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THE COMESA MODEL ENERGY POLICY FRAMEWORK

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THE COMESA MODEL ENERGY POLICY FRAMEWORK

    COMMON MARKET FOR EASTERN AND SOUTHERN AFRICA

    THE COMESA MODEL ENERGY POLICY FRAMEWORK

April 2008

Lusaka

TABLE OF CONTENTS

    Page

    ACRONYMS AND ABBREVIATIONS………………………………….. iv

    VISION……………………………………………………………………... 1

    MISSION………………………………………………………………….. 1

    EXECUTIVE SUMMARY………………………………………………… 2

    CHAPTER ONE: OVERVIEW OF COMESA AND STATUS OF 3 THE ENERGY SECTOR IN COMESA

    1.1 THE COMESA MISSION AND 3

    VISION…………………………………………………………

    1.1.1 Overview of COMESA……………………………………. 4

    1.1.2 Objectives of the COMESA Model Energy Policy 5

    Framework………………………………………………….

    1.1.3 Need for an Energy Policy Framework and Strategic

    Benchmarks ………………………………………… 5

    1.1.4 Energy Policy Framework Context …………………… 7

    1.2 STATUS OF ENERGY SECTOR IN THE COMESA

    REGION………………………………………….. 8

    1.2.1 Electric Power……………………………………………… 9

    1.2.2. Petroleum………………………………………………….. 10

    1.2.3 Gas…………………………………………………………. 10

    1.2.4 Coal…………………………………………………………. 11

    1.2.5 Biomass and other Renewable Sources of Energy…… 11

    1.2.6 Nuclear Energy……………………………………………. 13

    1.3 ENERGY EFFICIENCY AND 13

    CONSERVATION……………………………………..

    1.3.1 Secondary Stage………………………………………….. 13

    1.3.2 End use…………………………………………………….. 14

    CHAPTER TWO: KEY ISSUES IN THE ENERGY SECTOR 15

    2.1 BROAD SECTOR ISSUES OF ENERGY SECTOR…… 15

     (i)

    2.2 ISSUES OF ENERGY SUB-SECTOR……………………. 15

    2.2.1 Electric Power Sub-Sector……………………………….. 16

    2.2.2 Fossil Fuels Sub-sector…………………………………… 16

    2.2.3 Biomass and other Renewable Sources of Energy 17

    Sub-sector………………………………………………….

    2.3 ENERGY EFFICIENCY AND CONSERVATION 18

    ISSUES……………………………………...

    CHAPTER THREE: ENERGY POLICY GOAL AND 19

    OBJECTIVES

    3.1 MAIN POLICY GOAL………………………………………... 19

    3.2 ENERGY POLICY OBJECTIVES…………………………. 19

    CHAPTER FOUR: SUPPLY AND DEMAND SIDE ENERGY 24 POLICY OBJECTIVES AND POLICY INSTRUMENTS

    4.1 SUPPLY SIDE……………………………………………….. 24

    4.1.1 Electric Power Sub-sector..……………………………… 24

    4.1.2 Fossil Fuels Sub-sector………………………………….. 25

    4.1.3 Biomass and other Renewable Sources of Energy

    Sub-sector…………………………………………………. 27

    4.2 DEMAND SIDE………………………………………………. 29

    4.2.1 Household Sector…………………………………………. 29

    4.2.2 Transport Sector…………………………………………... 30

    4.2.3 Industrial and Commerce Sector………………………… 31

    4.2.4 Agricultural Sector………………………………………… 31

    CHAPTER FIVE: CROSS CUTTING ISSUES 32

    5.1 REGULATORY FRAMEWORKS………………………….. 32

     (ii)

    5.2 INTEGRATED ENERGY PLANNING……………………… 33

    5.3 ENERGY SECTOR GOVERNANCE………………………. 34

    5.4 INSTITUTIONAL FRAMEWORK…………………………... 34

    5.5 CAPACITY BUILDING………………………………………. 35

    5.6 ENERGY EFFICIENCY AND 35

    CONSERVATION……………………………………...

