Posted by: Barrak Al-Babtain | December 18, 2009

Energy Rebate

People in Kuwait have no incentive to reduce their energy consumption. I personally don’t really care about the Earth enough to let that influence the way I make my decisions, and i’d be lying if I said I was. The planet was here millions of years before we came to be and it will be here millions more after we pass. What I do care about is the inevitable transition that Kuwaitis have to suffer through as our oil begins to run out and become useless.

It is myopic and childish to simply ignore the fact that our country is almost entirely dependent on a finite resource. Oil will run out eventually and sooner than most people think. How will this transition happen? What are we doing to make sure that it is as painless and seamless as possible? Over 90% of our labor force works for the government. Their wages come from oil revenues. We cannot sustain this incredible level of dependency on one single, finite resource. Seeing as how this is such a valuable commodity, and how dependent we are on it, shouldn’t we be trying to make sure that it lasts as long as it can?

(The data is a bit out of date, but the general idea remains)

I propose that we incrementally raise the price of gasoline over the next 4 years, raising it so that by the end it will have become 4 times the price it is today. This will be done without sacrificing quality of life or having it become a burden on people. The way to do this is by having an energy rebate. This was mentioned before in greater detail here and here. The government will have made 4 times as much money selling domestic petrol than it would have. This money will go straight back to Kuwaiti citizens in the form of a rebate check, or an added bonus onto their paychecks. The amount will be the average amount that every Kuwaiti has spent on energy that month. This means that if you consumed an average amount of fuel, the check will mean you broke even. If you consumed more than the average amount you will have spent more on gasoline overall that month, since the check is less than what you spent on gasoline. If you consumed less than the average you will have made a profit just by being efficient and not wasting petrol.

The point of this initiative is that it alters behavior towards efficiency. The increase in cost has to be made public through a massive public awareness scheme so that people know for sure that in a few years time gas will be very expensive. This will make them think twice when buying gas-guzzlers and maybe think about buying a hybrid. The quality of life is arguably the same between the two, yet one is far more efficient than the other. The problem today is that people just don’t have the incentive to make that decision, and I don’t blame them.

Of course, the revenues from this program will be much more than the rebate checks that get sent out, since the government will still be collecting from industrial, commercial and non-Kuwaiti residents. This extra cash must go into improvements in pedestrian infrastructure, bus subsidies and many more and better buses, and of course into building the Kuwait Metro.

The point of this is to ease the transition into our inevitable, oil-less future. Will we enter that new age as spoiled brats that can’t do anything for ourselves, or as independent, reasonable and rational adults? The word ‘sustainability’ has become dreadfully overused, but our way of life just isn’t sustainable. We don’t have to sacrifice the quality of our life to be sustainable, we just have to live differently. Who knows, maybe it will turn out even better?


Responses

  1. i like the idea of these checks ..!

    i was chatting with a british teacher in school last week .. and he said its surprising how we don’t have a local made car .. a Kuwaiti car .. is it very hard to make one? can’t we build a car factory in the middle of the desert and start making cars? aren’t Kuwaitis creative enough to design cars that can compete against Toyota, Mercedes and BMW?

    btw i LOVE your blog🙂

  2. Why is it surprising? It’s not just a matter of creativity and entrepreneurship. Our local market is so saturated with high quality cars that it’s impossible to penetrate it with something new, let alone locally manufactured. This works in large countries with a significant poor (but upwardly mobile) population (India, Russia, China, Mexico, Brazil) where people want cars but can’t afford to import them, so they manufacture cars locally. They always end up being really bad, but with time and research they get better and better. But without that local market you’ll never have the time to do that.

    We don’t even produce our own food. We import that too, so I think if you want to start doing something locally, I think that may be a better place to start. Saudi Arabia and I think Qatar have started buying up fertile land in Africa and are growing rice and other staples. They want to control the means of production and become self sufficient. That is a good idea.

    If you want Kuwaitis to start becoming makers of things instead of consumers, we should think about designing and manufacturing cars; that’s too big. We have to think a lot smaller and become a nation that excels in good design in general, making smaller things, things we can consume locally as well as export. Kuwait can be the design capital of the GCC.

