Copenhagen

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Published on October 12, 2007

Author: Kestrel

Source: authorstream.com

Energy Efficiency – Bridge Over Trouble Waters of Unsustainable Development in Russia:  Energy Efficiency – Bridge Over Trouble Waters of Unsustainable Development in Russia I. Bashmakov Stakeholder Dialog on Future Climate Policy Collaboration Copenhagen, 7-8 October 2004 Efficiency and Sufficiency :  Efficiency and Sufficiency “The world has enough for everybody’s need, but not enough for everybody’s grid” (Mohatma Chandi) People invest their whole lives in “building privacy” by going from apartment buildings and public transport to large private houses and personal cars, from economy to business class But then, after kids leave homes, desired privacy turns into loneliness and drives “smiles per hour” down, while energy consumption per person up Both sufficiency and efficiency are driving activity levels, economy structures, as well as environmental impacts and emissions levels Policies to go beyond historical rates of change:  Policies to go beyond historical rates of change Inertia drives consumption patterns and lifestyles, determines the sufficiency levels and a need for efficiency Social structures, collective rules, personal values, institutions, on the one hand, and Society’s physical infrastructure, and the technologies embodied within it, on the other hand, interact with each other and evolve relatively slowly People prefer reproducing established behavioral stereotypes. Some of those stereotypes serve as community identifiction and are evolving much slower then any physical infrastructure elements Ability to go beyond historical rates of change both in changing of consumption patterns and lifestyles, as well as in forcing new technologies penetration depends on a wide range of policy choices and requires major policy changes in areas other than only climate change mitigation policies and measures Abundant technical and behavioural mitigation options do exist. And, under significant pressure, inertia in deploying them can be considerably reduced by effective policies and measures (SR. IPCC). There is no clear indication for preference for any particular policy instrument:  There is no clear indication for preference for any particular policy instrument It is partly due to lack of resources allocated for policy effectiveness monitoring, as well as real difficulty in separating single policy effects from other factors Any given policy outcome is more a function of governance, motivation, risk perception, trust building and mistrust problems, policy implementation design and adequate resources allocation than just policy title per se One example: very weak energy efficiency policy at the federal level in Russia was supported for a decade only verbally, with no clear institutional leadership and no resources allocated It contrasts energy efficiency policies at the regional level, where sufficient policy implementation infrastructure was created Climate mitigation “specific” and “framework” or “background” policies:  Climate mitigation “specific” and “framework” or “background” policies All emission reductions originate at the national level, and thus will be generated by some domestic actions All domestic policies and measures – directly or indirectly – influence emission volumes and patterns There are many “specific” policies targeted to reduce GHG emissions (emissions/carbon/energy taxes, tradable permits, voluntary agreements) There are much more “framework” or “background” policies, which provided very substantial emissions reductions as ancillary benefits Specific climate mitigation policies must be well in line with the framework ones:  Specific climate mitigation policies must be well in line with the framework ones Framework policies not only can have large indirect GHG emissions reduction effect, but also Set the framework, in which specific climate policies could be implemented effectively Sequence and combination of specific measures and structural reforms are important It is hard if possible to allocate direct and indirect emission reduction effects to “specific” and “framework” national policies and measures It is hardly possible to label each ERUs with different policy or color tags Implementation and replication of successful policies requires::  Implementation and replication of successful policies requires: Understanding of capacities to develop and adopt policy to implement policy choices, and to evaluate effectiveness of similar policies under different conditions and timely correct what is wrong Understanding that impacts of similar policies and measures differ widely among countries depending on implementation strategies adjusting policy to social structures, collective rules, personal values, institutions existence of other regulatory policies designed to prevent the undesired effects of free market operation in the presence of externalities, information and coordination problems “Framework” or “background” policies:  “Framework” or “background” policies During the 1990s, many economies in transition, some developed and developing countries, implemented drastic market-oriented reforms, including macroeconomic stabilization packages financial deregulation tax reforms privatization of state-owned enterprises trade liberalization and liberalization of energy markets