    5.6.1 Households………………………………………………… 36

    5.6.2 Transport Sector…………………………………………... 36

    5.6.3 Industrial and Commerce Sector………………………... 36

    5.7 ENERGY PRICING………………………………………….. 37

    5.8 RESEARCH DEVELOPMENT……………………………... 38

    5.9 REGIONAL AND INTERNATIONAL CO-OPERATION…. 38

    5.10 ENVIRONMENT……………………………………………… 39

    5.11 GENDER……………………………………………………… 39

    SELECTED BIBLIOGRAPHY 41

    (iii)

    ACRONYMS AND ABBREVIATIONS

BB/D (bb/d) - Barrels Per Day

COMESA - Common Market for Eastern and Southern Africa

    CAPP - The Central Africa Power Pool

CU - The COMESA Customs Union

EAPP - The Eastern Africa Power Pool

EIA - Environmental Impact Assessment

FTA - The COMESA Free Trade Area

GDP - Gross Domestic Product

LPG - Liquefied Petroleum Gas

MDGs - Millennium Development Goals

NEPAD - New Partnership for Africa's Development

NGOs - Non Governmental Organizations

    OAU - Organisation of African Unity

PRSP - Poverty Reduction Strategy Paper

PTA - Preferential Trade Area for Eastern and Southern Africa

PV - Photovoltaic

PP - The Southern Africa Power Pool

R&D - Research and Development

    RETs - Renewable Energy Technologies

    (iv)

    VISION

    TO ATTAIN UNIVERSAL ACCESS TO QUALITY ENERGY SERVICES FOR MAJORITY OF THE PEOPLE OF THE COMESA REGION

    WHILE PROTECTING THE ENVIRONMENT

    MISSION

    TO FACILITATE PROVISION OF ADEQUATE, AFFORDABLE, RELIABLE, QUALITY, SAFE, AND ENVIRONMENTAL BENIGN ENERGY SERVICES TO

    SUPPORT SOCIAL AND ECONOMIC DEVELOPMENT

    1

EXECUTIVE SUMMARY

    Energy plays a critical role in the development process, as a domestic necessity but also as a factor of production whose costs directly affects prices of other goods and services and the competitiveness of enterprises. It is widely seen as a driver to achieving Millennium Development Goals (MDGs).

    Thus, the importance of the energy sector in the economy necessitates that a long-term planning approach for energy development be adopted and it should be in line with the overall macro-economic policies.

    The main thrust of the COMESA Model Energy Policy Framework is to provide the COMESA member States with harmonized guidelines that would facilitate energy policy harmonization in the COMESA region in efforts to improve efficiency and increased investment.

    Specific objective of this Model Energy Policy Framework is to provide an outline of contents expected in National Energy Policy, which countries can then adopt and/or customize, therefore, harmonizing policies in the spirit of regional integration.

    The main energy policy goal is to meet the energy needs, in an environmentally sustainable manner, through providing an adequate and reliable supply of energy at least cost; to support social and economic development and sustainable economic growth and also to improve the quality of life of the people.

    Energy policy objectives of this model energy policy framework include improving the effectiveness and efficiency of the modern energy supply industries; improving the security and reliability of energy supply systems; increasing access to affordable and modern energy services as a contribution to poverty reduction; establishing the availability, potential and demand of the various energy resources; stimulating economic development; improving energy sector governance and administration; managing environmental, safety, and health impacts of energy production and utilization; and mitigating the impact of high energy prices on vulnerable consumers.

    The COMESA Model Energy Policy Framework focuses on key issues in the energy sector; supply and demand; side policy objectives and policy instruments; and cross cutting issues.

    This Model Energy Policy Framework is a flexible policy guideline which is expected to provide a framework for COMESA member States to customize their policies based on the country’s specific socio-economic considerations and

    circumstances.

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CHAPTER ONE: OVERVIEW OF COMESA AND STATUS OF THE ENERGY

    SECTOR IN COMESA

    1.1 THE COMESA VISION AND MISSION

    COMESA's image of the future is one of a fully integrated, internationally competitive regional economic community with high standards of living for all its people; a community ready to merge with other regional groupings to form the African Economic Community. This vision of the future draws inspiration from the spirit of the COMESA Treaty, and takes into account challenges in the COMESA environment, and lessons and experiences of the past.

    The aims and objectives of COMESA, as defined in its Treaty and its Protocols may be summarized as follows:

    ; to facilitate the removal of the structural and institutional weaknesses of

    member States so that they are able to attain collective and sustained

    development, and

    ; to create and maintain:

    (i) a fully Free Trade Area guaranteeing the free movement of goods and

    services produced within COMESA and the removal of all tariffs and non-

    tariff barriers;

    (ii) a Customs Union with a common external tariff under which goods and

    services imported from non-COMESA countries will attract an agreed single

    tariff in all COMESA states;

    (iii) free movement of capital and investment supported by the adoption of

    common investment practices so as to create a more favorable investment

    climate - a common investment area - for the COMESA region; and (iv) a gradual establishment of a payments union and the eventual

    establishment of a monetary union with a common currency; and the

    adoption of common visa arrangements, including the right of establishment

    leading eventually to the free movement of bona fide persons. In pursuit of the above goals, COMESA's mission is to endeavor to achieve sustainable economic and social progress in all member states through increased co-operation and integration in all fields of development, particularly in trade, customs and monetary affairs; transport, communication and information; technology, industry and energy; gender, agriculture, environment and natural

    resources. The implementation of this mission is considered a long term undertaking.