  3. I have been calling for this energy rebate for years. But, not just for gasoline. This should, IMO, be extended to residential consumption of electricity and water. To subsidize the cost of electricity by 90% just because we live in a welfare state is just ridiculous. It’s like saying, “Hey, people, use energy as much as you want. Oh, and never mind turning off those lights at night, either; we’ve got you covered.”

  4. Absolutely, Harry, this should be a total energy initiative: Gasoline, electricity and water. We should create a government program, similar to the ‘cash for clunkers’ thing in America whereby we would go into homes and replace their old and inefficient AC units and install better ones, either free of charge or at a heavily subsidized price.

    Generally, people tend to greatly overestimate the energy cost of lighting and underestimate the cost of cooling. This is where we use most of our energy: Air conditioning. The laws and regulations for that should be very strict and enforceable. The best way to do that is to just jack up the price of electricity, and provide rebates and subsidies for people that need them. That’s the only way to alter behavior and control costs.

  5. I don’t agree with what you’re saying there… The lifestyle in Kuwait and the consumption patterns are way different than anything you’ll study at textbooks anywhere. Increasing the price of a product can reduce the consumption at some parts of the world. This is not necessary true in Kuwait.

    Price increase of any product in Kuwait is considered as a premium that, unfortunately, Kuwaitis are willing to pay with no questions asked. I don’t need to bring you examples just look at so many items you use in your daily life.. even starbucks is charging us double what its charging everywhere else in the world.. yet we continue to consume their products.

    The answer for us is to educate people. By educating I dont mean a random unstudied tv adverts.. It is very important for Kuwaitis to understand the value of not only their money, but also the environment they live in.

    Increasing the energy prices will not make us drive less, will not make us use less water boilers at home or less air conditioning.. There are many examples world wide of how a rapid increase in a product’s value did not bring down the consumption rates.. so let us not reinvent the wheel here please.

  6. You’re absolutely right, but I’m not saying that simply raising the rates alone will solve the problem. I agree, doing that will not solve anything and will only result in (rightful) protests and anger.

    The whole point of what i’m suggesting is the rebate. This check is how we educate people. I want people to see a very clear choice in front of them:

    Choice 1: Drive a lot, pay lots of money
    Choice 2: Drive less, make lots of money.

    I agree that many people won’t bother and will still choose to drive the same cars and in the same way they did before (and waste electricity and water). But you will also have a large proportion of the population who will do the cost-benefit analysis and make the right choice. Once the attitude starts to change they won’t be the minority anymore and more and more people will want to make a profit out of efficiency. We need to make efficiency profitable. I won’t install a solar panel in my roof because electricity is so cheap that it’s not worth it. If electricity was expensive and a subsidized solar panel is available, I might think about it. Incentives do make a difference, even in Kuwait.

    How would education be a better alternative than this? Education alone is voluntary and it doesn’t force you to do anything.

    The way forward is to fix the incentives. The incentives are all wrong and encourage waste.

    If there was a way to give everyone that doesn’t buy a Starbucks 2kd every day, you’ll find that a lot of the more rational people would start drinking tea instead. And by the end of the month they’ll be 60kd richer. What’s wrong with that?

    Edit: Kuwait is already doing this, but in the opposite way. They are subsidizing energy for us. This makes it cheaper than it’s true value, and because energy is so cheap, we abuse it. Just removing the subsidy is enough for me, and the value of the subsidy would be given back to Kuwaitis as a rebate check (for them to do whatever they want to with) instead of wasting it on promoting inefficient overuse.

  7. I don’t really like your idea and i don’t think it will solve problems at all. In fact i think it will create more problems than it solves for the government.

    There is a point i want to touch on: “Oil will run out eventually and sooner than most people think.”

