Ivetta Gerasimchuk. Fossil Fuels – At What Cost? Government support for upstream oil and gas activities in Russia. – Moscow – Geneva; WWF-Russia, Global Subsidies Initiative of the International Institute for Sustainable Development. 2012
The report Fossil Fuels – At What Cost? Government support to upstream oil and gas activities in Russia is aimed at assisting Russia in meeting its Group of Twenty (G-20) and Asia-Pacific Economic Cooperation (APEC) commitment to “rationalize and phase-out over the medium term inefficient fossil fuel subsidies that encourage wasteful consumption.” The first steps in this direction are identification of budget outlays, tax breaks, and other forms of fiscal support for oil and gas extraction and measuring their economic and social efficiency, including integrated costs to the environment and future generations.
WWF-Russia has initiated this first comprehensive inventory of fossil-fuel subsidies in Russia in order to increase transparency of the economic mechanisms that contribute to the growth of greenhouse gas emissions and destruction of natural habitats, especially in the Arctic. In this sense, WWF-Russia follows the same logic that underpins G-20 and APEC commitments to fossil-fuel subsidy reform, but does it from a civil society prospective, advocating a broad debate about the efficiency of any governmental measures that affect the environment and socioeconomic welfare of the people, including over the long term.
WWF-Russia’s goal is for the world to develop an equitable and resilient low-carbon economy by 2050. In accordance with international agreements under the auspices of the United Nations Framework Convention on Climate Change, G-8, G-20 and other international forums, all efforts should be undertaken to keep the global average temperature from increasing by more than 2.0°C (compared to 1850). Fossil fuels are the main source of greenhouse gas emissions driving climate change and posing a threat to many natural habitats and human livelihoods.
In the Arctic, which is highly vulnerable to climate change, WWF-Russia works to preserve the region’s rich biodiversity and to ensure that the use of its natural resources is sustainable. Of late, the Arctic has become the frontier region where Russian oil and gas companies are increasingly expanding their activities.
Meanwhile, WWF-Russia identifies three important gaps that have yet to be closed in order to enable safe development of the Arctic riches: a governance gap, a knowledge and science gap, and a gap in the technical capacity for oil spill response. In view of these gaps, the tax relief schemes discussed in this report incentivize oil and gas companies to carry out projects with extremely high environmental risks offshore and in new areas beyond the polar circle instead of building up “smart” investments into improvements in energy efficiency and oil recovery at existing onshore fields.
Based on the methodology of the Global Subsidies Initiative, this report also explains the cost of Russia’s continued reliance on extraction of oil and gas. In our opinion, the “business-as-usual” approach to the development of the Russian energy sector may no longer be adequate for the current global challenges and Russia’s modernization agenda.
We look forward to a broad discussion of both the report’s findings and future research on its subject matter. We also hope that this report will make a useful contribution to the international body of research underpinning the global reform of wasteful and inefficient subsidies and the wider agenda-sustainable and effective energy in the 21st century.