Evalutaion of Mitigation / Adaptation policy portfolios for … Russia.pdf · Sector Technological options Policy instrument CEI Mean CEI Energy management Performance standards (energy

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Author: Prof. Alexander ILYINSKY

Financial University of Technology

Co-authors: Dr. Popi KONIDARI, Anna FLESSA M.Sc.

National and Kapodistrian University of Athens - Energy Policy and Development Centre

Moscow, 2013

PROMITHEAS-4: “Knowledge transfer and research

needs for preparing mitigation/adaptation policy portfolios”

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This document is part of the relevant report prepared for the FP7 funded project

“PROMITHEAS-4: Knowledge transfer and research needs for preparing

mitigation/adaptation policy portfolios”, coordinated by Prof. Dimitrios

MAVRAKIS, Energy Policy and Development Centre (Greece). The whole report

contains twelve (12) documents for each one of the emerging economies that

participate in the project: Albania, Armenia, Azerbaijan, Bulgaria, Estonia,

Kazakhstan, Moldova, Romania, Russia, Serbia, Turkey and Ukraine.



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CCOONNTTEENNTTSS

Contents.........................................................................................................................5

List of Tables .................................................................................................................5

List of Figures ...............................................................................................................5

Abbreviations.................................................................................................................6

Abbreviations.................................................................................................................6

Assessment of the scenarios for Russia, through the multi - criteria method AMS...7

General comments .............................................................................................................. 7

Required data ...................................................................................................................... 7

Assignment of grades.......................................................................................................... 8

Results ................................................................................................................................ 25

References.......................................................................................................................... 27

Conclusions .................................................................................................................29

LLIISSTT OOFF TTAABBLLEESS

Table 9: Total emissions for the country. ______________________________________________7 Table 10: Emissions per sector for the country. _________________________________________7 Table 11: Other environmental effects for the country under each scenario, _________________8 Table 12: Water use for cooling (Energy sector). ________________________________________8 Table 13: Mean CEI for each sector depending on the policy instruments of the BAU scenario. 10 Table 14: Mean CEI for each sector depending on the selected policy instruments of the OPT

scenario. ___________________________________________________________________11 Table 15: Mean CEI for each sector depending on the selected policy instruments of the PES

scenario. ___________________________________________________________________13 Table 16: Overall cost efficiency for the three scenarios._________________________________15 Table 17: Equity measurement. _____________________________________________________18 Table 18: AMS results for each scenario. _____________________________________________26

LLIISSTT OOFF FFIIGGUURREESS Figure 33: ClimAMS-2012.....................................................................................................................8 Figure 34: Environmental performance of the scenarios....................................................................9 Figure 35: Political acceptability.........................................................................................................18 Figure 36: Feasibility of implementation............................................................................................25 Figure 37: Final grades. .......................................................................................................................25



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AABBBBRREEVVIIAATTIIOONNSS AAU Assigned Amount Unit

BAU Business As Usual

CHP Combined Heat and Power

CERs Certified emission reductions

CIS Commonwealth of Independent States

DHE Dangerous Hydrometeorological Events

EBRD European Bank on Reconstruction and Development

EPC Energy Performance Certificates

ERUs Emission Reduction Units

ESCO Energy Services COmpany

FAO Food and Agriculture Organization of the UN

FDI Foreign Direct Investment

GCM Global Circulation Models

GDP Gross Domestic Product

GFM German Marshall Fund

GIS Green Investment Scheme

GHG Greenhouse Gas

IEA International Energy Agency

IFC International Finance Corporation

IPCC Intergovernmental Panel on Climate Change

JI Joint Implementation

LULUCF Land Use, Land Use Change, Forestry

M/A Mitigation/Adaptation

NC National Communication

NEFCO Nordic Environment Finance Corporation

OECD Organisation of Economic Cooperation and Development

OPT Optimistic

OSCE Organization for Security and Co-operation in Europe

PCA Agreement on Partnership and Cooperation

PDD Project Design Documents

PES Pessimistic

RAO UES Unified Energy System of Russia (RAO-UES

REA Russian [Federal] Energy Agency

RES Renewable Energy Sources

RES-e Electricity produced from Renewable Energy Sources

RF Russian Federation

RMUs Removal Units

RSEFP Russia Sustainable Energy Finance Programme

RUR Rublies

TPP Thermal Power Plant

UN United Nations

UNCTAD United Nations Conference on Trade and Development

UNDP United Nations Development Programme

UNECE United Nations Economic Committee for Europe

UNEP United Nations Environmental Programme

UNFCCC United Nations Framework Convention on Climate Change

WMO World Meteorological Organization

WTO World Trade Organization

WWF World Wildlife Fund



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The three scenarios have been assessed trough the multi criteria method AMS. This method is combines three multi-criteria methods: Analytical Hierarchy Process (AHP), Multi-Attribute Utility Theory (MAUT) and Simple Multi-Attribute Ranking Technique (SMART) (Konidari and Mavrakis, 2007; 2006). AMS is developed for evaluating climate policy instruments (PI) or relevant Policy Mixes (PM) and with suitable modification for evaluating their interactions as well. Three criteria are applied in AMS – environmental performance, political acceptability, and feasibility of implementation. Evaluation results for each criterion are reviewed below.

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The LEAP model provides the following outcomes for all three scenarios:

Table 1: Total emissions for the country.

Total GHG emissions (in MtCO2eq) Scenario

2000 2020 2050

BAU 1272,7 2196,4 4318,9

OPT 1272,7 2016,9 4080,8

PES 1272,7 2116,3 4213,3

Table 2: Emissions per sector for the country.

Scenario GHG emissions (in MtCO2eq)

2000 2020 2050

Households

BAU 154,3 169,5 518,8

OPT 154,3 115,7 450,6

PES 154,3 143,3 488,4

Agriculture BAU 20,0 19,3 59,2

OPT 20,0 18,6 58,6

PES 20,0 19,0 58,8

Other Services BAU 44,3 107,6 329,4

OPT 44,3 78,3 300,1

PES 44,3 96,8 318,6

Industry BAU 143,6 245,3 751,0

OPT 143,6 230,8 733,4

PES 143,6 238,1 742,4

Transport BAU 187,8 353,5 1082,3

OPT 187,8 282,3 979,4

PES 187,8 317,1 1030,1

Electricity generation

BAU 357,9 482,8 759,7

OPT 357,9 473,0 740,6

PES 357,9 483,6 756,3

Heat generation

BAU 17,0 15,3 15,3

OPT 17,0 15,1 14,9

PES 17,0 15,3 15,2



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Table 3: Other environmental effects for the country under each scenario,

Scenario Million Metric Tonnes CO2 eq

2000 2020 2050

Environmental effects (Carbon Monoxide (CO)- Nitrogen Oxides (NOx)- Non Methane Volatile

Organic Compounds- Sulfur Dioxide)

BAU 23,4 42,4 127,2

OPT 23,4 31,4 111,5

PES 23,4 36,8 119,0

Table 4: Water use for cooling (Energy sector).

Billion cubic meters Scenario

2000 2020 2050

BAU - - -

OPT - - -

PES - - -

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The software ClimAMS-2012 is used (Fig. 33) for the evaluation of the scenarios.

Figure 1: ClimAMS-2012.

Criterion 1: Environmental performance

Direct contribution to GHG emission reductions: For this sub-criterion, the outcome of LEAP for the total expected GHG emissions in year 2020 are used (Table 9). The scenario with the fewer amounts of emissions has the best performance for this sub-criterion. Negative values are inserted to the software.



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Indirect environmental effects: The total amount of the total environmental effects provided by LEAP (Table 11) is used to assess the sub-criterion. Negative values are inserted to the software.

As a next step, the 2020 data is entered in ClimAMS (with negative value) to calculate respectively the direct effect on GHG emissions and indirect environmental effects.

Figure 2: Environmental performance of the scenarios.