    “The Stone Age came to an end not for a lack of stone, and the oil age will end, but not for a lack of oil.” – Sheik Ahmed Zaki Yamani (Chief Architect of OPEC)

    The December 21st Hopenhagen World Summit is the first of the many that will follow. And in these UN Summits international agreements will be made. At first it will be to reduce the consumption of fossil fuels and reduce the expulsion of green house gasses but its only a matter of time before renewable energy sources become cheaper and more efficient. When gas burners and fossil fuels were first used they were just as inefficient as solar panels and wind turbines are today, but almost one hundred years later now they became good enough and are getting better and so will the wind turbines and solar panels be in 30-50 years time, if not even more efficient than current internal combustion engines. In 30 years when renewable energy is cheap enough to mass produce and efficient enough to be used by the masses the world summit that year will not be about reduction of fossil fuels but about the complete adoption of renewable energy into every aspect of our energy needs. And eventually, just like the excessive use of coal burners was limited and is now being forced to be reduced even more every year, the use of gasoline and fossil fuels in general will be limited and enforced by international laws and regulations. When it becomes part of international law and burning fossil fuels becomes illegal its going to be impossible to live in Kuwait, unless Kuwait adapts to this from now.

    And it will happen, because just like we held an oil embargo in 1973 because we ran the oil fields, they will hold an oil embargo because they run the rest of the world. You mentioned that we import everything, when burning fossil fuels becomes illegal we will need everyone’s help except our own.

    I think what would be a better option for Kuwait is if it were to invest in its own Kuwaiti Youth and engineers and invest in designing renewable energy sources of their own. We have the engineers, the architects, the designers and the natural resources, money and time to spend on creating a better form of renewable energy. Solar panels and cells are currently struggling to be more effective at producing energy, especially in hot and humid climates like ours. We live in this climate and it would be in our best interests to design our sources ourselves!

    I can imagine a Kuwait that in 50 years or so sells renewable energy technologies to every country in the world. I think it is the only way of sustaining life in Kuwait. We are used to this high-priced and high-income lifestyle, one we can only guarantee with a strong income.

    I know that during the 80s and 90s the Kuwait Institute of Scientific Research (KISR) was commissioned to research renewable energy sources for Kuwait, specifically Solar Energy. But after a short period of time and a lot of money the project was shut down due to lack of productivity. They lacked the patience required for such research but it is very important to our country.

    Telling people that the Earth is dying is not a good enough reason to invest into these things. But telling Kuwait that it will be poor unless it does is something that will work. And most of all, telling Kuwait it will be even richer if it does will work even better.

  8. Bumo: Thanks for taking the time to reply, I really appreciate it as always. I’ll answer you point by point:

    “I don’t really like your idea and i don’t think it will solve problems at all. In fact i think it will create more problems than it solves for the government.”

    You can’t just say that and not lay out what those problems will be. So, what are the main problems? Protests? The skewed and altered macro-economic energy model? People still won’t care and will just pay the extra money without any real change in behavior?

    “(End of oil)”

    That’s true, to a point. The end of oil won’t come as a result of a concerted effort by the major global players to end climate change. That’s bullshit and I don’t think any realist would actually believe that. The “Oil Age” will end because of peak oil and the ever increasing price of oil that results. $100, $200, $500 per barrel. These prices will force people in America to finally wake up and change their lifestyle (the same way it did, briefly, in the 70’s during the embargo). It will force people to adopt the best and most efficient methods of creating non-hydrocarbon energy. It’s because they can’t afford not to do that. We might still be making insane amounts of money, even more than we do today; that’s because we’re going to be one of that last people to still have some remaining recoverable oil. But that will only be an illusion. It’s going to feel like a rollercoaster, and those years of peak oil will be us going up that really, really high peak. Click, click, click, click… Then we come crashing down. Hyper inflation, mass exodus, environmental catastrophes, war, you name it.

    “I think what would be a better option for Kuwait is if it were to invest in its own Kuwaiti Youth and engineers and invest in designing renewable energy sources of their own. We have the engineers, the architects, the designers and the natural resources, money and time to spend on creating a better form of renewable energy. Solar panels and cells are currently struggling to be more effective at producing energy, especially in hot and humid climates like ours. We live in this climate and it would be in our best interests to design our sources ourselves!”

