Demand, Prices and Subsidies for Energy: Managing Household Energy Consumption in the United Arab Emirates

Abstract

The United Arab Emirates (UAE) is one of the largest energy consumers in the world in per capita terms and ranks third globally in terms of the ecological footprint per capita. Subsidized energy prices, common to the Middle East, are partly responsible for this ranking. However, while conventional economic theory suggests that the high level of energy consumption in the country would be solved if energy subsidies were removed, this solution lacks contextual components that are decisive in successful policy implementation. This thesis revisits the findings on household energy demand in academic literature, including the gasoline and electricity sectors, and the relationship with prices. A survey study of UAE residents’ household energy consumption preferences is used to support findings that conflict with the recommendation of complete subsidy elimination made by international organizations such as the International Monetary Fund and the International Energy Agency. By incorporating in the analysis components pertinent to the local context, including the particular role of the government and its objectives as well as end-user behavior, we find that energy subsidy elimination is not the most effective option for decreasing per capita household energy consumption in the UAE. Rather, framing policies targeting energy conservation in a customized way for each population group would increase the likelihood of success.

Date of Award	Jul 2014
Original language	American English
Supervisor	Sgouris Sgouridis (Supervisor)