Criterion 2: Political acceptability

Cost efficiency: For the first sub-criterion the mean CEI for each sector was calculated depending on the policy instruments that were under each scenario (tables 13,14 and 15). Each value was multiplied with the respective amount of GHG emission reductions that were estimated by LEAP outcomes. For measures that concern adaptation additional calculations were done.

PROMITHEAS-4: “Knowledge transfer and research needs for preparing mitigation/adaptation policy

portfolios”

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Table 5: Mean CEI for each sector depending on the policy instruments of the BAU scenario.

Mitigation

Scen. Sector Technological options Policy instrument CEI Mean CEI

Energy management Performance standards (energy efficiency standards, energy audits, energy service contracts) (Law No. 261-FZ/23-11-2009; Government Order No. 1830-p/1-12-2009; Decree No. 636/18-8-2010)

-5,75

Energy efficient appliances Energy labeling for appliances (Law No. 261-FZ/23-11-2009) -2,5

Energy management Dissemination policy instruments - Behavior change (Information and education plan) (Law No. 261-FZ/23-11-2009)

-0,25

Buildings

Energy management Financial policy instruments – Subsidy (Tax credits) (Law No. 261-FZ/23-11-2009)

-0,75

(-5,75-2,5-0,25-0,75)/4 = -2,318

Industry GHG emission reduction Tradable permits (JI) (Orders of the Government of the RF No. 215-p/20-2-2006; No. 278-p/1.3.2006; No. 444/20-12-2007; No. 884-r/27-7-2009; Resolutions No. 422/30-11-2007; No. 424/30-11-2007; No. 843/28-10-2009)

-0,5 -0,5

Transport Emission standards Technological standards (Euro 3-4-5, standards) (Law No. 41-FZ, 25-4-2002)

0,5 0,5

GHG emission reduction Tradable permits (JI) (Orders of the Government of the RF No. 215-p/20-2-2006; No. 278-p/1.3.2006; No. 444/20-12-2007; No. 884-r/27-7-2009; Resolutions No. 422/30-11-2007; No. 424/30-11-2007; No. 843/28-10-2009)

-0,5

Promotion of RES technologies Financial policy instrument - Subsidy (Premium scheme) (Federal Law No. 250-FZ/4-11-2007; Order No. 1166-r/18-8-2009)

-0,25

Promotion of RES technologies Regulatory standards (Certificate) (Federal Law No. 250-FZ/4-11-2007; Decree of the Government of the Rf No. 426/3-6-2008; Order No. 187/17-11-2008)

-0,75

BA

U

Energy

GHG emission reduction Technological or design standards (Resolution No. 410/1-7-2005)

+1,25

(-0,5-0,25-0,75+1,25)/4 = -0,063

Adaptation - - - -


portfolios”

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Table 6: Mean CEI for each sector depending on the selected policy instruments of the OPT scenario.

Mitigation


Energy management Performance standards (energy efficiency standards, energy audits, energy service contracts, energy passport) (Law No. 261-FZ/23-11-2009; Government Order No. 1830-p/1-12-2009; Decree No. 636/18-8-2010)

-5,75


Energy efficiency Energy efficienct lighting (Law No. 261-FZ/23-11-2009) -2,5

Energy management Dissemination policy instruments - Behavior change (Information and education plan) (Law No. 261-FZ/23-11-2009)

-0,25

Buildings

Energy management Financial policy instruments – Subsidy (Tax credits, subsidies-proposed) (Law No. 261-FZ/23-11-2009)

-0,75

(-5,75-2,5-2,5-0,25-0,75)/5 = -2,875


-0,5

Energy management Dissemination policy instruments - Behavior change (Proposed)

-0,25

Industry

Energy management Financial policy instruments (Proposed) (Tax excemptions, subsidies)

-0,5

(-0,5-0,5-0,25)/3 = -1,25/3 = -0,416

Emission standards Technological standards (Euro 3-4-5, standards) (Law No. 41-FZ, 25-4-2002)

0,5

Energy efficiency Performance standards (Transport management) (Proposed) 0,5

Enery management Dissemination policy instruments - Behavior change (Proposed) (Ecodriving, change of transport mode)

-0,25

Fuel switch Support for biofuels (Proposed) 0,25

Transport

Energy management Energy efficient vehicles (Proposed) -1,75

(0,5+0,5-0,25+0,25-1,75)/5 = -0,15


-0,5

OP

T

Energy

Promotion of RES technologies Financial policy instrument - Subsidy (Premium scheme – -0,25

(-0,5-0,25-0,75+1,25-0,25)/5 = -0,10


portfolios”

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capacity based scheme) (Federal Law No. 250-FZ/4-11-2007; Amended “Electricity Law/6-12-2011; Order No. 1166-r/18-8-2009)


-0,75

Energy management Financial policy instruments (Proposed) (Tax excemptions, subsidies)

-0,25

GHG emission reduction Technological or design standards (Resolution No. 410/1-7-2005; Government Decree, 2009)

+1,25

Agriculture GHG emission reductions Subsidies (Proposed) -1 -1

Adaptation Water management Subsidies (Proposed) -1/6 Agriculture

Land management Dissemination policy instruments (Awareness campaign) (Proposed)

-1/6

(-1/6-1/6)/2 = -1/6

Land management Regulatory policy instruments (Proposed) -1/6 Foresty

Others Regulatory policy instruments (Proposed) -1/6

(-1/6-1/6)/2

Households - Industries

Water management Regulatory policy instruments (Fees)(Proposed) -1/6 -1/6


portfolios”

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Table 7: Mean CEI for each sector depending on the selected policy instruments of the PES scenario.

Mitigation


Energy management Performance standards (energy efficiency standards, energy audits, energy service contracts, energy passport) (Law No. 261-FZ/23-11-2009; Government Order No. 1830-p/1-12-2009; Decree No. 636/18-8-2010)

-5,75


Energy efficiency Energy efficienct lighting (Law No. 261-FZ/23-11-2009) -2,5

Buildings

Energy management Financial policy instruments – Subsidy (Tax credits, subsidies-proposed) (Law No. 261-FZ/23-11-2009)

-0,75

(-5,75-2,5-2,5-0,75)/4 = -2,875


-0,5 Industry

Energy management Financial policy instruments (Proposed) (Tax excemptions) -0,5

(-0,5-0,5)/2 = -0,5

Emission standards Technological standards (Euro 3-4-5, standards) (Law No. 41-FZ, 25-4-2002)

0,5

Energy efficiency Dissemination policy instruments - Behavior change (Proposed) (change of transport mode)

-0,25

Fuel switch Support for biofuels (Proposed) 0,25

Transport

Energy management Energy efficient vehicles (Proposed) -1,75

(0,5+0,5+0,25-1,75)/4 = -0,313


-0,5

Promotion of RES technologies Financial policy instrument - Subsidy (Premium scheme – capacity based scheme) (Federal Law No. 250-FZ/4-11-2007; Amended “Electricity Law/6-12-2011; Order No. 1166-r/18-8-2009)

-0,25


-0,75

PE

S

Energy

GHG emission reduction Technological or design standards (Resolution No. 410/1-7- +1,25

(-0,5-0,25-0,75+1,25)/4 = -0,063


portfolios”

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2005; Government Decree, 2009)

Agriculture GHG emission reductions Subsidies (Proposed) -1 -1

Adaptation Agriculture Water management Subsidies (Proposed) -1/6 -1/6

Land management Regulatory policy instruments (Proposed) -1/6 Foresty

Others Regulatory policy instruments (Proposed) -1/6

(-1/6-1/6)/2

Households - Industries

Water management Regulatory policy instruments (Fees)(Proposed) -1/6 -1/6

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Table 8: Overall cost efficiency for the three scenarios.

Mitigation/Adaptation Cost (pseudo-monetary units)

Buildings Agricultur

e Industry Transport

Energy Total Scen.

M A M A M A M A M A

BAU 0 0 0 0 0 0 0 0 0 0 0

OPT -238,9 0 -0,7 0 -6,032 0 -10,68 0 -0,620 0 -256,9

PES -106,4 0 -0,3 0 -3,600 0 -11,39 0 -0 0 -121,7

For dynamic cost efficiency, there are no available data from LEAP so the SMART procedure is used. RES technologies according to the potential that the country has (described in a previous session) are promoted mostly in the OPT scenario compared to the other two scenarios.