    People have been talking about doing stuff like that for years now and i’m sick and tired of just hearing it. We just don’t have the work ethic or the attention span as a nation and more importantly the leadership to embark on such project. The reason why we don’t is that we have basically been drugged into a lethargic lifestyle of consumption and cynicism. What was the drug? Cheap energy. Years of cheap energy has given us a national infrastructure that is dominated by the car and a society that doesn’t care how big and inefficient their homes are.

    What i’m trying to make clear here is that we’re already gaming the system by having these energy subsidies in place. The government is basically giving us free energy to sedate us. That may seem like a good idea for them in the short term, since it makes everyone happy, but in the long term it ruins us.

    Having the energy rebate is a realistic, achievable solution to at least attempt to alter behavior so that we can bend the curve of energy consumption towards it being more sustainable tomorrow than it is today.

  9. This subject is so boring to me, I should admit. I find my self agreeing and disagreeing with most of the points here and with everyone. It’s all about sustainability here, and sustainability is a big word that means so many different things.
    The point is raise awareness and give incentives to people to consume less. I agree we need both, education and an effective incentive program for people to follow. All of that is good and well, but won’t solve much of our problems.
    We are a consumerist society, and we imported that from the USA. We have chosen the worst the west have to offer and decided to follow their footsteps. The way we live, we eat, we work and we structure our lives is not based on a long term goals, but short lived ones.
    Architecture is not responding to nature simply because it has the option not to. We have AC’s and it solves our problems. Barrak is right, our biggest problem is the AC, we need to change it and work around it as much as we can.
    I disagree that rebating for gasoline will make our micro-environement better alone. How many cars are out there anyway? It will only reduce traffic.
    I see the resistance to hiking the prices from some commentators, this is a pure Kuwaiti instinct. We wont accept any higher charges or paying for anything, its just natural.
    This is a really complicated subject that can not be dealt with without proper research and in-depth analysis. Barrak, a rebate program will encourage waste, not a good way to spend money, and not all people are rational.

    The economy is something completely different, and Barrak again, we are not the biggest consumers of our own finite resource, the only way to save it is be reducing its production and exportation.

    Kuwait is not the source of pollution nor the reason for global climate change, the west and east are, once we fully comprehend that we can move forward.
    Economy is the to use our limited resources in the best possible way. We should start from there.

  10. Jasem, I just don’t believe that attitudes will change as long as energy (petrol, water, electricity) remains to be insanely cheap.

    The problem is how would you raise the price of energy without inciting riots. I just think the rebate idea is the best way to do that.

    Imagine if your electricity bill is 140kd per month. You will do everything you can to try and buy a better air conditioner, better insulation, think about investing in solar panels (especially if they’re subsidized). People will change only when we force them to.

  11. Okay disregard my previous comment if you feel it would make no difference. I was assuming from your rebate plan that we live in a perfect nation that knows no corruption and surely enough has no problem pushing laws. Don’t mind my wishful thinking.🙂

    You are looking at it from a one sided equation. Who controls the economics of Kuwait? Lets look at the other side of your “buy a hybrid” argument.

    In Kuwait, the current best selling cars are Ford, Mercury, Chevrolet, GMC, Toyota, BMW and Mercedes-Benz. All of which could be counted as gas guzzlers. In Kuwait the best selling car companies are owned by Alwazzan, Alghanim, Behbehani, Alsayer, Alghanim and Albishir. (In order of the companies above)

    Kuwait is a capitalist monarchy, and free traders’ rights are protected by the Constitution. But lets disregard that, do you think these companies and free traders will let you pass a bill to pull their revenue down to a quarter of what they used to make?

    A four fold increase in the price of energy will render the entire economic balance system of this country completely redundant.

  12. That’s true, but you’re basically fighting their battle for them by giving up without even trying.

    “A four fold increase in the price of energy will render the entire economic balance system of this country completely redundant.”

    I don’t really understand what you’re saying there. Can you please rephrase that?

    But still, if people demand more efficient cars (because that will save them money) then the car dealerships will supply more fuel efficient cars. That’s a fact. If every car in Kuwait has twice the gas mileage, that means we save half our domestic petrol consumption.

