as et al. 2012 was used to determine the degradation value based invasive species that damage local ecosystems. According to WWF only on the reduction of the coral reef areas over the last 10 years Silent Invasion report, not treating ballast waters imposes marine (see Annex 2). pest associated with direct costs equivalent to about US$0.75 per ton of untreated water in 2021 prices or US$7.5 billion per year for the 10 billion tons of water transported globally each year (WWF MANGROVES International 2009). The degradation value of the mangrove ecosystem services As an indication of the size of the problem, it is estimated that is based on the negative trend flows over the last 10 years as globally there are around 10 billion tons of ballast water released calculated and reported in Annex 2 regarding the Natural Capital into the seas annually (IMO 2012). If responsibility for these is where De Groot et al. 2012 was used to determine the degradation proportional to the volume of trade (almost 90 percent of traded value based only on the reduction of the mangrove areas over the good go by sea) then Egypt would account for about 0.19 percent last 10 years (see Annex 2). of the total. Based on the WWF estimate of damages this would result in releases of 16.71 million tons of ballast water. The annual cost would be US$12.53 million. HARMFUL ALGAE BLOOMS Although UNESCO has set up a harmful algae bloom monitoring system for Northern Africa, the effects of these events were not valued, given the lack of evidence-based data on their effects on the marine environment in Egypt. SEAGRASS The degradation value of the seagrass ecosystem services is based on the negative trend flows over the last 10 years as calculated and reported in Annex 2 regarding the Natural Capital where Scanu et al., 2022 was used to determine the degradation value based only on the reduction of the seagrass areas over the last 10 years (see Annex 2). 108 Egypt Country Environment Analysis OIL SPILL There is no information on the cost of clean up after all the oil spills In the Mediterranean Sea, 218 oil spills occurred between 2014 and that occurred in Egypt. Unfortunately, the cost grid developed by 2020 (El Magd et al., 2021) while in the Red Sea only four oil spills Etkin 1999 (US EPA, 2004) could not be used as the oil spill volume were reported by the media between 2010 and 2019. The sum of is not officially reported in Egypt. The GOE fined a tanker for an associated fines was annualized and used in the analysis. oil spill in 2010 which is the only official cost of US$108,000 and adjusted for 2021 (US$132,937 per event) that is available. The fine was used for all oil spills that occurred irrespective of the severity of the oil spill. © Freepik © Adobe Stock 109 Egypt Country Environment Analysis AGGREGATED RESULTS BY SUB-CATEGORY Tables A1.2 to A1.4 illustrate the total, Mediterranean Sea and Red Sea CCZED results. Table A1.2: Egypt Annual Total Cost of Coastal Zone Environmental Degradation - Mean estimate, 2021 Population Total CCZED2021 Category Considered Lower Bound Upper Bound Middle Bound US$ million US$ billion US$ billion % of GDP billion Air 1.646 2.848 1.717 0.447% Ambient Air 6.9 1.630 2.784 1.769 0.438% Ambient Ozone 6.9 0.016 0.064 0.038 0.009% Water 2.169 3.267 2.690 0.666% Drinking Water, Sanitation 7.4 0.113 0.242 0.149 0.037% and Hygiene Water Resource Quality 7.4 1.818 2.726 2.272 0.562% Water Resource Quantity 7.4 0.239 0.298 0.268 0.066% Waste 0.629 0.851 0.740 0.183% Treatment 7.4 0.629 0.851 0.740 0.183% Coastal Zone 0.519 5.142 0.754 0.187% Fisheries 0.535 0.723 0.629 0.156% Coastal Erosion 0.046 0.107 0.077 0.019% Coral Reefs 0.002 0.398 0.006 0.002% Mangroves 0.000 0.024 0.000 0.000% Seagrass 0.012 0.017 0.012 0.003% Thermal Shock NC NC NC 0.000% Brine 0.001 0.002 0.001 0.000% Ballast Water 0.004 0.029 0.025 0.006% HABs NC NC NC 0.000% Oil Spill 0.001 4.193 0.004 0.001% Sub-total 4.963 12.107 5.901 1.482% Global Environment 1.204 2.408 1.806 0.447% Total 6.167 14.515 7.706 1.929% National GDP2021 404.14 Note: NC = Not Calculated. 