In BAU scenario, RES technologies are not promoted because of (IFC, 2011 – Russia):

- the lack in: i) competitiveness between RES and traditional fossil fuels in the current market environment; ii) a legal and regulatory framework to stimulate the use of RES in the electricity sector; iii) federal and regional RES support programmes; iv) the necessary infrastructure for the successful development of RES-E; v) appropriate information, including information about available RES and reliable data about the results of implemented projects; vi) the necessary regulatory, technical and methodological documentation and software for the design, construction and operation of renewable energy generating facilities

- institutional and regulatory barriers;

- the inadequate level and quality of scientific support; and

- inadequate human resources.

Although in Western countries lighting control systems and electronic ballasts for linear fluorescent lamps are widely used, they are almost absent from the Russian market (Pacific Northwest – National Laboratory, 2012). Therefore, the dominance of inefficient and outdated lighting technologies leads to in highly inefficient energy use patterns and vast energy saving potential (Pacific Northwest – National Laboratory, 2012). It is indicative that in public buildings only, the power demand for lighting is approximately three times higher than that of the Organization for Economic Cooperation and Development (OECD) average (Pacific Northwest – National Laboratory, 2012).

For energy efficiency implementation in Russia the main problems that prevent its adoption are linked with the lack of (Pacific Northwest – National Laboratory, 2012; UNDP, 2009; European Commission, 2009): i) motivation; ii) knowledge and information; iii) funding and long-term investments; and iv) organization and coordination. Additionally, the BAU policy portfolio is characterized by weak and inadequate legal framework, weak relationships between the federal level and regions and weak monitoring mechanisms 1 (European Commission, 2009).

The situation in BAU reflects the fact that the country has low rates of technological adoption (137th in the world) (World Economic Forum, 2013). It is indicative that Research and Development accounted for only 3% of the total investment in terms of FDI projects (Ernst & Young, 2012b).

Research on energy efficiency is supported by Two Federal Targeted Programs, the “Research and Development in Priority Areas of Science and Technology Complex of Russia 2007-2012” and “National Technological Basis for the period 2007-2011” (Asia Pacific Energy Research Centre, 2012; Ministry of Energy of the RF, 20132). Both programs contain

1 Extended territory of RF requires the vertical management system, which includes at least three levels – federal, regional, municipal (European Commission, 2009) 2 http://minenergo.gov.ru/activity/vie/

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tasks and measures related to appropriate research and development activities3 (including on energy saving) in the Russian economy. 18 projects are implemented on the commercialization of these technologies on the basis of extrabudgetary resources in funding over 10 billion. rubles (Ministry of Energy of the RF, 20134). Furthermore, there are private research institutes and organisations engaged in research on improving energy efficiency and energy saving in various sectors of the Russian economy, such as the Center for Energy Efficiency (CENEF), the Sustainable Energy Development Center (ISEDC), the Institute of Energy Strategy (IES), and others (Asia Pacific Energy Research Centre, 2012). However, R&D for new technologies and agro-industry products is still lacking (FAO, 2012b). Also, the vast availability of fossil resources in the country did not offer incentives to increase energy efficiency technologies or the deployment of RES (UNECE, 2010). In combination with the absence of clear political for this direction, the awareness in the public and private sector for such technologies will develop very slowly (UNECE, 2010).

Due to the proposed policy instruments of the OPT policy portfolio, energy efficiency and RES technologies are more supported not only for the market, but also for research activities as well. Even if in the PES policy portfolio the priority is the attractiveness of investments in the Russian energy sector and not mitigating GHG emissions the situation is improved compared to the BAU policy portfolio, but less compared to OPT because of the absence of any official intension to promote RES (see session “Main characteristics of policy portfolio” for PES). The assigned grades are: BAU – 5, OPT – 7, PES – 6.

For competitiveness there are no available results from LEAP, therefore the SMART procedure is used. During 2011, the global Foreign Direct Investments (FDI) increased by 16% despite the economic and financial crisis, exceeding the pre-crisis level (Ernst & Young, 2012b). For the same year the Russian inflow of FDI increased by 22%5 due to the continued growth of local consumer markets and manufacturing opportunities which motivated investors according to the United Nations Conference on Trade and Development6 (UNCTAD) (Ernst & Young, 2012b). On the other hand there were investors (62%) that were discouraged due to the political, legislative and administrative environment of Russia7, while other considered as less attractive the infrastructure and the limited incentives for sustainable development (Ernst & Young, 2012b).

Approximately 39% of investors expect the mining, oil and gas sector to attract the most FDI in the next two years (Ernst & Young, 2012b). This is reasonable since there is an extremely tight correlation between oil prices and the Russian GDP, resulting to the strong dependence of national economy on the energy sector for economic growth (World Economic Forum, 2013). Additionally, the ountry is characterized by investors as a key global energy player and a large market (Ernst & Young, 2012b). 20% of the investors place next the information and communication technologies, followed by energy and utilities, agriculture, consumer goods and automotive (Ernst & Young, 2012b).

There are opportunities for foreign investors in investments concerning RES and energy efficient technologies, but they are not so attractive compared to other countries (Ernest & Young, 2012). One possible reason is that energy prices in Russia are low compared to international ones, specifically for heat and natural gas, not providing incentives to save

3 More specifically their primary objective is business involvement in co-funding of activities aimed at the development and introduction of high-performance, resource-saving technologies and new forms of energy (http://minenergo.gov.ru/activity/vie/ and http://minenergo.gov.ru/upload/iblock/9ef/9ef9b992ebdce9acd3455f396c031433.pdf 4 http://minenergo.gov.ru/activity/vie/ 5 Although Russia led Central and Eastern Europe at attracting FDI, its number of FDI projects declined by 36% in 2011, but job creation grew by 4% for the same year (Ernst & Young, 2012b). 6 the growth is attributed to its agreement to join the WTO from mid-2012, to the fact that the country that does not have any capital flow restrictions and to a new round of privatizations (Ernst & Young, 2012b) 7 the following activities are characterized by investors as complex and costly: getting electricity, dealing with construction permits and trading across borders (Ernst & Young, 2012b).

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energy or returns to attract new investment (Pacific Northwest – National Laboratory, 2012; OECD/IEA, 2005). Average prices for residential consumers and government agencies were in 2003 at 2,3 US cents/kWh; for industrial users at about 2,5 US cent/kWh (OECD/IEA, 2005). For comparison, the average prices in IEA countries in 2002 were about 11,4 US cents/kWh for residential consumers and for large industrial users at 5,9 US cents/kWh (OECD/IEA, 2005). If residential tariffs were to be made fully cost-reflective, they would have to be 25% to 40% higher than industrial tariffs (OECD/IEA, 2005).

A second reason was the delay in the setting of the premium tariff for RES-E and furthermore, it did not ensure: i) the absence of market risks for investors (since it was linked to the market prices for energy) (UNECE, 2010); ii) a return on investment sufficiently attractive for private investors (UNECE, 2010). A strong obstacle for the development of energy efficiency and RES projects is the absence of operational dedicated credit lines8 provided by national funds (UNECE, 2010). The only available financing mechanisms are ordinary commercial loans for short- to mid-term time periods and to relatively high interest rates (UNECE, 2010).

Two more reasons that affect the competitiveness of the country in “green investments” are (UNECE, 2010): i) the delay in the complete privatization and liberalization process in the Russian energy sector and ii) the strong state influences in the strategic decisions of market operators that limit often the foreign investors to a role of minority shareholders, with no influence on the corporate governance of the companies (UNECE, 2010).

Improved cost efficiencies, manufacturing output and demand reductions are expected to lead to improved efficiency of energy supply and demand with clear economic gains for industry and residential consumers after the liberalization of domestic gas prices in 2011 (GMF, 2010). Russian policy makers will probably prefer more such economic benefits compared to benefits due to mitigation of climate change impacts (GMF, 2010). Furthermore, there are relatively few qualified energy auditors, banks, property developers and managers who can understand the benefits of efficiency and know how to use efficiency to boost profit and lower investment risk (Pacific Northwest – National Laboratory, 2012).

