Joining Paris Agreement: Look before you leap

Russia’s ratification of the Paris Agreement on climate change that took place on September 23, 2019, and its subsequent participation in the deal entails long-term risks for the Russian economy and social stability in the country.

The Paris Agreement is an agreement within the United Nations Framework Convention on Climate Change (UNFCCC) that deals with mitigating carbon emissions and preventing temperature from rising above 1.5-2°C starting 2020. The agreement was drafted instead of the Kyoto Protocol and, unlike the latter, has no definite term, which should be taken into account.

The ratification of the Paris Agreement raises legitimate issues, one of which is the need to evaluate the socioeconomic consequences of this step for Russia. Lack of such evaluation coupled with an uncertain political situation caused by the withdrawal from the agreement of several countries, including the United States, Brazil and Turkey, questions the rationale for such speedy ratification of this international document by the Russian Federation. Rushed ratification makes Russia a discriminated party to the agreement that is not only bound by toughest obligations but also has to cope with the worst terms of participation in the world considering the sanction regime.

If we look at the document itself, the current version of the Paris Agreement is not finished because the rules for performing it are still in development. Based on this, it should be noted that the agreement does not meet the criteria set by Russian President Vladimir Putin in 2017:

“We want to wait until the regulation for distributing resources and other purely technical but important provisions are in place.”

The Energy Security Doctrine approved by the President on May 13, 2019, particularly focuses on the threats coming from the country’s involvement in international climate structures. The doctrine fairly states that these structures may become an excuse for discriminating against the Russian fuel and energy industry in international markets. Analysis shows that the Paris Agreement will actually be one of such dangerous international climate structures for Russia as described above and will also create a whole range of risks for the Russian fuel and energy industry and the real economy. Russia’s obligations under the agreement are defined as absolute national emission reductions, which restrict development of the country’s economy and result in excessive financial load onto the fuel and energy sector enterprises, growth in electricity tariffs, and increased fuel prices both for industrial enterprises and all citizens.

As the country with the world’s fourth largest energy industry, Russia is among top greenhouse gas emitters. In case emission restrictions are introduced, Russian companies will have to choose between seeking substantial finances for purchasing new production equipment and reducing production volumes. Russia’s Ministry of Energy is taking an active part in discussing this issue as electrical energy industry is an economic sector with differentiated tariffs. Introducing any new payments for its entities, including carbon tax, will result in overall increase in tariffs for end users. Such solution can lead to drastic negative social and economic effects.

Expert propose a more extensive use of other methods to reduce the greenhouse effect. In particular, due to a program for increasing energy efficiency that has been implemented in the past five years, the overall pollutant emissions in the generating sector have reduced from 2.5 mio tons to 2.1 mio tons. Meanwhile, three years after the Paris Agreement took effect, we have yet to see its efficiency, with a growth in global greenhouse gas emissions reported in the past few years.         

By Gennady Shmal, Deputy Chairman of the Russian Chamber of Commerce and Industry Committee on Energy Strategy Fuel and Energy Development

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