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EU-Russian Climate Cooperation: Towards a Post-2012 Low Carbon

Investment Regime

Anatole Boute

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STRUCTURE OF THE ARGUMENT

– EU external climate policy towards Russia– Challenges to low carbon investments in Russia– EU sponsored international regulatory initiatives:

• ECT Protocol on Energy Efficiency• Kyoto Protocol• International Partnership for Energy Efficiency• Export of the acquis communautaire

– Assessment and way forward

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The EU external climate policy

“Moral commitment”historical carbon debt and import of carbon intensive goods

Security of supplynecessity to guarantee availability of energy, in context of increasing competitiveness for energy resources

Competitivenessinternational diffusion of climate/energy efficiency/renewable regulation can support the EU industry

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EU climate policy in relation to Russia

“Moral commitment”

carbon cost of EU energy security: gas-coal switch, gas flaring

Security of supply

energy savings in Russia to ensure energy exports

Competitivenesshuge market potential for low carbon equipment

cooperation in achieving climate targets at least cost

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REGULATORY CHALLENGES TO LOW CARBON INVESTMENTS

Financial level playing field for low carbon investments

Declarative nature of regulation

Insufficient implementation / enforcement

Instability and unpredictability of investment climate

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EU sponsored international regulatory initiatives

Energy Charter Treaty Protocol on Energy Efficiency

Financing?

market-oriented price formation

full reflection of environmental costs

BUT

“in an economically efficient” / “cost effective” way

appropriate to states’ own energy conditions

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Declarative nature ? “strive to minimize” environmental impact of energy

“strive to ensure” that energy efficiency policies are coordinated

Implementation?

Russia and the ECT

Investment stability?investment chapter of ECT

BUT

focus on traditional political risks for traditional energy investments

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Kyoto Protocol

Financing?

flexible mechanisms: Joint Implementation

BUT

- possibility to “greenwash” hot air under JI “track I”

- post-2012 ban

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Declarative?

binding emission reduction targets

BUT

Russia’s post-2012 stance

Enforcement?compliance mechanism

Investment stability?Kyoto is about investment promotion not protection

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International Partnership for Energy Efficiency

Declarative?

EU idea: mandatory energy efficiency standards and targets

Outcome: voluntary partnership based on exchange of information, best practices, joint research.

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Export of the EU acquis communautaire

Declarative?mandatory targets for RES but indicative for efficiency

impact of low carbon prices on effectiveness of EU ETS

Implementation?will the renewable energy targets be met?

Stability?

changes to renewable energy support schemes

intervention with the ETS

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Joint projects with third countries under the RES Directive

Financing?mainly directed at helping EU Member States to achieve their target at least cost (import of RES-E)

Implementation?linked to EU RES targets

Stability?

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ASSESSMENT

Non-binding character of existing instruments

Indicative targets

Loose cooperation rather than compliance and responsibility

No clear protection against regulatory changes

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Possible way forward

Instability/unpredictability holds back modernisation main concern of low carbon investors: regulatory changes

EU and Russian regulation governing low carbon investments are characterised by similar deficiencies

take an investor perspective to depoliticise the debate

Focus on regulatory stability for low carbon investmentscommon rules to tackle common investors’ concern

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Thank you

Contact: a.boute@abdn.ac.uk