Measures taken were basically inspired by desires to increase overall efficiency, but they had significant emission implications through their impact on motivation activity levels production structures technology and consumption patterns and energy use About all GHG emissions reductions to the date are fruits of “framework” policies:  About all GHG emissions reductions to the date are fruits of “framework” policies Russia accumulated emission reductions in 1990-2002 equal to 8,400 million t СО2 This is 2.7 times annual EU СО2 emissions, 7 times of that for Japan and 50% over the U.S. annual emission. Such reduction resulted from Russia’s transition path to a market economy and can be attributed not just to GDP decline alone but also for to such policies as: demilitarization deregulation privatization price liberalization demonopolization structural changes switching fuel mix in favor of natural gas energy efficiency improvement activities No single “specific” climate policy can bring as much effect as transition to a market economy Central command planning in 30-50 years makes every economy irrespective of climate and size pregnant with large energy inefficiencies and high carbon intensities! :  No single “specific” climate policy can bring as much effect as transition to a market economy Central command planning in 30-50 years makes every economy irrespective of climate and size pregnant with large energy inefficiencies and high carbon intensities! Law of energy efficiency: the sustainable way to economic prosperity goes along the energy efficiency arch!:  Law of energy efficiency: the sustainable way to economic prosperity goes along the energy efficiency arch! Transition back to a market economy allows decoupling of economic growth and energy consumption:  Transition back to a market economy allows decoupling of economic growth and energy consumption Poland managed to increase its GDP by 46% in 1990-2002 with the decline of TPES by 11% and decline of CO2 emission by 42% Slovak Republic managed to increase its GDP by 18% in 1990-2002 with the decline of TPES by 13% and decline of CO2 emission by 20% Russia reduced GDP energy intensity by 2,3% annually in 2000-2003, but its energy intensity is still above 1990 level Reversing trend to command economy in Russia may have very negative effect on GHG emissions:  Reversing trend to command economy in Russia may have very negative effect on GHG emissions Growing oil and gas revenues lead to the decline of state economic power dependence from the domestic business community and Trend to the centralization of economic descisions is reversing with all inefficiencies embodied in command econmy Political situation in Russia and then general economic policy in much degree is driven by the situation at the world oil market Putins era –reversing centralization Perestroika and political collapse of the USSR Transitio to a market economy Collapse of Soviet economic system Slide14:  Oil and Gas GDP is 30% of Russian GDP in 2004 Russia needs energy export revenues to “pull” its NOGGDP growth, so aggressive energy policy is a must! To keep 2002 oil and gas export levels, while doubling GDP, Russia needs to sustain annual energy productivity growth by 4,8%! If Russia is only able to keep rates of energy productivy improvements achieved in 2000-2003 (2,3%), then achievable GDP growth in 2002-2010 is in the range of 50-70%! Russia: Doubling GDP, Energy Export and Energy Efficiency Russia sold Kyoto Protocol ratification for grits of democracy:  Russia sold Kyoto Protocol ratification for grits of democracy Russian rates of economic growth are function of both: oil and gas export revenues and energy efficiency improvements In any given year there is a minimum required level of oil and gas export (world oil prices sensitive) to financially support the GDP growth in Russia Failure to boost energy efficiency can either: limit domestic energy supply and thus economic growth or reduce export potential and also limit GDP growth rates All possible combinations of oil and gas production volumes, rates of energy efficiency improvemtns, and GDP growth rates in 2002-2012 keeps CO2 emission far below 1990 level Better modeling tools are required to prove it, but Russian Government does not inspire them Growth rates and economic development :  Growth rates and economic development Russia is ranked only 63 by UNDP in human development index (Poland is 35) Sustainable rates of economic growth Desired 7% per year is hardly possible, but Sustainable 4-5% can be achieved GDP growth structure is more important then growth rates Reverse trend to militriazation of the economy (in 2005 Russan Federal budget defence and security allocations are going up by 26-28% while many social programs are shrinking) may bring GDP growth without any development To improve general economic efficiency a number of structural reforms are in the implementation or design stage Success of many those reforms in much degree depends on progress with energy efficiency Energy efficiency still is not recognized by the Russian Government as a policy capable to solve a wide range of country’s economic problems:  Energy efficiency still is not recognized by the Russian Government as a policy capable to solve a wide range of country’s economic problems Energy is waisted mainly where there is no money to invest in energy efficiency Public financing reform Direct