Russia approves energy strategy to combat warming in the midst of climate summit

Russia has approved a new energy strategy

The government of the country approved by the Order No. 3052-r as of 29 October, 2021 — “Strategy of socio-economic development of Russia with low greenhouse gas emissions until 2050". Federal agencies and state-owned enterprises need to include measures aimed at reducing greenhouse gas emissions in their activity programmes and send the updated programmes to the Ministry of Economic Development of Russia by March 30, 2022. It is also recommended that state corporations and “interested joint-stock companies with state participation” do the same. The organisational plan of the event must be developed within six months.

The strategy was published almost simultaneously with the start of the world climate conference in Glasgow (it will last until November 12) and the summit on November 1-2 with the participation of world leaders. Russia's President Vladimir Putin, as well as China's President Xi Jinping, did not participate in the conference, in particular because “there is no provision for a video link speech” — Russia was represented by a delegation led by Deputy Prime Minister Alexey Overchuk. The conference discussed how to stop global warming. Tatarstan President Rustam Minnikhanov also spoke about the need to develop a set of measures to reduce the carbon footprint, as well as to develop a circular economy involving an increase in the recycling of resources in connection with the planned introduction of the international carbon tax in 2026 in his next annual address in early October.

How the world dealt with greenhouse gases in Kyoto and Paris

The authors of the new Strategy also begin by analysing the international context, noting the fact that global climate change (temperature rise due to an increase in the concentration of greenhouse gases in the atmosphere of the Earth) began in the 1970s, that is, almost half a century ago. Climate change has not stopped, it continues now. Too hot summers and too cold winters for certain climatic zones of, for example, Russia are called by a number of experts among the unpleasant consequences, which is also mentioned in the Strategy).

All this, according to the government, is inevitably associated with irreversible consequences “for anthropogenic and natural systems”, that is, for man and nature. To minimise such risks, it is necessary to adapt the spheres of both public administration and a number of sectors of the economy and, importantly, regional infrastructure.

In the world, serious steps in this direction began to be taken only in the early 1990s, when the UN Framework Convention on Climate Change was adopted, and continued in Kyoto in 1997 with the adoption of the so-called “Kyoto Protocol”. The Protocol obliged to “limit or reduce greenhouse gas emissions” in the first commitment period from 2008 to 2012, or for the signatories of the special Doha Amendment, from 2013 to 2020.

The next stage was only the adoption of the Paris Agreement in 2015. The parties decided what to do after 2020 and adopted the “long-term temperature target”: It consisted in keeping the increase in global average temperature well below 2 degrees Celsius above pre-industrial levels and in making efforts to limit the temperature increase to 1,5 degrees Celsius.

Disadvantages of climate change

Russia was a party to all of these agreements. And, according to the government of the country, within the framework of the Kyoto Protocol, Russia even exceeded its obligations to limit anthropogenic greenhouse gas emissions. The thing is that our state was forced to do this not even because of the signed protocols, but because of its geographical location: “Average annual temperatures are rising in all physical and geographical regions and federal districts. The highest rate of increase in the average annual temperature is observed on the coast of the Arctic Ocean.”

Moreover, even if you have never been and will not visit the coast of the ocean or Lake Baikal, climate change will affect you not only by the intense heat and polluted air of large cities. It leads to degradation of various ecosystems due to changes in thermal and humidity conditions: and this affects not only the degradation of mountain glaciation, but also the accelerated aging of buildings. Tellingly, the government of the Russian Federation decided on a “global energy transition” (the transition of energy from generation based on hydrocarbons and other fuels to carbon-free energy resources and resources with low greenhouse gas emissions), even despite certain advantages that climate change can bring. This is not only and not so much an increase in the navigation period in the waters of the Northern Sea Route, but also a reduction in the duration of the heating period and an increase in crop production productivity.

There are simply more disadvantages. For 10 years, from 2008 to 2018, the volume of anthropogenic greenhouse gas emissions in the world grew by 1,5% annually, reaching 55 billion tonnes of “carbon dioxide equivalent”. Up to 80% of this emission was accounted for by the Group of 20 countries. Over 30 years, the mass of global greenhouse gas emissions has increased by 1,5 times, and in developing countries (including Russia) — by 2-4 times in general. 43% of all emissions are accounted for by China, the USA, EU countries, India, Russia, Japan, Brazil and Indonesia.