110 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table A1.3: Egypt Annual CCZED Mediterranean Sea- Mean estimate, 2021 Population Total CCZED2021 Category Considered Lower Bound Upper Bound Middle Bound US$ million US$ billion US$ billion % of GDP billion Air 1.410 2.440 1.493 0.37% Ambient Air 5.9 1.396 2.385 1.461 0.4% Ambient Ozone 5.9 0.014 0.055 0.032 0.0% Water 1.969 2.957 2.440 0.6% Drinking Water, Sanitation 5.9 0.090 0.193 0.119 0.0% and Hygiene Water Resource Quality 5.9 1.663 2.495 2.079 0.5% Water Resource Quantity 5.9 0.215 0.269 0.242 0.1% Waste 0.615 0.831 0.723 0.179% Treatment 5.9 0.615 0.831 0.723 0.179% Coastal Zone 0.507 4.532 0.631 0.156% Fisheries 0.447 0.605 0.526 0.1% Coastal Erosion 0.046 0.107 0.077 0.0% Coral Reefs 0.0% Mangroves Seagrass 0.012 0.017 0.012 0.0% Thermal Shock 0.0% Brine 0.000 0.001 0.001 0.0% Ballast Water 0.002 0.014 0.013 0.0% Harmful Algae Blooms Oil Spill 0.001 3.789 0.004 0.0% Sub-total 4.501 10.761 5.288 1.31% Global Environment 0.602 1.204 0.903 0.2% Total 5.103 11.995 6.190 1.5% National GDP2021 404.14 Note: NC = Not Calculated. 111 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table A1.4: Egypt Annual CCZED Red Sea - Mean Estimate, 2021 Population Total CCZED2021 Category Considered Lower Bound Upper Bound Middle Bound US$ million US$ billion US$ billion % of GDP billion Air 0.236 0.408 0.224 0.08% Ambient Air 1.0 0.234 0.399 0.309 0.08% Ambient Ozone 1.0 0.002 0.009 0.005 0.00% Water 0.200 0.309 0.249 0.06% Drinking Water, Sanitation 1.5 0.023 0.049 0.030 0.01% and Hygiene Water Resource Quality 1.5 0.154 0.231 0.193 0.05% Water Resource Quantity 1.5 0.023 0.029 0.026 0.01% Waste 0.014 0.020 0.017 0.00% Treatment 1.5 0.014 0.020 0.017 0.00% Coastal Zone 0.012 0.609 0.123 0.03% Fisheries 0.088 0.119 0.103 0.03% Coastal Erosion 0.00% Coral Reefs 0.002 0.398 0.006 0.00% Mangroves 0.000 0.024 0.000 0.00% Seagrass 0.00% Thermal Shock 0.00% Brine 0.001 0.001 0.0401 0.01% Ballast Water 0.002 0.014 0.013 0.00% HABs 0.00% Oil Spill 0.000 0.053 0.000 0.00% Sub-total 0.463 1.347 0.613 0.17% Global Environment 0.602 1.204 0.903 0.2% Total 1.065 2.550 1.516 0.4% National GDP2021 404.14 Note: NC = “Not Calculated.” 112 EGYPT COUNTRY ENVIRONMENT ANALYSIS © Adobe Stock 113 Egypt Country Environment Analysis Annex 2: Coastal Natural Resource Stock Calculations WAVES METHOD FOR THE BLUE ECONOMY The Wealth Accounting and the Valuation of Ecosystem Services (WAVES) methodology allows to: (i) estimate quantitatively the stock of wealth of a nation or total wealth (TW) and provide a decomposition of this wealth that helps decision makers identify priority categories; and (ii) provide a proxy to estimate depletion for each category Lange et al. 2011; and Lange et al. 2018). This analysis aimed at calculating Egypt’s BE Resource Rents (RR), meaning the net income from resource extraction and ecosystem services (renewable or nonrenewable) available in the coastal and marine environment. RR can be defined as the “projected” total revenue from gross sales less all costs incurred in the extraction process as well as ecosystem services adjusted for inflation that is based on the latest IMF macro-framework projections. The current projections relied on actual trends, being positive or negative. Unlike WAVES that projects RR over 100 years, the RR is projected over the time of a generation (considered to be equivalent to 25 years, from 2021 to 2045) in this analysis. Hence, the natural capital’s (NC) stock represents one of the TW four main categories, according to the following basic equivalence: NC+PC+IC+NFAs= TW Where: • NC is the Natural Capital, and it corresponds to total resources • IC is the Intangible Capital, and it is calculated as a residual but available in coastal areas and marine waters, including