The Russian membership of the WTO is expected to have positive impact on the agricultural sector (Ernst & Young, 2012b). On the other hand, the Russian agriculture sector will face the following situation due to climate change. Climate will become more favorable for the majority of its territory (warmer climate and abundant precipitation), but the possible expanding of food production in most regions probably be limited by poor soils, lack of infrastructure or remoteness from agricultural markets (World Bank, 2009; Alcamo J. et al., 2003). Even if the conditions are better for crops, they will be better for for pests, diseases and weeds that could hinder crop growth (Alcamo J. et al., 2003).Also, warmer and drier climate in the main crop growing regions can threaten the potential productivity of important crops such as wheat, potatoes, maize, and barley (Alcamo J. et al., 2003).

Forest fires are responsible for increases in the depth of soil frost penetration, the superficial drain and water erosion in vast territories. All these will probably raise the frequency of floods under conditions of plentiful precipitation and fast snow thawing. Consequently, agricultural production and fertility of soils will face negative impacts (Kiselev S. et al., 2013).

8 The definition of a “Line of credit” (or credit line) is the following: An arrangement set between a financial institution (usually a bank) and a customer. This arrangement establishes a maximum loan balance that the bank will permit the borrower to maintain. The borrower can draw down on the line of credit at any time, as long as he or she does not exceed the maximum amount set in the agreement (http://www.investopedia.com/terms/l/lineofcredit.asp). The advantage of a line of credit when compared with a regular loan is that interest is not usually charged on the part of the line of credit that is unused, and the borrower can draw on the line of credit at any time that he or she needs to. Depending on the agreement with the financial institution, the line of credit may be classified as a demand loan, which means that any outstanding balance will have to be paid immediately at the financial institution's request (http://www.investopedia.com/terms/l/lineofcredit.asp).

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The competitiveness of the country is affected almost equally in OPT and PES. The promotion of green investments will benefit Russian enterprises regardless if they are promoted as climate change policy or energy policy objectives. The assigned grades are: BAU – 4, OPT – 7, PES-6.

For equity the ratio GHG emission reductions in MtCO2eq to capita is used. It is considered that the larger the ratio is the fairer is the scenario in sharing the burden among the sectors.

Table 9: Equity measurement.

Scenario Total amount of 2020 GHG emissions (MtCO2eq)

Reductions compared to BAU

Population in 2020 (in million)

Ratio reductions tCO2eq per capita

BAU 2196,4 0 139,7 0

OPT 2016,9 2,180 139,7 1,642

PES 2116,3 0,087 139,7 0,066

For flexibility the scenarios are compared towards the incentives and the options that they offer to target groups. Significant tax incentives for the support of energy-saving technologies were introduced with Law “on Energy Saving and on Increasing Energy Efficiency” approved in November 2009 (UNECE, 2010). These tax incentives include: i) investment tax credits up to 30% for companies investing in energy efficiency and energy saving technologies; ii) accelerated depreciation of assets belonging to the category of objects with high energy efficiency or classified in top energy efficiency classes and iii) partial compensation of interests on loans granted by Russian banks for investing in energy savings and increased energy efficiency technologies (UNECE, 2010).

The OPT policy mixture has more financial instruments (subsidies, tax excemptions, soft loans) compared to the other two policy mixtures.

The assigned grades are: BAU - 5, OPT - 6, PES - 5.

For stringency for non-compliance, the level of stringency is determined by sanctions, penalties and other rules-influencing mechanisms for transgressors. All three scenarios foresee the penalties for certain climate change policy issues as described in the respective sessions. So, all are assigned with 6.

Figure 3: Political acceptability.

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Criterion 3: Feasibility of implementation

The scenarios were evaluated against 3 sub-criteria.

For implementation network capacity - The existing implementation network does not provide the necessary information – at least in English - for the full range of climate change policy issues in the country. There is limited number of official reports regarding national climate change policy issues for the RF in English, while those in Russian language have general information. The development of analysis work and assessments for supporting the awareness of customers and for providing a quantitative background for the identification of attractive EE and RES projects is restricted due to the partial absence of databases with consumption data on public and residential buildings (UNECE, 2010). Even if a new Law had included the establishment of such databases, long time is needed until these databases become statistically significant, since usually there are no past data to refer to (UNECE, 2010). Also, established on line databases are not updated or do not provide the nessary information. Such a case is the Russian registry of carbon units9. It is the “standardized electronic database for accurate issuance, holding, transfer, acquisition, cancellation and retirement of AAUs, CERs, ERUs and Removal units (RMUs), as well as carry-over of ERUs, CERs and AAUs”. In the web-site the session news presents issues only up to 2011, while information about the amount of AAUs or ERUs is not available. Additionally, the difficulties in finding and collecting the necessary data for the work in PROMITHEAS-4 reflect an inefficient implementation network.

Furthermore, the reported information in the 5th National Communication of the country to UNFCCC was not sufficiently transparent concerning the national circumstances, the way that national circumstances affect GHG emissions and removals and how national circumstances and changes in the national circumstances affect GHG emissions and removals over time (UNFCCC, 2012). The Expert Review Team recommended the improvement of the completeness of Russian reporting and the provision of information on all reporting elements related to reporting on the national system in accordance with the UNFCCC reporting guidelines (UNFCCC, 2012).

The Russian implementation network includes the following entities:

- the Ministry of Energy10 is responsible for (UNECE, 2010; European Commission, 2009): i) the design and implementation of State energy policy and normative-legal regulation in the fuel and energy sector 11 through the development of strategies and investment programs, the establishment of minimum energy efficiency standards and the promotion of RES; ii) the preparation of the annual Progress Report on energy saving and energy efficiency improvement for the Government of the RF; iii) providing informational and educational support of activities at international, federal, regional and municipal levels; iv) supporting a favorable investment climate so as to attract invetsments and to interact with the business community and the financial institutions on the basis of public-private partnerships. Its web-site does not have an English version or a page for climate change.

- The Ministry of Natural Resources and Environment12 of the RF is responsible for the state policy regarding the study, renewal and conservation of natural resources, including the state subsoil stock and forestry, water resources, forests and environmental conservation. The English version of its web-site has only the Services and Agencies supervised by the Ministry. There is no web page or session for climate change issues.

9 http://www.carbonunitsregistry.ru/eng-default.htm 10 http://minenergo.gov.ru/aboutminen/leaders/ 11 This Ministry of Energy was established after the approval of the Government decision No. 400 on May 28, 2008) (this Decision was amended by the resolutions of the Government of the Russian Federation dated 13 October, 7 November, December 29, 2008, 27 January, August, 12 December 22, 2009, 20 February, 15 June, July, November 13, 2010, 26 March 24, 2011) (Ministry of Energy of the RF, 2013). 12 http://www.mnr.gov.ru/english/

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- the Ministry of Finance13 is involved in climate change policy since it approves budgetary funding for energy efficiency programs and works out financial mechanisms to promote energy efficiency improvement (European Commission, 2009). There is an English version of its web-site. No information about JI projects.

- the Ministry of Economic Development14 is responsible for the (European Commission, 2009): i) coordination of the efforts for reducing the energy intensity of GDP by 40% by 2020; ii) joint development of the main part of the regulatory framework with other ministries and departments; iii) participation in the activities of an Energy Efficiency working group with the Commission on technological development and modernization of the Russian economy under the President of the Russian Federation. This Ministry is also involved in the administative procedure of the JI projects.

- The Ministry of Regional Development15 is also responsible for the state energy policy, including energy saving and energy efficiency (Asia Pacific Energy Research Centre, 2012). Coordination of projects for long-term sectoral development strategies. No active English version of the web-site.