  13. I am not fighting their fight, I am just stating the facts that i think are important if you want to make change. You have to know what you are dealing with before hand.

    Increase the price of petrol and all of a sudden people are buying less and less cars with regular engines and going for cars with smaller engines and better fuel efficiency or God forbid a morbid hybrid. If you want to make a change over night its impossible.

    If i buy a hybrid tomorrow, who will service my car a few days down the line? In this country i guarantee you it is impossible to find a mechanic that can handle one. Are you going to import your mechanics from Japan or USA? Or Europe? In which case the cars will become expensive to maintain. Forget maintenance, no company will insure a car that cannot be maintained. And for that matter, if people buy less big cars and overall less cars because they wont be able to afford the expensive and expensive to maintain hybrids and sensitive fuel efficient cars then what happens to the banks? What happens to the economy when the banks aren’t lending money to anyone, or when they are… just smaller loans and less loans in general? What happens to the dealerships that no longer sell cars? What happens to all their workers, mechanics, salesmen, managers, etc?

    My car costs me roughly 400KD in petrol every year and around another 200KD or so in maintenance costs. If i reduce my consumption to half that by buying a Toyota Prius its great that i save 200KD in fuel but its not great that i spend 400+ KD on servicing my engine, transmission, etc. This is ignoring the fact that the Prius sucks and that i probably wont be able to find a mechanic that knows how to a single thing on the car (even in Toyota). You are also ignoring the fact that most cars sold in Kuwait are not made for the Kuwaiti market. And the fact that most hybrids and fuel efficient cars are ugly, heavy, slow and boring. Cars are not just a mode of transportation for almost everyone i know…

    But why even go for petrol cars? Wasn’t your argument about reducing the consumption of energy? Our killer is energy in homes and not cars. What have petrol cars got to do with any of that? Unless you propose this to reduce the number of cars on the street?

    The price of petrol controls everything, the whole economy relies on it.

    In this country we import everything, food, water, energy, materials, iron, steel, asphalt, workers, even our money is made somewhere else… But if your workers no longer see this country as somewhere they can make a few pennies to send back home but see it as a country that will cost them more to live in than they will make… they wont come… they wont run your companies or your schools or your restaurants.

    Think about it, most of these workers use taxis, the taxi ride might cost them 1KD a trip which is expensive now, but if in four years time the trip costs 4KD that means its no longer going to cost them 20KD a month, it will now cost them 80KD a month, which is probably around half of their salary. Divide the rest on daily consumption, food, water, rent and clothing and you have nothing left. If you increase their pay, then the price of food goes up if they work in a restaurant, the price of a car goes up if they work in a…

  14. I see what you’re saying, and inflation is obviously a risk. I’m just saying that what we’re living in isn’t reality; we’re actually being sold cheaper energy than what it’s worth and i’m worried that this altered reality is generating perverse incentives that are guiding our country and people down a very unsustainable path.

    You can argue that the status quo can’t handle such a change, and maybe if the process was a shock, that would be true. But i’m not advocating for a sudden doubling of the price (which is what happened in Dubai a few years back). I’m saying we should announce this and make it clear that it will happen gradually over several years. This will give time for people to act, and for companies to reorganize and find solutions for the new reality.

    In that time, we could have completed the first phase of the metro, so the people you’re worried about that can’t afford a taxi can use that. In fact, a taxi should be a luxury, not the standard form of transportation. The density of people in a taxi versus a bus or a train is too small and adds so much unnecessary traffic.

    I mean, you can defend the reasons for not adopting this, and you’d be right, but you have to see beyond these first few years of pain and understand that a generation from now, things will be much better, and we would be moving down a much better path.

    Edit: You’re absolutely right, electricity is far more important in terms of actual energy consumption. It’s a lot more than transportation, and the margin for improvement is arguable greater and easier to achieve. But the issue of the petrol subsidy is a lot closer to my heart because solving it reduces traffic, cleans the air, incentivizes public transportation and walking, and it reduces the amount of petrol we consume domestically (so we can export more and generate even more revenue). It has far more of an impact on the urban fabric than water and electricity conservation. But you’re right, the other two are more important substantially.