their is not calculated in this context. biodiversity: crude oil, natural gas, fishery, PAs, coral reefs, • NFAs are the Net Foreign Assets, calculated as total value of the mangroves and seagrass. Whereas crude oil, natural gas, fishery, assets that the country detains abroad minus the value of the and PAs methods are well established, the ecosystem services domestic assets owned by foreigners. The NFAs are available generated by coral reefs (such as seafood and recreational in the 2021 External Wealth of Nations Mark II database (Milesi- tourism), mangroves (such as carbon sequestration, fish habitat, Ferretti, 2021) but are not calculated in this context. coastal protection from storms, wood and nonwood products, and shrimp farming) and seagrass (such as supporting food security, • TW is Total Wealth, to be regarded as the present value of future mitigating climate change, enriching biodiversity, purifying water, consumption, which is sustainable, discounted at a rate of time protecting the coastline, and controlling diseases) are not usually preference, over a defined time scale. included in WAVES and were valued based on a benefit transfer from meta-analyses notably produced by De Groot et al. 2012 and Scanu et al., 2022) although there is a study that was published in 2003 but was not used (Cesar, 2003). As coral reefs, mangroves and seagrass subcategory valuations are not usually included in WAVES, their valuation bring a more comprehensive dimension to Egypt’s BE natural wealth. • PC is the Produced Capital, defined as the accumulation of investment series (that is, gross fixed capital formation ), accounting for depreciation of capital. In other words, produced capital can be regarded as the sum of physical capital and urban land but is not calculated in this context. 114 EGYPT COUNTRY ENVIRONMENT ANALYSIS Coastal and marine natural capital stock subcategories are 3. Protected areas: The protected areas NC relies on the adjusted illustrated below where table A2.1 provides the area assumptions World Bank 2021 WAVES calculation adjusted for 2021, projected and retained median values for the NC calculations while tables over 25 years and discounted at 3 percent. There are new A2.2–A2.5 provide the projections and meta-analysis adjustments. protected areas in the pipeline to comply with the Convention on Biological Diversity’s Aichi Biodiversity Target 11. All these new 1. Oil and Gas: estimation in Red Sea and Med Sea. The WAVES PAs could be considered in future to adjust the PA contribution to method is used for potential extraction where projected stock and the NC. Variables (areas) could be adjusted to carry out simulations extraction stock were derived from Petrodata Offshore Rig Day and sensitivity analyses in case new Coastal and Marine PAs Rate Trends (S&P Global Commodity Insights n.d.); and British are adopted. Petroleum (BP 2022). Incidentally, all variables (volume and prices) could be adjusted to carry out simulations and sensitivity 4. Coral reefs: quality and mapping areas: qualitative EEAA data analyses. Tables A2.1 and A2.2 illustrate Egypt’s marine flows evidenced by available data from scientific literature helped of oil and gas. validate trend based on ICRI (Annex 1). Incidentally, all variables (areas and values) could be adjusted to carry out simulations and 2. Fishery: Three types—artisanal with nonmotorized and sensitivity analyses. motorized as well as industrial time series data—on: catch by pelagic, cephalopod, demersal, and crustacean; total and by 5. Mangroves: quality and mapping areas: qualitative EEAA data boat number of fishermen by fishing type; number of boats by evidenced by available data from scientific literature helped fishing type; average days of work per year per type; as much validate trend as a policy to increase the mangrove areas by as possible, the average market price of the four species and 200 ha was adopted by GOE and is being