- Sberbank16 is the Carbon Unit Operator according to the relevant Russian Government Decrees and examines applications from Russian investors for JI projects (Sberbank, 2013). In 2012, 97 applications were accepted for analysis concerning modernization of technical equipment in the electric and heat power industry, oil and gas extraction, metallurgy, construction materials sector and chemistry (Sberbank, 2013).

- the Federal Tariff Service or Federal Agency for Tariffs17 implements the state policy on tariffs and approves minimum and maximum tariff for the energy producers (Asia Pacific Energy Research Centre, 2012; UNECE, 2010). The Regional Energy Commissions decided in accordance to the local conditions the concrete tariffs in the oblasts (regions) of the country (UNECE, 2010). There is an English version of the web-site, but with limited updated material.

- the Russian [Federal] Energy Agency (REA) 18 within the Ministry of Energy was established19 on December 22, 2009 by the government. It has 70 regional branches (Asia Pacific Energy Research Centre, 2012; UNECE, 2010). Its key tasks concern operating the federal EE and energy saving information system; administering, monitoring, and coordinating efforts for the effective implementation of the EE law in the budgetary, power generation, industrial, and residential sectors of the Russian economy at the federal and regional level (Asia Pacific Energy Research Centre, 2012; UNECE, 2010). REA will provide information on Russian Fuel-and-Energy-Complex developments and will establish energy efficiency criteria and indicators (UNECE, 2010). No English version of the web-site, but it is updated until recently.

- Ministry of Agriculture20 is not fully involved in climate change policy issues, but due the impact of climate change on agliculture it needs to update its responsibilities accordingly21. No English version, no department for climate change issues.

13 http://www.minfin.ru/en/ 14 http://www.economy.gov.ru/wps/wcm/connect/economylib4/en/home/about/ 15 http://www.minregion.ru/ 16 http://sberbank.ru/en/corporatecustomers/carbonfinance/ 17 http://www.fstrf.ru/eng 18 http://www.energohelp.net/articles/all-law/ 19 More specifically the power and the competences of REA are quoted in the Federal Law No. 261 on Energy Saving and on Increasing Energy Efficiency and on Introduction of Changes in Selected Legislative Acts of the Russian Federation (approved on 23 November 2009) (UNECE, 2010) 20 http://www.mcx.ru/ 21 its main responsibility is the development of the national policy and normative-legal regulation about agriculture; land relations (in relation to agricultural land); regulating the market of agricultural products, raw materials and food, food and processing industries, the production and trafficking of tobacco products; the

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- RosTechNadzor (the Federal Environmental, Industrial and Nuclear Supervision Service of the RF) is a federal regulatory authority (IEA, 2009). It controls and supervises activities in mining safety, industrial safety, nuclear safety and environmental protection. Its responsibilities include (IEA, 2009): i) adoption of regulatory and legal documents in aforementioned areas, grant and revoke licences and permits; ii) registration of industrial enterprises based on their environmental impact and establishment of emission limits for them; iii) monitoring compliance with environmental legislation and safety regulations of companies and individuals and imposing fines; iv) review of safety regulations; v) development of coal mine safety regulations, including methane recovery and usage of standards.; vi) conduction of coal mine inspections, and collection of data on methane concentrations in mines and methane emissions from underground mining (IEA, 2009).

The Government of the RF has appointed two energy commissions: i) the Commission on Fuel and Energy Complex. It is located at the Prime Minister’s Office; engaged in legal aspects, institutional structures; approves and monitors the National Programme; ii) the Commission on modernization and technological development of the Russian economy. It is located at the President’s Office; engaged in selecting and funding the most innovative projects in energy efficiency and RES that can be implemented within Russia (UNECE, 2010). The Federal Council and the Duma have respectively their appointed energy committees for these matters (UNECE, 2010).

Apart from the aforementioned entities a number of Coordination Councils22 (such as energy service organisations and associations, energy producer and end-user economic entities) for the implementation and coordination at different levels of energy saving and energy efficiency policies are established in Russian regions and municipalities (Asia Pacific Energy Research Centre, 2012). Some indicative entities are the Center for Energy Efficiency (CENEF), Center for Energy Policy, AcademEnergoServis, Institute for Energy Policy, RusDem, ESCO Negawatt, Rus Esco, 3E, Energo Servis and regional centers for energy efficiency with the major located in Kaliningrad, Murmansk, Kola, Karelia, and Ekaterinburg (Asia Pacific Energy Research Centre, 2012). The majority of these entities have relevant energy saving management infrastructures (in 2007 there were 75 centres and agencies and 24 energy saving foundations) (Asia Pacific Energy Research Centre, 2012). Also, the Russian Green Building Council (RuGBC)23 is activated for green building construction in Russia; it was created in November 2009 (Pacific Northwest – National Laboratory, 2012). Web-site with English version, but no available publications in English.

It is indicative that a large number of entities are involved with overlapping responsibilities, while there is lack of institutions with clearly oriented areas. There is no entity directly responsible for the exploitation of RES in the RF. The Federal Forestry Agency had an unstable position during the last decade. From 2000 to 2012 its position changed four times: until 2008 it was under the Ministry of Natural Resources; from 2008 to 2010 it fell under the Ministry of Agriculture; from 2010 to May 2012 was supervised by the Government of the RF; and as of May 2012 it reports directly to the Ministry of Natural Resources and Ecology (FAO, 2012). There is no institution at federal or regional level directly charged with addressing the issue of coal mine methane utilization (IEA, 2009). The monitoring of activities performed by coal companies and the issuance of licences for subsoil use is assigned to regional authorities (as part of regional administrations) (IEA, 2009). This lack of co-

sustainable development of rural territories; management of State property of the subordinate enterprises and establishments. 22 The “Coordinating Council for Energy Saving and Energy Efficiency, Relations with Business and Regions”

was established in September, 2008 (Presidential Decree No. 889, issued on 4.06.2008 and RF Ministry of Energy act (No. 75 of 15.09.2008). It was intended to work out energy efficiency policy, to coordinate activities of federal and regional governments and business institutions in pursuing energy saving state policy and energy efficiency improvement (European Commission/AESA Consortium, 2009). 23 http://www.rugbc.org/en

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ordination or management within government is an obstacle for the enhanced recovery and use of CMM in Russia.

The current implementation network does not provide the necessary information of how regulations are applied and enforced and how property rights are protected (World Economic Forum, 2013). This situation along with corruption24 and undue influence affects negatively economic transactions and creates problems for doing business in Russia (World Economic Forum, 2013).

All aforementioned barriers for investments pointed out the existence of general and diffused lack of awareness on the relevance of energy efficiency and RES in RF (UNECE, 2010). The absence of operational credit lines among financial institutions indicates a general lack of experience in the national banking sector concerning financing schemes for energy efficiency and RES projects (UNECE, 2010). Due to the weaknesses of the current implementation network there is still incomplete metering of energy consumption on final customers, which are billed not on actual consumption but on living surface or other similar norms (UNECE, 2010). Although the Law on Energy Saving and on Increasing Energy Efficiency envisages full metering of consumption of all energy resources starting from 2012, it will still take some time before the awareness-raising effects of such a measure become tangible and lead to the development of a motivation to change consumption behaviors (UNECE, 2010).

The assigned grades are: BAU - 4, OPT - 3 and PES - 4. The current implementation network is not contributing sufficiently towards the objectives of the Russian climate change policy. For a more strict policy portfolio as the OPT, its performance is worse, while in PES it is the same with that under the BAU policy portfolio.

For administrative feasibility — Policy making in the RF is often characterised by a gap between the two different pairs (Henry A. Laura and Sundstrom McIntosh Lisa, 2012): i) presidential announcements and adoption of new laws; ii) implementation and enforcement of policies.