  15. I agree with Barrak. A morsel of cynicism is called for, as, based on past experiences, it has become clear that getting things done locally is difficult. But, not impossible, and there simply aren’t any alternatives – NOT doing anything is NOT an option. I suspect a number of hybrid interventions need to be developed simultaneously. These will include the development of ALL the aforementioned interventions (rebates, alternate energy, etc.) as well as a development of alternate means of transport, which needs to be implemented BEFORE many of the tougher methods are to be implemented. It will also need to be accompanied by a substantial PR campaign explaining why it is done, perhaps similar in extent to the ‘Red’ one currently supersaturating most of our neighborhoods. This is not as far fetched as it might sound, as similar, very drastic interventions have been done elsewhere – perhaps the most vivid historical example being the Haussmann plan in Paris, or, more recently, the ‘Congestion Charge’ which was applied in London a few years back. This latter point involved charging 5 pounds from anyone wishing to enter central London 5 (nowadays its over 8 pounds, if I remember correctly). At the time there were a myriad of nay-sayers, however, the plan was implemented without any major hitches and it did manage to reduce city-center congestion. Now, this intervention involved some substantial pre-planning, which included doubling up on the amount of buses before the congestion-charge was implemented. The technology (the cameras) monitoring the traffic also needed to function impeccably from the beginning, as it would have been too easy to dismiss it if the logistics and technology wouldn’t have been in working order from the programs commencement.
    Now, what it would need to have, in the local context, is a incorruptible and solid means for how the system is supervised and enforced – something that always seems to be somewhat lax locally. This could perhaps be avoided by ‘simply’ mechanizing and automating the process as far as possible and removing it out of the direct hands and influence of the various parties that might have wish to compromise its aims.

    Anything can be achieved. All that usually holds us back is our own timidity, cynicism and lack of proper commitment and planning (design)… Let’s make an effort to change that…

  16. Barrak, energy and gasoline, though similar, are different. Raising the price of gasoline will reduce consumption and traffic, but will not change anything about our oil reserves. We export most of it. Energy in general is far more important to look at here.
    We suffer from blackouts in the summer, not because we consume gasoline, but because we over use our electricity. We need to do something for sure, and the price of gasoline is too low, however, I think we are looking at this from the street perspective. Public transportation, walking and everything else can co-exisits, look at the US.
    Look at your design too, you have tackled openness, green, day-lit, dwelling, all it needs is efficient electronics that don’t consume electricity too much.

    I like the debate here, hope more people participate.

  17. Hello Mr. Barrak, mashala your blog is very interesting and your posts have opened our eyes to real urbanization from an architectural, engineered point of view, i congratulate you on that. I even used some of your ideas (with reference to your blog of course) for a subject Im currently studying in KU called Intro to Design. ilfikra min ilmada ina we find solutions to problems that have come to our attention, fortunately i have found your blog to be very helpful. I hope you dont mind🙂

  18. Thank you very much, Eng FH for the kind words. Of course, I don’t mind, i’m glad you found what we do useful. I’m curious as to what the problem you faced was and what you decided was the solution.

    Jassem: Yeah, we export most of it, but reducing local consumption means we have MORE to export, no? Or maybe i’m missing something. Or at least we reduce our imports of refined gasoline, but i’m not sure if we still do that.

    Tom: I remember London before the congestion charge and i’ve lived there after; the difference is incredible. But I think the biggest lesson, like you said, was that it was a comprehensive solution. Congestion charge, better and more buses, more taxis, better/cheaper underground, working cameras.

    The comprehensive solution for Kuwait would have to include:

    -Kuwait Metro
    -Reduced gas subsidies
    -Much better pedestrian facilities (safer, cleaner sidewalks, pedestrian traffic lights, access ramps, etc)
    -an RFID system to punish speeding
    -More buses and clear route maps, buses that stick to schedule.
    -Energy rebate system
    -Carpool initiatives

    I don’t think a congestion charge is what we need, but a way to reduce the overall demand for cars. The only fair way to do that is if we provide a viable alternative to driving, which doesn’t exist today.


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