implemented (Annex if the cost structure is available for fuel, lubricants, and other 1). Incidentally, all variables (areas and values) could be adjusted boat operations and maintenance. The fishery NC relies on to carry out simulations and sensitivity analyses. the adjusted World Bank 2021 calculation adjusted for 2021, 6. Seagrass: Mapping areas and quality: official data was validated projected over 25 years and discounted at 3 percent. Incidentally, by scientific literature (Annex 1). Although De Groot et al. 2012 all variables (volume and prices) could be adjusted to carry out provides seagrass values, Scanu et al. 2022 was retained as simulations and sensitivity analyses in case new policies are the analysis is more recent, is more robust and covers several introduced to improve the fish stock. Mediterranean sites in Italy. A benefit transfer was carried out to determine the seagrass values. Incidentally, all variables (areas and values) could be adjusted to carry out simulations and sensitivity analyses. Table A4.1: Areas and Values Used for Coral Reefs, Mangroves and Seagrass Natural Capital Calculation Value in 2021 Sub-Category Estimated Area in 2021 Median Low High Unit ha US$/ha US$/ha US$/ha Mediterranean Sea Seagrass 34,840 7,139 7,000 9,977 Red Sea Coral Reefs including seagrass 319,325 79,777 24,046 4,989,199 Mangroves 700 3,249 99 243,189 Source: adapted from Chapter 1, Chapter 4 and Annex 1; De Groot et al. 2012; and Scanu et al. 2022. 115 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table A2.2: Projected Oil and Gas Extraction Cost and Prices truncated in 2030 Production Cost and Spot Unit 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Price and ±% Production Projection US$/ Cost of Offshore Oil Extraction 46.38 46.84 47.31 47.79 48.26 48.75 49.23 49.73 50.22 50.73 BOE Cost of Offshore Gas Extraction US$/m3 0.16 0.16 0.16 0.16 0.16 0.16 0.16 0.17 0.17 0.17 Spot Price Projection US$/ Oil Spot Price 70.86 71.57 72.28 73.01 73.74 74.47 75.22 75.97 76.73 77.50 BOE Periodical Price Change ±% 1% 1% US$/ Natural Gas Henry Hub million 3.89 5.20 5.36 5.52 5.68 5.85 6.03 6.21 6.40 6.59 BTU Periodical Price Change ±% 3% 3% Natural Gas Henry Hub equiv. US$/m3 0.14 0.18 0.19 0.20 0.20 0.21 0.21 0.22 0.23 0.23 Note: BOE stands for barrel of oil equivalent. BTU stands for British thermal unit. Sources: BP 2022; S&P Global Commodity Insights n.d. © Adobe Stock 116 Egypt Country Environment Analysis Table A2.3: Projected Egypt Active Offshore Oil and Gas Production and Natural Capital Flow truncated in 2030 Offshore Oil and Unit ±%, 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Gas in2021 Prices and ±% or Log Med Sea Offshore m3 63.07 63.07 63.07 63.07 63.07 63.07 63.07 63.07 63.07 63.07 Gas Production billion m3 Abu Qir 0% 2.60 2.60 2.60 2.60 2.60 2.60 2.60 2.60 2.60 2.60 billion m3 West Nile Delta 0% 16.54 16.54 16.54 16.54 16.54 16.54 16.54 16.54 16.54 16.54 billion m3 Nooros 0% 12.4 12.4 12.4 12.4 12.4 12.4 12.4 12.4 12.4 12.4 billion m3 Atoll 0% 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 3.6 billion m3 Zohr Phase 1 0% 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 18.6 billion m3 Zohr Phase 2 0% 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 9.3 billion Red Sea Offshore m3 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 Gas Production billion m3 Belayim 0% 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 11.9 billion Gas Natural Capital US$ Med Sea NC (1.1) 1.7 2.0 2.2 2.5 2.8 3.1 3.4 3.7 4.0 billion US$ Red Sea NC (0.2) 0.3 0.4 0.4 0.5 0.5 0.6 0.6 0.7 0.8 billion Med Sea Offshore Oil Production BOE Abu Qir 11.0 10.4 9.9 9.4 9.0 8.6 8.2 7.8 7.4 7.0 million Red Sea Offshore BOE 261.0 Oil Production million 260.0 259.1 258.2 257.3 256.5 255.7 254.9 254.2 253.5 BOE Belayim 27.4 26.4 25.5 24.6 23.7 22.9 22.1 21.3 20.6 19.9 million BOE Suez Ras Fanar 0% 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 41.6 million BOE Suez Ras Budran 0% 109.5 million 109.5 109.5 109.5 109.5 109.5 109.5 109.5 109.5 109.5 BOE Suez Zeit Beit 0% 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 82.5 million Oil Natural Capital US$ Med Sea NC 0.3 0.3 0.2 0.2 0.2 0.2 0.2 0.2 0.2 0.2 billion US$ Red Sea NC 6.4 6.4 6.5 6.5 6.6 6.6 6.6 6.7 6.7 6.8 billion Sources: EIA 2022; Offshore Technology, www.offshore-technology.com/marketdata/abu-qir-development-lease-conventional-gas-field-egypt/. 