At the same time, the Strategy of the Government of the Russian Federation states that if the increase in annual greenhouse gas emissions increases in China, India, the USA and Canada, then in Russia, along with the European Union, it falls. The main reason for the latter was the so-called “targets for limiting greenhouse gas emissions” — they are achieved by achieving a balance between anthropogenic greenhouse gas emissions and their absorption, more simply — by achieving carbon neutrality.

Abrupt transition to “green energy course”

Achieving such carbon neutrality is being done not only at the level of national and international economies, but also at the level of transnational corporations (TNCs). TNCs are adopting their own development strategies to reduce greenhouse gas emissions, increase renewable energy consumption, and increase energy efficiency. Other active participants in the fight against climate change are the cities that have also declared their readiness to achieve carbon neutrality not even by the 2050s and 2060s, but by the 2025-2040s. Although cities of developed countries, such as Stockholm, Helsinki, Copenhagen, are mainly mentioned among them, but Moscow and Rostov-on-Don, for example, participate in the Global Covenant of Mayors for Climate & Energy.

The new world summit in Glasgow is taking place against the backdrop of the unfolding energy crisis in the same European Union (as well as in the USA and a number of Asian countries), the reason for which was the same green agenda or “Green Course”, according to which many coal-fired power plants were actively closed in the countries, and the gas market was deregulated. The price of gas repeatedly eventually “broke through the ceiling”— the suppliers, including Russia, simply did not have time and could not manage to meet the growing needs of EU countries and companies in energy (even gas, even coal) due to the pandemic, and wind farms and other green technologies could not ensure the stability of supplies of the required volumes.

One of the reasons for the energy crisis was the course to ban the sale (use) of carbon-intensive products. On the other hand, some countries announced plans to introduce standards limiting the level of greenhouse gas emissions for cars, which could lead to a reduction in the use of internal combustion engines (Norway, Denmark, Great Britain, Spain, France, China, Germany). However, long queues for gasoline at filling stations in the same UK, as in a number of US states, showed that a sharp transition to the green energy is fraught with a serious blow to businesses and public safety. Even during the pandemic, when there would seem to be the demand for fuel and energy (as well as for transport and logistics services) could help with the introduction and especially with following environmental standards.

Russia has chosen a more “soft policy”

It is against the background of the latest crisis and the new summit that the strategy of the Russian authorities in this matter is particularly interesting: it is a “soft policy”. And there is nothing surprising here — for the Russian economy, a sharp transition to green energy can create serious risks, given its oil and gas and petrochemical direction. Taking this into account, the authors of the Strategy write, as well as the real need to ensure energy transition and reduce greenhouse gas emissions into the atmosphere, incentives and conditions are needed to reorient capital flows to finance sustainable environmental, social and economic development of the country, “as well as the adaptation of financial market participants to new types of risks in the transition to an economy with low greenhouse gas emissions”.

It is worth noting here that a separate factor in the destabilisation of the EU energy market this autumn was speculative gas trading on the stock exchanges due to the rejection of European politicians from the principles of natural gas monopolies: “Only free trade in small volumes of gas supplied through gas pipelines that are independent of gas suppliers”, the EU insisted.

It is obvious that it is impossible to do without strict financial regulation in this area within the framework of the global energy transition. This will also make it possible to verify green projects for sustainable and transitional ones, according to the government of Russia. Among such projects, the Strategy identifies hydrogen and nuclear power, cleaner technologies based on natural gas using hydrogen and methane-hydrogen mixture. Not to mention the utilisation or processing of carbon dioxide and electrification of transport (the latter project is being actively implemented in Tatarstan).

The only possible scenario is cogeneration, construction of nuclear power plants and hydroelectric power plants

The Strategy defines measures to ensure by 2030 a reduction in greenhouse gas emissions by up to 70% relative to the 1990 level. In theory, this should be helped by the general stagnation of the world economy (which, as is known, began even before the pandemic) due to the growing debt burden in developed and developing countries, the slowdown in world trade growth, including due to the growth of global protectionism.

