Residents don't actually know how much energy costs in the UAE; there is ultimately a price to pay when they are left in the dark. Consumers that are unaware of the true price of their energy consumption are less likely to understand the virtues of energy conservation. A new policy will help to change this, though it is only a first step.
On their bills, customers in Abu Dhabi will soon see not only what they are charged, but what the electricity they use actually costs to produce, as we report today. There is, in fact, a significant difference between the two. Energy bills for expatriates are subsidised 50 per cent while Emiratis receive an 86 per cent subsidy.
Seeing the real price of keeping the lights and air-conditioning on may not change many people's behaviour, since they still won't have to pay it. But making consumers more aware of the costs of powering the UAE does pave the way for more significant changes.
The nation is ultimately trying to break an unhealthy paradox: energy rich-countries are some of the biggest spenders on meeting their own domestic energy needs. This contributes to what economists have called "the curse of oil". Countries that become too dependent on oil revenues and whose citizens become too dependent on energy subsidies develop weaker institutions and are less competitive relative to those with less mineral wealth.
The UAE has already increased petrol prices twice in the past year. Many residents have bristled at these changes but that does not mean they are not necessary. Energy is scarce and increasingly so, and this reality should be reflected in its price.
The Government can no longer be expected to foot such a large portion of the energy bill for both individuals and companies. Indeed, a more accurate pricing of energy is essential to shaping consumer behaviour.
At a time when the UAE is becoming a leader on research into alternative energy and nurturing fresh ideas about the right mix of energy sources, it is right for the country, and for consumers, to consider what can be done at home.