    3

1.1.1 Overview of COMESA

    COMESA was established in 1994 as a successor to the Preferential Trade Area for Eastern and Southern Africa (PTA), which had been in existence since 1981 within the framework of the Organisation of African Unity's (OAU) Lagos Plan of Action and the Final Act of Lagos. The ultimate objective of PTA was to create an economic community with high standards of living for the people of area.

    COMESA is a regional economic grouping comprising 19 member States which have agreed to promote regional integration through trade development and to develop their natural and human resources for the mutual benefit of all their people.

    The member states are Burundi, Comoros, Congo DR, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

    The aims and objectives of COMESA as defined in the Treaty and its Protocols are to facilitate the removal of the structural and institutional weaknesses of member States so that they are able to attain collective and sustainable development through regional integration. Whereas, the Treaty provides that “the member

    States undertake to co-operate in the joint development and utilization of energy resources including hydro, fossil and biomass”.

    Currently, COMESA is one of the regional organisations that the African Union and the New Partnership for Africa's Development (NEPAD) recognize as a vehicle and a building bloc for Africa's development, especially from the point of view of developing the continent's infrastructure, i.e., energy, transportation, communication, etc.

    COMESA has an area of about 12 million square kilometers, spanning Northern, Eastern and Southern Africa and has a population of over 389 million. Moreover, the region is endowed with diverse natural resources which include arable land, minerals, petroleum, water, etc, and it is also a big market.

    Trade and investment are considered as the primary instruments for promoting and deepening economic integration in COMESA. In order to facilitate trade and investment, the development of appropriate physical infrastructure and facilitation in energy, transport and communications are taken as key issues.

    The COMESA Free Trade Area (FTA) was launched in October, 2000 when nine of the member States eliminated their tariffs on COMESA originating products. Currently there are thirteen member states in the FTA namely Burundi, Comoros, Djibouti, Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius Rwanda, Sudan, Zambia and Zimbabwe.

    4

    Trade has grown significantly averaging 20% per year of intra-FTA trade, while overall intra-COMESA trade has also been boosted by increased intra-FTA trade with a growth rate of about 7% per year.

    The next stages for COMESA are the formation of a Customs Union, a Monetary Union and the establishment of a Common Market. The launch of the Customs Union (CU) is programmed for 2008.

1.1.2 Objectives of the COMESA Model Energy Policy Framework

    The main thrust of the COMESA Model Energy Policy Framework is to provide the COMESA member States with harmonized guidelines that would facilitate energy policy harmonization in the COMESA region in efforts to improve efficiency and increased investment.

    The specific objective of the model energy policy framework is to provide outline contents expected in National Energy Policy, which countries can then adopt and/or customize, therefore, harmonizing policies in the spirit of regional integration.

1.1.3 Need for an Energy Policy Framework and the Strategic Benchmarks

    Energy plays a critical role in the development process, as a domestic necessity but also as a factor of production whose costs directly affects prices of other goods and services and the competitiveness of enterprises. The cost of energy is one of the critical factors that affect the success of COMESA’s Free Trade Area and Common Investment Area, since it determines, to a great extent, COMESA’s

    competitiveness in its regional and extra-regional markets.

    Energy is widely seen as a driver to achieving Millennium Development Goals (MDGs) as it contributes in: eradicating extreme poverty and hunger; achieving universal primary education; promoting gender equality and empower women; reducing child mortality; improving maternal health; combating HIV/AIDS; ensuring environmental sustainability; and developing a global partnership for development. Because by 2015 all 191 United Nations member States have pledged to meet the above eight MDGs.

    Thus, the importance of the energy sector in the economy necessitates that a long-term planning approach for energy development be adopted and it should be in line with the overall macro-economic policies.

    It has been established that energy poverty could be defined as the absence of sufficient choice in accessing adequate, affordable, reliable, quality, safe, and environmentally benign energy services to support human and economic development. It is therefore, apparent that energy poverty exists in many COMESA member States at all levels, particularly in the rural areas.

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