x Abu Dhabi, UAEFriday 19 January 2018

Cheap energy is a recipe for waste

Subsidies for water and electricity reduce the incentive to build "green" buildings in this country. That's just one more reason to consider a gradual reduction in these subsidies.

In November of last year, Masdar's former director of property development told the World Economic Forum that sustainable development in the Gulf will not work until governments reduce subsidies on water and energy.

"Why should we save energy and water by investing in energy efficiency when energy and water are free?" Khaled Awad, who had left Masdar a year earlier, told a panel on "cities of the future" in Dubai. "Who is going to do this?"

Ten months on the answer in the UAE seems to be, "not many". As The National reported yesterday, out of 22,892 buildings worldwide that have been certified under the Leadership in Energy and Environmental Design (LEED) standard, only 40 are located in the Emirates. Artificially cheap energy and water is part of the reason why.

Although some buildings in the country, especially in Dubai, have been earmarked for such certification, subsidised energy schemes mean green buildings remain the exception. This could change but only if the cost of producing power and water are slowly passed to the consumer.

That seemed to be the direction of movement last November, but for now, water and electricity prices remain fixed, with the Government picking up the majority of the tab. (In Dubai, for instance, citizens enjoy an 86 per cent subsidy, whereas expatriates pay half the true cost).

No economy, not even a healthy one like the UAE's, can sustain itself over the long term by giving services away for free. But this is not an economic problem alone. Environmentalists rightly point out that until prices rise there will be little incentive to use less and save more.

A modest increase in water and electricity rates does not have to be painful; such a solution would in all likelihood incorporate a new system of smart meters. Paying for the exact usage has promoted significant awareness and conservation among bill-payers elsewhere.

Decreasing the UAE's carbon footprint, and increasing conservation, will take a change in attitude from all parties: the government, developers and consumers. But it starts with realistic pricing.