According to the government of the country, by 2050 the growth rate of the world economy is going to fall to 2-2,5%. At the same time, the Russian authorities, through the implementation of the new energy strategy, want to achieve sustainable growth above the global average by at least 3%. To do this, we could implement one of two scenarios for energy transfer: inertial (conditionally conservative and cautious) or intensive. The inertial one, of course, implies the implementation of only decisions already taken to achieve national goals and objectives of sectoral strategic planning documents. This also implies the preservation of the current economic model, “including the preservation of the balance structure for energy production and consumption”. The problem is that such scenario, in principle, will not allow achieving carbon neutrality. The intensive scenario, called “targeted” in the new energy strategy, assumes, on the contrary, the introduction of modern technologies to reduce greenhouse gas emissions, first of all.

Secondly, the decarbonisation of economic sectors will require additional measures such as the development of combined heat and electricity generation (cogeneration), the consistent construction of nuclear power plants, hydroelectric power plants and other renewable energy sources. At the same time, thirdly, the burden will also fall on the coal industry, where in order to reduce greenhouse gas emissions, a complete transition to “the best available technologies, support for innovative and climate-efficient coal burning technologies” will be required.

Otherwise, the level of net greenhouse gas emissions and the subsequent deterioration of climatic and environmental conditions by 2050 will be higher than European ones (from 2030 to 2050, emissions will increase from 1,7 billion tons to almost 2 billion tonnes of carbon dioxide equivalent). Even if outdated equipment is replaced and worn-out housing stock is removed, while replacing outdated coal-fired thermal power plants with power units based on natural gas and other renewable energy, economic growth in Russia will slow down (at least due to a decrease in mining, which will inevitably hit the federal budget). And there will be no tangible additional effects in the form of a reduction in the growth rate of emissions by 2050, the authors of the Strategy, who ultimately advocate an intensive scenario, assure: the effect of the loss of part of energy exports simply cannot be compensated by the expansion of non-energy exports, and there will not be enough incentives for businesses to switch to low-carbon technologies.

Why cogeneration and replacement of boiler houses are needed

The target (intensive) scenario, according to the authors of the Strategy, ensures mutual coordination, firstly, of the goals of the international climate agenda to reduce greenhouse gas emissions, secondly, of the country's economic capacities to switch to technologies with low greenhouse gas emissions, and, finally, thirdly, ensuring national interests of socio-economic development. Based on this, such scenario provides not only for the mandatory possibility of each country participating in the Paris Agreement to independently determine the trajectory of reductions and national contribution to the collective goal, but also, most importantly, technological neutrality of measures, that is, non-discrimination of the results of reductions and acquisitions, including from nuclear and hydropower projects.

What this means in practice in relation to the Russian energy sector, apart from the obvious intentions to reduce the carbon footprint, can be seen from the detailed enumeration of the main tools, and this is the inevitable replacement of boiler houses. As a result of the development of combined heat and electricity generation, low-efficiency facilities will be “everywhere” replaced by cogeneration facilities that jointly generate electric and thermal energy. Kazan residents should be familiar with such technologies, given the construction of new facilities at Kazan CHP-1 (Tatenergo) using General Electric gas turbines — the installation allowed it to be widely used in power generation, district heat supply and industrial cogeneration.

At the same time, the works in cogeneration mode (generally considered one of the most environmentally friendly technologies that meet the requirements for reducing the carbon footprint in manufactured products and the provisions of the Paris Climate Treaty) are conducted by TAIF Group and TGC-16, which has two stations on its balance sheet: Kazan CHPP-3 and Nizhnekamsk CHPP (PTK-1).

In particular, back in 2017, a power unit was installed at the Kazan CHPP, based on a GE 9HA.01 gas turbine. By the way, even within the framework of this year, it was to the closure of inefficient boiler houses and the generation of thermal energy in Kazan in the cogeneration mode that the report of Almaz Latypov, the head of the technical department of TGC-16 JSC, was dedicated to at the meeting of the Scientific and Technical Council of the Ministry of Industry and Trade of the Republic of Tatarstan on the development of the energy complex of Tatarstan. Now combined generation accounts for two-thirds of the capacity or 2,5 thousand Gcal/h out of 6,8 thousand.