117 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table A2.4: Coral Reef Meta-Analysis Adjusted and Weighted for Egypt, in 2007 PPP$/ha Importance Adjustment Coral Reef Median Min Max Median Min Max for Egypt factors Provisioning services Food 155 0 6,175 Medium-High 75% 116 0 4,631 Raw materials 245 9 64,328 Low 10% 25 1 6,433 Genetic resources 33,048 33,048 33,048 Medium-High 75% 24,786 24,786 24,786 Ornamental resources 292 16 1,555 None 0% 0 0 0 Regulating services Climate regulation 1,291 83 2,192 Low 10% 129 8 219 Moderation of extreme 1,514 4 104,134 Low 10% 151 0 10,413 events Waste treatment 85 85 85 No (unknown) Erosion prevention 153,880 1,333 306,427 Low 10% 15,388 133 30,643 Habitat services Genetic diversity 1,099 7 92,401 Medium 50% 550 4 46,201 Cultural services Esthetic information 1,562 0 1,484,996 High 100% 1,562 0 1,484,996 Recreation 114 4 6,429 High 100% 114 4 6,429 Cognitive development 197,899 36,793 2,129,121 45,128 26,038 1,628,426 Total (2007 US$) 197,899 36,793 2,129,121 45,128 26,038 1,628,426 Source: De Groot et al. (2012). Note: Adjustment factors: 10% for low; 50% for moderate; 100% for high. 118 EGYPT COUNTRY ENVIRONMENT ANALYSIS Table A2.5: Mangrove Meta-Analysis Adjusted and Weighted for Egypt, in 2007 International Dollar/ha Relevance Adjustment Mangroves Median Min Max Median Min Max for Egypt factors Provisioning services Food 234 0 18,743 Moderate 50% 117 0 9,372 Fresh (water) supply 296 1 4,277 N/A 0% 0 0 0 Raw materials 93 0 4,218 Low 10% 9 0 422 Moderate to Genetic resources 10 10 10 75% 8 8 8 High Medicinal plants 301 7 596 Low 10% 30 1 60 Regulating services Climate regulation 31 7 184 High 100% 31 7 184 Moderation of extreme 2,238 2 32,291 Moderate 50% 1,119 1 16,146 events Waste treatment/water 4,197 6 640,099 Moderate 50% 2,099 3 320,050 purification Erosion prevention 1,226 188 13,076 Medium-High 75% 920 141 9,807 Nutrient cycling 45 45 45 Moderate 50% 23 23 23 Habitat services Lifecycle maintenance Moderate to 1,127 5 123,886 100% 1,127 5 123,886 (esp. nursery service) High** Gene pool protection 1,815 9 22,054 Moderate 50% 908 5 11,027 (conservation) Cultural services Opportunities for 549 20 28,347 High 100% 549 20 28,347 recreation, tourism Total 12,162 300 887,826 6,933 212 519,329 Note: Adjustment factors: 10% for low; 50% for moderate; 100% for high. Source: De Groot et al. (2012) 119 EGYPT COUNTRY ENVIRONMENT ANALYSIS Annex 3: Existing and Suggested Green Instrument Taxonomy for the Circular and Blue Economies Instrument Green Instrument Implementation, Adjustment, Existing Green Instruments Taxonomy or Introduction Regulatory • Standards, bans, permits/quotas, compliance, monitoring, • Cleaner production assessment and eco-efficiency enforcement, and penalties exist suggested in MOE and SwitchMed, 2016 needs to • EIA suggested for all projects in FEDDG, 2021 be implemented • SEA already used for the Southern Red Sea • Demolition audit (EU guidelines to be adapted Tourism Sector for Egypt) • Environmental audit • EEAA to be mandated to drive MSP process • -MSP and ICZM • Green procurement (percent recycling) suggested in EU SwitchMed, 2016 and FEDDG, 2021 needs to • Public Contracts Law 182/2018 prioritizes the demand for be implemented and from local markets for green and sustainable products Fiscal / • Green tax, polluter-pays principle, such as Extended • Compulsory EPR started to be implemented (e.g., Budget Producer Responsibility (EPR) Executive Regulations single-use