The prospects for significant policy change towards decarbonization are low in Russia due to the lack of environmental concern, in particular over the impacts of climate change, the interpretation of the post-Soviet emission decline as a climate effort, and the dominance of the economically vital fossil fuel sector. The main emission reductions are likely to originate from cutting energy waste and modernization rather than focused mitigation policies. However, the abundance of domestic fossil fuels, the unfavourable investment climate and the weakness of the policy implementation system obstruct these policies. Nevertheless, Russia’s domestic goal to limit GHG emissions to 75 per cent of the 1990 level by 2020, which never deviated much from the business-as-usual emissions trend, is likely to be achieved more easily than expected due to the current negative economic prospects. Even though the political conflict with Ukraine has destabilized President Putin’s power, and an overthrow of the Putin regime seems less unrealistic than a year ago, climate policy is unlikely to change due to the lack of public demand for stronger measures. At the international level Russia is likely to wait and see how other major emitters will play their cards in Paris in 2015 before deciding on its participation in a new climate agreement.
The Russian oil sector, so crucial to the economy, was obliged to cut its associated petroleum gas ﬂaring to 5% of total supply from 2012. Signiﬁcant progress has been since, but the target has not yet been reached. Here weak formal institutions have made way for informal institutions as they clearly watered down the policy outcome. Not only is far more ﬂaring allowed as a result of exemptions and non-compliance with subsoil licences, it also remains unclear how much is actually ﬂared, due to unclear metering practices, and because ﬁnes can be avoided or written off without much oversight. The oil-sector lobby has advocated many of these informal institutions. Further, this chapter identifies subversive institutions which formalize informal institutions through laws and regulations.
Energy-saving companies, ESCOs, were launched in Russia under the 2009 Energy Efficiency Law, but no particular formal policy goals were set. Despite the fairly weak formal institutional framework, only few informal institutions could be identified – which underlines the marginality of energy-efficiency policy on the political agenda. Recently, the public sector has started hosting ESCO projects, which indicates that the ESCO concept may gradually have gained some relevance in Russia. However, there have been few ESCO activities in the housing and industrial sectors, perhaps due to the mismatches of the ESCO scheme with sector-specific regulations. Moreover, it is not informal institutions as such, but lack of access to finance and the mismatch of the ESCO concept with Russian realities that are the main barriers to the development of the ESCO sector in Russia.
This chapter continues the examination of Russia’s energy efficiency law, now focusing on the tax instruments. The role of these instruments – tax breaks for highly energy-efficient property, accelerated depreciation factor and investment tax credit – is found to be almost redundant. We found evidence of the state making use of informal institutions to avoid the costs entailed in wider adoption of the opportunities outlined by the tax instruments – thus, using informal institutions against its own policy goal of improving energy efficiency. Also the regulatory basis remains unclear, and therefore prone to abuse. As no clear policy goal has been set for the tax instruments on energy efficiency, it is difficult to estimate their success.