It was pointed out many times in previous sessions that after the ratification of the Kyoto Protocol, the country delayed in developing policy instruments for participation in the three flexible mechanisms (Henry A. Laura and Sundstrom McIntosh Lisa, 2012). Until 2009 little attention was given to develop broader policies for mitigating GHG emissions reflecting the fact that Russian officials and bureaucrats did not see climate change as an important or urgent policy problem (Henry A. Laura and Sundstrom McIntosh Lisa, 2012). The “National Action Plan on Kyoto Implementation” that was issued in February 2005, was exceedingly vague, with no clear declarations of the policies that the government would actually pursue (Henry A. Laura and Sundstrom McIntosh Lisa, 2012). There were also no action or implementation plans developed for the previous “Energy Strategy until 2020” (UNECE, 2010). There was a lack of: i) a clear policy framework for the substantial support of energy efficiency and RES; ii) clear responsibilities for policy implementation and monitoring of progress and this clearly constituted a significant legal and institutional barrier (UNECE, 2010). Particulalry for RES, there is still no defined regulatory framework in place or under development (UNECE, 2010). Apart from RES and energy efficiency policy issues, the existing Russian legislation is not sufficiently clear regarding the ownership of recovered coal mine methane gas (IEA, 2009). There is need for establishing a system that would clearly identify gas ownership and allow the transfer of rights to use from recovered CMM (IEA, 2009). This problem is linked also with ERUs, since it is not clear if the sale of ERUs from such projects that reduce methane emissions would result in the mine owner (IEA, 2009).

24 According to Transparency International, public officials and civil servants, including the police, are classified as the most corrupt institutions in the country, followed by the education system and parliament (World Economic Forum, 2013).

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The country delayed also in fulfilling its international commitments. Until early 2007 the government did not submit a full national emissions inventory to the UNFCCC and was the last Annex I country that did so (Henry A. Laura and Sundstrom McIntosh Lisa, 2012). In 2008, the country failed to pay the International Transaction Log (ITL) fees due to lack of coordination between governmental agencies (Point Carbon, 2010).

These observations indicate administrative burden - caused by inefficient or unclear bureaucratic processes – which leads to increased transaction costs within the economy, from opening a business to customs procedures or accessing utilities (World Economic Forum, 2013). It is indicative that obtaining a new electricity connection requires 10 procedures, takes 281 days and costs 1,852% of per capita income to complete (World Bank, 2012). This shows that regulation instead of protecting the public is being administered inefficiently, placing excessive time and cost constraints on business (World Bank, 2012). On the othe hand, the Russian inventory system is actually relatively robust, while Russian JI projects tend to be better prepared than projects in other Eastern European countries (Point Carbon, 2010).

The grades are – based on the aforementioned comments – BAU – 4, OPT – 3 and PES-4. The currently implemented policy portfolio is not characterized by administrative feasibility due to problems that emerged each time that a new policy instruments was implemented. Since the low performance against this sub-criterion is due to the whole administrative structure and its interlinkages between ministries, departments, agencies and services, the situation will not improve in the other two policy portfolios. In OPT due to the introduction of more policy instruments that require frequent and strict monitoring the performance of the policy portfolio against this sub-criterion is worsen.

For financial feasibility – it was foreseen, even before the ratification of the Kyoto Protocol by Russia, that the country will need financial resources for fulfilling its obligations to develop climate change mitigation measures, to adapt its economy to climate change, to create GHG emissions monitoring, control and registration systems, to contribute to the budget of the Kyoto Protocol and to cover its administrative costs (UNEP, 2006).

The absence of any tariff components to cover environmental externalities leads to diminished awareness of the value of natural resources on behalf of the Russian customers and implies the absence of a potential financial mechanism for energy efficiency and RES projects (UNECE, 2010). The latter is actually happning. The implementation of RES projects needs State-sponsored support system, but the current legislation fails to provide any financial incentives for RES generation (Kopylov A., 2010). The development of relevant policy instruments in support of RES remains a necessity25. For the support of energy efficiency actions, there is no information available about budget allocation in support of the Federal law No. 261 – FZ “On energy conservation and increase of energy efficiency” (APEC, 2011). Public organizations are not able to retain or reallocate savings on communal expenses or to conclude long-term contracts or contracts that pay for investments with future savings (UNECE, 2010).

Financial incentives for energy efficiency in industry are provided by international institutions apart from governmental incentives. Such institutions are:

- EBRD: It launched a 300 million EUR framework facility, the Russian Sustainable Energy and Carbon Finance Facility (RSECF), after the approval of the EBRD Board of Directors in May 200926. The RSECF envisages lending credit lines to participating banks (six to seven Russian banks) for on-lending to private sector companies concerning sustainable energy projects in the industrial sector27. Free-of-charge assistance for the identification of profitable energy saving measures and quantification of the associated

25 See for example the article of Chairman of the State Duma Committee on International Affairs K.Kosachev “Alternative sources of energy: Russia and the world experience” in “Rossiyskaya gazeta” http://www.rg.ru/2011/06/08/kosachev-poln.html 26 http://www.ebrd.com/pages/project/psd/2009/37857.shtml 27 http://www.ebrd.com/english/pages/project/psd/2013/43114.shtml

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benefits is provided to participating banks and sub-borrowers. Since 2006, the EBRD investments in the RF for energy efficiency amounted to more than 755 million EUR (UNECE, 2010).

Also EBRD established the “Russian Sustainable Energy Financing Facility (RUEFF)” for supporting private companies increase their competitiveness through the financing of energy effi cient and renewable energy projects. It is a special direct loan facility to larger Russian companies28. The facility provides loans of up to RUB 300 million through partner banks (Scandinavian countries, Germany and last but not least the Netherlands0 to private companies and solo entrepreneurs (RUEFF web-site, 2013; Mokveld Kees, 2011)

- International Finance Corporation (IFC) (member of the World Bank Group): It operates the Russia Sustainable Energy Finance Programme (RSEFP)29 since 2005. RSEFP is an investment facility that provides credit lines for Russian financial institutions who will lend these funds to energy efficiency and RES projects. The RSEFP was initially a five-year donor-funded programme, launched in 2005 to stimulate investments for energy efficiency projects by supporting financial institutions in building an energy efficiency product. The programme has three parts, i.e. advisory services, investments, and activities to improve the awareness of and regulatory environment for energy efficiency and RES (Mokveld Kees, 2011). The overall volume of the credit line was USD 150 million, of which USD 100 million were disbursed to six participating banks. The average project financed by this programme is USD 500,000 to USD one million, while the payback period averages 3.5 years (UNECE, 2010). The Program is supported with funds from the Global Environment Facility, Danish Energy Agency, Ministry for Foreign Affairs of Finland and Ministry of Economy and the Employment of Finland. Since 2010 two more projects were launched by IFC:

� Russia Residential Energy Efficiency Project30 which aims to stimulate

investment in the energy-efficient renovation of residential multifamily buildings and to reduce CO2 emissions in Russia. The Project will create an effective legal and institutional platform to support local homeowner associations and housing management companies in obtaining access to financing. It is Supported with funds from the Ministry for Foreign Affairs of Finland, the Ministry of Employment and the Economy and the Global Environment Facility.

� Developing Renewable Energy in Russia 31 which aims aims to mobilize investments and through advisory services increase the scale of private sector involvement in renewable energy. The Project also promotes a sustainable market for renewable energy in the Russian Federation by supporting the development of enabling policies, institutional capacity, introduction of financial mechanisms, and expanding access to finance. It is supported with funds from the Global Environmental Facility (GEF).

- The Nordic Environment Finance Corporation (NEFCO) 32 - an international finance institution established in 1990 by five Nordic countries - has financed environmental projects in the RF. NEFCO places emphasis on direct investments from public-private partnerships and corporate public services. Since 2007, NEFCO, had 20 active and 37

28 http://www.ruseff.com/Page/Partners/17 29 http://www.ifc.org/wps/wcm/connect/regprojects_ext_content/ifc_external_corporate_site/rsefp_home/overviewenglish/home 30 http://www.ifc.org/wps/wcm/connect/region__ext_content/regions/europe+middle+east+and+north+africa/ifc+in+europe+and+central+asia/countries/promoting+energy+efficiency+in+russian+residential+housing 31 http://www.ifc.org/wps/wcm/connect/region__ext_content/regions/europe+middle+east+and+north+africa/ifc+in+europe+and+central+asia/countries/developing+renewable+energy+in+russia and http://www.ifc.org/wps/wcm/connect/RegProjects_Ext_Content/ifc_external_corporate_site/home-rrep 32 http://www.nefco.org/introduction/this_is_nefco

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completed energy sector projects in the RF, mainly for RES technologies, energy efficiency, fuel switching, waste (biogas) and wastewater treatment (UNECE, 2010).