plastic bags and e-waste) and private under Waste Management Law 202/2020 voluntary EPR initiatives exist for mainly plastic • Subsidy removal (being gradually implemented by GOE bottles and e-waste with IMF support) • German Dual System EPR to be scaled up to cover • Charge/fee increase to improve cost recovery and service waste categories, especially in eco-industrial parks efficiency (water, liquid/solid/other wastes, energy, etc. is and industrial zones being gradually implemented by GOE) • Target ODA willing to use debt-for-nature/climate • Debt-for-project swap (4 ODA organizations, including swap that was reemphasized at the COP27 Italian cooperation that is still ongoing) • Prioritize green budgeting by notably including CE and BE criteria to be introduced • Green budgeting (implemented by MOPED, mainly • Greening TSFE projects to be implemented as focusing so far on transport, construction, and electricity) suggested by FEDDG, 2021 • TSFE (operational since 2019 and managed independently but in close collaboration with MOPED and close coordination with other regional sovereign funds) • Sovereign green bond of US$750 million so far, mainly • Green and blue bonds’ investments need to cover targeting transport, water, and wastewater other sectors by setting CE and BE investment • Environment Protection Fund managed by MOE with some criteria with the possibility of introducing environment focus on waste and mainly funded by the MOE’s own impact bonds budget, penalties and fines as well as ODAs • Regular public fund appropriations are needed to be • PPP funding is common leveraged by ODA/DFIs/IFIs to provide CE and BE incentives based on criteria • Public-Private Partnership Law 67/2010 and its Executive Regulations Decree 238/2011 need to be considered for the management of PAs to be managed by the ecotourism sector 120 EGYPT COUNTRY ENVIRONMENT ANALYSIS Instrument Green Instrument Implementation, Adjustment, Existing Green Instruments Taxonomy or Introduction Incentive • Tax/tariff exemption, blending, soft loans, etc. extended by • Introducing CE and BE criteria to grant soft loans or several GOE entities and Governorates (e.g., Investment provide incentives Law 72-Article 11/2017; SCEZ, GAFI, IDA, MSMEDA), and ODA/DFI/IFI facilities through the banking sector • Well targeted CE and BE incentives are needed to • MOE rice husk incentives are being provided through cover the subsector incentive gaps MSMEDA • Deposit-refund schemes are not considered yet and • Procedural incentives (e.g., increasing the renewal could be demonstrated for waste categories under cycle, etc.) (considered under Waste Management Law EPR, notably e-waste, batteries, glass and plastic 202/2020) bottles, etc. • Voluntary carbon market to offset carbon dioxide emissions and carbon credit company launched in November 2022 • Creating markets and targeted financing mechanisms for ecosystem services and artisanal fishermen to be complemented by the biodiversity gap financing to determine various sources of funding to bridge this gap • Setting up private trust funds for conservation such as the USAID to be set up under the Red Sea Coral Initiative Trust Fund to be set up by USAID with seed funds to be leveraged by the private sector, notably those involved in the maritime environment • Tradable coefficient of exploitation to preserve the coast and manage protected areas Moral • International Certification, e.g.: • International Certification to be introduced, e.g.: Suasion • ISO 14030-3 Environmental Performance Evaluation • Circularity • Ecolabeling • Social Enterprise Accreditation • Fair trade • CSR Egypt platform • Environmental Performance Rating (PROPER) was • Knowledge alert, e.g., early warning systems for high considered under EPAP II but was not implemented levels of pollutants under the ongoing World Bank Greater Cairo Air Pollution Management and Climate Change. 121 EGYPT COUNTRY ENVIRONMENT ANALYSIS