and indirect budget expenditures to provide utilities to housing stock and public buildings consume 15-35% of all municipal budgets Public institutions alone spend over 4 billion US$ on utilities Federal government regularly fail to pay about 2 billion US$ to regions and utility companies for services thus aggravating indebtedness problem Metering installation and energy efficiency improvements can bring 6-10 billion US$ relief in budget appropriations Power sector reform Only costs reduction through energy efficiency improvements can make power supplier competitive Only actions to reduce heat loses reverse the process of squeezing CHP power and heat markets niches Price liberalization reform and removing subsidies:  Price liberalization reform and removing subsidies Threshold 2: rigidity of collecting payments actions brings no results Threshold 1: collection rate starts declining   High heat, power and water costs on the background of low incomes in rural areas do not allow for removing cross-subsidies Limits of purchasing power - Bashmakov’s wing Only cost reduction through efficiency improvements can balance costs with purchasing power, keep payment discipline high and utility companies financialy viable Collection rate price elasticity -0,2 -0,4 -1,0 Communal and housing reform:  Communal and housing reform Directly or indirectly 85% of housing and communal services costs are associated with energy and water supply as well as with maintenance of buildings envelopes and in-house utilities infrastructure Substantial investments are needed to rehabilitate the system. Just to improve energy efficiency of district heating systems – 50 billion US$ They can generate at least 10 billion US$ on costs savings Cost reduction (not tariffs escalation) is the only way left to balance consumers purchasing power with operating and investment costs Introduction of competitiveness is possible only when paying disciple for allowances and subsidies from budget and from households is sufficiently high High costs and low profitability of C&H sector keeps private investors at distance Bringing Russian communal services quality in line with present Western European Standards is possible only with application of new energy efficient solutions Other reforms and policies:  Other reforms and policies Privatization Many government and municipal assets have low value and companies running then are not profitable partly due to low energy efficiency So they are sold for little money Social reform Russia spends lower portion of its GDP on education and health care comparing to developed countries But within those allocations 10-40% are paid for utilities, not for education or medical treatment Energy efficiency can significantly (sometimes up to 70%) reduce utility spending and realize funds for improving social services Industrial competitiveness With present high energy intensity Non oil and gas industry cn not compete not only at foreign markets, but at domestic ones as well thus not reducing need in hard currency through import substitution nor by providing additional export revenues So dependence of economic growth from oil and gas stays high and sustainability of growth is declining even in spite of accumulated 20 billion U$ economic stabilization fund Energy efficiency improvement policies and measures:  Energy efficiency improvement policies and measures In most countries, management of energy effiiency imprivement policies and masures is not addressed with a single policy instrument, but with a more or less balanced portfolio of instruments: Legislation and regultion providing administrative and market insentives and setting appropriate programs, insitutional and reporting systems Taxes and subsidies Policies to remove market imperfections and barriers Energy efficiency standars and building codes Finacial instruments Promoting new technologies development and penetration Labelling and other infomational tolls All of them in some degree are applied in Russia, but mostly at regional and local levels with very weak leadership provided by the Federal Governent In the new Federal Governent structure there is no department responsible for energy efivciency Dimensions and timetable of setting a complex institutional, regulatory, and legal frameworks for regional level energy efficiency policies and measures in Russian regions:  Dimensions and timetable of setting a complex institutional, regulatory, and legal frameworks for regional level energy efficiency policies and measures in Russian regions Regional EE Building Codes development and enforcement system timetable (Russia): 10 years to develop and 10 more years to get effects:  Regional EE Building Codes development and enforcement system timetable (Russia): 10 years to develop and 10 more years to get effects It takes political will and time:  It takes political will and time To put in force appropriate “background” policies To develop, coordinate and implement energy efficiency improvement polices To build adequate policy implementation capacity To develop and implement measures and activities motivated or forced by those policies But it brings Development and keeps it sustainable and as a side effect reduces of negative environmental effects and GHG emissions Sets a framework in which specific policies to combat climate change can be effective

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