All scenarios are graded with 5.

Figure 4: Feasibility of implementation.

The overall final score for each policy portfolio is presented in the below figure:

Figure 5: Final grades.

RReessuullttss

The results for each scenario are presented in Table 18.

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Table 10: AMS results for each scenario.

Scenarios Criteria

BAU OPT PES

Direct contribution to GHG emission reductions (0,833) 0,000 83,300 37,172

Indirect environmental effects (0,167) 0,000 16,700 8,502

Environmental performance (0,675) - A 0,000 100,00 45,674

Cost efficiency (0,390) 0,000 47,300 22,407

Dynamic cost efficiency (0,227) 3,573 8,968 5,660

Competitiveness (0,103) 1,128 4,520 2,853

Equity (0,188) 0,000 17,500 7,804

Flexibility (0,056) 1,395 2,210 1,395

Stringency for non-compliance (0,036) 1,133 1,133 1,133

Political acceptability (0,259) - B 7,229 81,631 41,251

Implementation network capacity (0,228) 11,697 7,505 11,697

Administrative feasibility (0,685) 21,994 14,112 21,994

Financial feasibility (0,088) 3,667 3,667 3,667

Feasibility of implementation (0,065) - C 35,358 25,283 35,358

Total (A+B+C) 8,846 79,420 41,628

The calculations show that the policy portfolio in OPT is the best one in terms of overall performance. The policy portfolio in BAU is the worst one.

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RReeffeerreenncceess Alcamo Joseph, Dronin Nikolai, Endejan Marcel, Golubev Genady, Kirilenko Andrei, 2003. Will Climate Change Affect Food and Water Security in Russia? Summary Report of the International Project on Global Environmental Change and its Threat to Food and Water Security in Russia. Available at: http://www.usf.uni-kassel.de/ftp/dokumente/projekte/rglass.summary.pdf

Asia Pacific Energy Research Centre, 2012. Compendium of Energy Efficiency Policies of APEC Economies. Available at: http://aperc.ieej.or.jp/file/2012/12/28/Compendium_2011.pdf and http://www.ieej.or.jp/aperc/CEEP/Russia.pdf

Asia-Pacific Economic Cooperation (APEC), 2001. Compendium of Energy Efficiency Policies of APEC Economies - Russian Federation. Available at: http://aperc.ieej.or.jp/publications/reports/compendium.php and http://aperc.ieej.or.jp/file/2012/12/28/Russia_2011.pdf Christiane Egger, Reinhold Priewasser, Michaela Kloiber , Lucia Bezáková, Nils Borg , Dominique Bourges, Peter Schilken, 2012. SURVEY REPORT-Progress in energy efficiency policies in the EU Member States - the experts perspective, Findings from the Energy Efficiency Watch Project. Available at: http://www.energy-efficiency-watch.org/fileadmin/eew_documents/EEW2/EEW_Survey_Report.pdf

Ernest & Young, 2012a. Renewable energy country attractiveness indices. Issue 34, August 2012. Available at: http://www.ey.com/Publication/vwLUAssets/Renewable_energy_country_attractiveness_indices_-_August_2012/$FILE/Renewable_energy_country_attractiveness_indices_Aug_2012.pdf Ernst & Yound, 2012b. Growing Beyond - Positioned for growth, Ernst & Young’s 2012 attractiveness survey - Russia. Available at: http://www.ey.com/Publication/vwLUAssets/Positioned_for_growth/$FILE/Positioned_for_growth.pdf European Commission, 2009. Russia - Support to the creation of an energy efficiency management system in Russia, Contract N° 2009/209448 - Version 1, Framework Contract Commission – Lot 5, December 2009. Available at: http://ec.europa.eu/energy/international/russia/doc/support-_energy-efficiency-management-russia-en.pdf European Commission/AESA Consortium, 2009. Russia - Support to the creation of an energy efficiency management system in Russia, Contract N° 2009/209448 - Version 1, Framework Contract Commission – Lot 5, December 2009. Team composition: Vladimir Usievich, Vladimir Zhuze. Available at: http://ec.europa.eu/energy/international/russia/doc/support-_energy-efficiency-management-russia-en.pdf

FAO, 2012b. Eastern Europe and Central Asia, Agro-Industry development Country brief – Russian Federation. Regional Office for Europe and Central Asia. Available at: http://www.fao.org/fileadmin/user_upload/Europe/documents/Publications/AI_briefs/AI_breiefs2012/fao_russian_federation.pdf

FAO, 2012. The Russian Federation Forest Sector Outlook Study to 2030. Available at: http://www.fao.org/docrep/016/i3020e/i3020e00.pdf GMF, 2010. Russian Coal: Europe’s Ne w Ener gy Challenge. Written by Kevin Rosner, Ph.D. Senior Fellow, Institute for the Analysis of Global Security. CLIMATE & ENERGY Paper Series 2010. Available at: http://www.gmfus.org/doc/GMF7535%20CE%20Russian%20Coal%20(Rosner)%20030810.pdf Henry A. Laura and Sundstrom McIntosh Lisa, 2012. Russia’s Climate Policy: International Bargaining and Domestic Modernisation, Europe-Asia Studies, 64:7, 1297-1322, DOI: 10.1080/09668136.2012.701388. Available at: http://dx.doi.org/10.1080/09668136.2012.701388 IEA, 2009. Coal Mine Methane in Russia - Capturing the safety and environmental benefits. Available at: http://www.iea.org/publications/freepublications/publication/cmm_russia.pdf

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IFC, 2011b. Renewable Energy Policy in Russia: Waking the Green Giant. IFC Russia Renewable Energy Program in Partnership with the Global Environment Facility (GEF). Available at: http://www1.ifc.org/wps/wcm/connect/bf9fff0049718eba8bcaaf849537832d/PublicationRussiaRREP-CreenGiant-2011-11.pdf?MOD=AJPERES Kiselev Sergey, Romashkin Roman, Nelson C. Gerald, Mason- D’Croz Daniel and Palazzo Amanda, 2013. Russia's Food Security and Climate Change: Looking into the Future. Discussion Paper, No. 2013-16, February 21, 2013, Available at: http://www.economics-ejournal.org/economics/discussionpapers/2013-16 and http://www.google.gr/url?sa=t&rct=j&q=water%20use%20in%20russia%2C%20climate%20change&source=web&cd=28&cad=rja&ved=0CGUQFjAHOBQ&url=http%3A%2F%2Fwww.economics-ejournal.org%2Feconomics%2Fdiscussionpapers%2F2013-16%2Fcount&ei=FqR1UZDZFeik0AXa8IHYDg&usg=AFQjCNFsLLeflK-PA_VADqM_rAnbP3dIpA

Konidari P. and Mavrakis D., 2006. Multi-criteria evaluation of climate policy interactions. Journal of Multi-Criteria Decision Analysis 14, pp 35 – 53.

Konidari P. and Mavrakis D., 2007. A multi-criteria evaluation method for climate change mitigation policy instruments. Energy Policy 35, pp 6235-6257.