Growth rate of the Russian economy may be up to 3% a year

The authors of the new energy strategy believe that the growing demand for electricity is provided by steam generation with low greenhouse gas emissions, as well as the generation of nuclear power plants, hydroelectric power plants and renewable energy sources. At the same time, in 2031-2050 — it is during this period that the main changes in the Russian energy sector will occur — transport will be electrified, greenhouse gases will be disposed of or processed, and in metallurgy and chemical industry, where coal is largely used, technologies will be introduced (including those fixed by law, and it will not be possible to bypass them in theory) using hydrogen.

However, while this is on paper so far, the authors of the Strategy admit that replacing natural gas with hydrogen in industry still “requires research and the creation of the necessary infrastructure”. As a result, the share of post-industrial industries in Russia by 2050 will grow by almost 12% by 2020, and “traditional” industries will reduce their share in GDP by 9,4%. And annual growth rate of the Russian economy in 2031-2050 should be up to 3% a year, with an inevitable decline to 2,8% by 2050 (see about the global stagnation of the economy above). In response, annual cumulative investments in reducing greenhouse gas emissions from 1% to 2% will lead to a reduction in gross emissions by 910 million tonnes of carbon dioxide equivalent by 2050 more than under the inertial scenario.

Additionally, this will create full-fledged new industries, in particular hydrogen energy and electric transport. It will reduce the carbon intensity of the Russian economy by half — to the level of the leading countries, and will also lead to the principle of a closed-cycle economy.

How new energy strategy will affect energy, industry and housing and communal services

Most of all, the new Strategy will affect the production and distribution of electric and thermal energy, industry and housing and communal services. It is these industries in the Russian Federation that account for the largest volume of consumption of fuel and energy resources (oil, gas, coal, and so on). This means that these industries will inevitably experience an increase in the impact of state policy measures in the field of energy conservation. New measures of financial and tax policy await them — and companies themselves are expected to provide public non-financial reporting on the implementation of the above steps — including, for example, disclosure to consumers of information about the origin of electricity and its “carbon footprint”.

On the other hand, state support for the introduction of carbon-free technologies await the same sectors. In particular, the energy sector — for replacing part of the coal generation with carbon-free and low-carbon, and separately the oil-producing industry — for increasing the volume of associated petroleum gas utilisation. The energy industry will also be required to reduce losses in electrical and thermal networks to ensure cost-effectiveness of work . The introduction of strict energy efficiency requirements for new residential, public and industrial buildings — to reduce the size of energy resources used during the operation of the building (as well as the decommissioning of worn-out funds) — await construction sector and housing and communal services. As well as the need to involve solid fuel combustion waste generated at energy facilities (ash and slag mixtures, fly ash, slags) into economic turnover, use them in the construction of buildings and roads, land reclamation and restoration of disturbed territories.

What awaits industrial production

As for industry, local businesses in various industries — from metallurgy to chemical — are facing difficult times, the list of events that will directly affect them is one of the longest (even if we do not take into account the problematic replacement of natural gas with hydrogen and the obvious tightened environmental requirements). From an elementary increase in the “service life of devices and products in order to reduce the need for material and energy resources for the production of new one” and the need to use waste wastewater in a closed system — to an attempt to switch to a fuel that emits less greenhouse gas during combustion in the chemical industry and the introduction of new catalysts.

Now the spent power equipment will be forced to be disposed of (returning spent non-ferrous and ferrous metals to the economy), and wet cement production will be reduced. Each such measure has a decent economic, not just an environmental component, most often it rests on energy costs. A simple example of the production of “wet” cement, “a method that is used when the properties of the components do not allow the use of a dry method (more economical and rational)". So, for cement-burning process, “rotating long furnaces are used here, in which heat exchange devices are built in” — whereas similar furnaces for drying sand in the production of dry building mixes are used “of a smaller size”.