Kopylov Anatoli , 2010. Russian Wind Industry, the Past and the Future. Available at: http://rawi.ru/media/Text_files/Russia%20Wind%20for%20IndiaEdit_cleanfinal.pdf Pacific Northwest – National Laboratory, 2012. Analysis of the Russian Market for Building Energy Efficiency. Prepared for the U.S. Department of Energy under Contract DE-AC05-76RL01830. Available at: http://www.pnnl.gov/main/publications/external/technical_reports/PNNL-22110.pdf Point Carbon, 2010. Risk assessment of CDM and JI project portfolio - A delivery to The Danish Energy Agency. Available at: http://www.ens.dk/sites/ens.dk/files/klima-co2/ji-cdm/evaluering-danske-jicdm-program/FINAL%20Portfolio%20Report%20DEA.pdf Sberbank, 2013. Annual Report of Sberbank of Russia OJSC for 2012 – Prepared pursuant to securities Laws of the Russian Federation, Approved by the Audit Commission of Sberbank of Russia OJSC. Available at: http://sberbank.ru/common/_en/img/uploaded/files/pdf/stockholders/info_for_annual_report_2013_en.pdf

UNDP, 2009. Energy Sector and Sustainable Development - National Human Development Report in the Russian Federation 2009. Available at: http://hdr.undp.org/en/reports/nationalreports/europethecis/russia/NHDR_2009_Russia_English.pdf UNEP, 2006. Report on Sustainable Production and Consumption policy of the Russian Federation. Prepared by Sofia Solovieva, Olga Speranskaya, and Olga Ponizova for UNEP Regional Office for Europe financed by the Netherlands. Available at: http://www.unep.ch/scoe/documents/russia_report_12142006_en.pdf UNFCCC, 2011 - http://unfccc.int/resource/docs/2012/tp/02.pdf UNFCCC, 2012. Report of the in-depth review of the fifth national communication of the Russian Federation. Compliance Committee. CC/ERT/2012/8, 5 October 2012. Available at: http://unfccc.int/files/kyoto_protocol/compliance/plenary/application/pdf/cc-ert-2012-8_idr_nc5_of_the_russian_federation.pdf World Bank, 2009. Adapting to Climate Change in Europe and Central Asia. Available at: http://www.worldbank.org/eca/climate/ECA_CCA_Full_Report.pdf World Economic Forum, 2013. Scenarios for the Russian Federation – World Scenario Series. Available at: http://www3.weforum.org/docs/WEF_Scenarios_RussianFederation_Report_2013.pdf

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CCOONNCCLLUUSSIIOONNSS This report concerns the development and assessment of three (3) climate change

mitigation and adaptation policy scenarios for Russia of them is characterized by a different policy portfolio and is named after it as Business As Usual (BAU), Optimistic (OPT) and Pessimistic (PES).

All scenarios take into consideration the following national objectives: i) 0% reduction by 2012 of its GHG emissions compared to those of base year 199033; ii) 4,5% share of RES in the total electricity generation by 2020 (except for electricity generated by hydro power plants with power exceeding 25MW) and iii) 40% reduction of the energy intensity of GDP by year 2020 compare to the 2007 level.

The country has already decreased by 36,9% its GHG emissions – excluding net emissions or removals from LULUCF - between 1990 and 2009, while total GHG emissions, including net emissions or removals from LULUCF, decreased by 57,2% (UNFCCC, 2011).

BAU scenario

The BAU scenario concerns the time evolution of the already implemented mitigation and adaptation policy instruments (set into force before 31 December 2010) in Russia until the year 2050 and serves as the reference against which the outcomes of the other scenarios are compared.

The currently implemented Russian mitigation policy has three main components: i) penetration of RES in the electricity generation, ii) support to increase energy efficiency and iii) GHG emission reductions through JI. Concerning the adaptation policy, there are no implemented policy instruments.

According to the outcomes of the model Long range Energy Alternatives Planning System (LEAP) for the BAU scenario in 2020 the GHG34 emissions are increased compared to those of year 200535 by 131,6%. The RES share in the transport sector for year 2020 is 0% (due to the absence of supportive mechanisms) and in electricity generation 16,95%.

OPT scenario

The Optimistic scenario concerns the time evolution of an enhanced mitigation/adaptation policy portfolio that Russia will implement during the time interval 2011 - 2050. This enhanced policy portfolio takes into account the policy instruments adopted after 1st January 2011 as well as plans of the country and supports: i) the introduction of efficient technologies in almost all sectors targeting to the maximum reduction of GHG emissions through the maximum exploitation of the potential of the country in energy efficiency and renewable energy sources and ii) the necessary infrastructure for the adaptation of the country towards the minimum – in size and extent - expected climate change impacts.

The policy portfolio of this scenario includes a wider range of policy instruments compared to those that synthesize the BAU scenario. Performance standards, financial policy instruments (subsidies and grants), dissemination policy instruments (awareness campaigns and seminars) are proposed for the main economic national sectors. Adaptation policy instruments are foreseen for the agricultural, water management and forestry sector.

Based on the outcomes of the LEAP model for the OPT scenario, GHG emissions in Russia will increase by 120,9% in 2020 compared to those of year 2005. The share of RES in the transport sector in 2020 will be 2,6%, and 21,09% in electricity production.

33 Under the Copenhagen Accord the country aims to reduce its emissions by 2020 within a range of 15-25% compared to the 1990 level of emissions. 34 For biofuels the amount of air pollutant were not available in LEAP for all branches. 35 GHG emission sources which are taken into consideration in this study do not include the “Oil transformation” sector due to missing data. Due to this lack of data there is difference between the official historical data for GHG emissions and those calculated by the LEAP model.

30

PES scenario

The Pessimistic scenario concerns the time evolution of a mitigation/adaptation policy portfolio that the country will implement up to 2050 without exploiting fully the national potential in energy efficiency and renewable energy sources and by facing the worse expected impacts of climate change, taking into account the policy instruments adopted after 1st January 2011.

This scenario assumes less ambitious mitigation policy by limiting the possible technological options only to a selected number of sectors with the highest energy efficiency potential and the most promising for the country types of RES. The scenario considers the implementation of all policies approved (existing or planned) policies, but no additional policies apart from in line with the EU climate change policy and the country priorities.

According to the outcomes of the LEAP model for the PES scenario, GHG emissions in Russia will increase by 126,8% compared to those of year 2005. The share of RES in the transport sector in 2020 will be 2% and in the electricity generation it will be 18,53%.

Assessment outcomes36

Using the multicriteria method AMS, the three (3) policy portfolios were assessed against their environmental performance (amount of GHG emissions and secondary environmental effects), political acceptability (attitude of the involved entities (target groups) towards the relevant policy portfolio) and feasibility of implementation (applicability of the policy portfolio from the point of the governmental and national pertinent entities).

The BAU policy portfolio has the largest amount of GHG emissions, followed by the PES.

The policy portfolio of the OPT scenario has the best performance in political acceptability since it is the most cost effective for the target groups (residential, industrial, energy and transport sectors) compared to the other two policy portfolios. It offers a fair distribution of the “climate change” burden among the respective sectors and allows the economic sectors to be more competitive. It offers more flexibility for the target groups in complying with their obligations under the specific policy portfolio.

The performance of the BAU and PES scenarios under the third criterion is equal. The country has established an implementation network that is not able to adjust properly its activities under a more strict policy portfolio like that of OPT compared to the BAU one. The country can not managed to allocate the necessary funds for the implementation of its supportive policy instruments for RES and energy efficiency under all scenarios.

Given the above, the mitigation/adaptation policy portfolio which characterizes the Optimistic scenario is the one that allows the achievement of most goals of the climate change policy of Russia. Nevertheless, the success of this policy portfolio requires the encouragement of business investments in RES and particulalrly in energy efficiency projects, the continuous support for capacity building that will lead to an effective and robust implementation network and a more stringent frame for non-compliance.

In this report, the component of adaptation in climate change policy is not fully developed since the country hasn’t set an adequate framework to reduce its vulnerability to climate change. Moreover, the design and assessment of relevant policy instruments require data related to the frequency of extreme events, water resources and use, low-income groups, biodiversity, the health sector, etc., which are not available at the moment.

36 The assessment outcomes depend on the level of expertise of the person who makes the assessment as

well as the degree of justification concerning the sub-criteria.

31

Concluding, the scenarios of this report were developed under the same assumptions for the evolution of GDP and population for the period 2011-2050. In order to perceive the performance and applicability of the three (3) policy portfolios, the report should include six (6) more scenarios with the combinations “low population growth – high GDP growth” and “high population growth-low GDP growth”, according to the socioeconomic frameworks presented in the IPCC pathways (new generation of IPCC scenarios).