The climate war: as a “tax on carbon” would affect utility bills

Care or lobbying?

Last week on April 22, Russia signed the Paris climate agreement, which should replace the Kyoto Protocol after 2020. The new document does not contain country commitments to reduce emissions, but marks the beginning of a new phase in global climate policy. The Paris agreement — a convenient excuse to limit the use of fossil fuels, in particular, via a broad introduction to the world of a payment for emissions of carbon dioxide. “The national contribution of Russia to the Paris agreement will be to limit emissions of greenhouse gases by 2030 up to 70% of 1990 levels”, — said Deputy Prime Minister Alexander Khloponin.

Of course, the struggle for climate and the environment is important. However, this medal has a reverse side. First, the scientific basis of the theory of anthropogenic climate change raises doubts among some scientists, as, for example, said RAS. Secondly, the struggle for the climate is turned into a fine instrument of lobbying those or other economic interests. This, and not the “concern of the progressive humankind in the issues of global warming,” is a driver of world climate policy.

For example, in 2015 in the period leading up to the Paris UN summit called for the introduction of “tax on carbon” European oil and gas company. Under pressure from the “shale revolution” in Europe was flooded with cheap coal from the United States, surpassing oil and gas company. In response, they decided to hit competitors where it hurts the most — carbon. Coal combustion gives much more greenhouse gas emissions than oil and especially gas.

The fight against coal

The desire to help the planet and covers representatives of Russian business, especially for this United in the Russian partnership for the preservation of the climate. The most notable initiative of this partnership was announced by the head of RUSAL Oleg Deripaska, the idea of establishing a global “reward for carbon”. Its size should be 15% by 2020 for the emission of tons of CO2-equivalents, with a further gradual increase of fees to$ 35 per ton by 2030.

A cause of concern for the leadership of RUSAL’s climate is coal, this time Chinese. The fact that producers of primary aluminium from China, strongly pushed on the world market competitors, the main source of electricity is coal generation. On the contrary, RUSAL for its production uses clean energy from hydropower plants. Kemerovo region Governor Aman Tuleev described the environmental initiatives of the head of RUSAL: “just need to strangle the Chinese aluminum industry and to withdraw your. But at the same time you completely destroy coal generation”.

“Carbon fees” has its supporters and in the Russian Ministry of nature. At least the head of the Ministry Sergey Donskoy on the eve of the Paris summit declared that Russia is ready to consider this issue. Support to the Ministry of environment also received the initiative of the presidential envoy in the far Eastern Federal district Yuri Trutnev to turn Eastern Siberia into a carbon-free zone. As optimistic said the Ministry of the environment, creating carbon-free zone is possible by switching to renewable energy and by introducing mechanisms for financial incentives, including a carbon tax.

It is clear that the emergence of “low-carbon economy” — it is beautiful and progressive. However, how much this pleasure will cost?

Who will pay?

The main source of greenhouse gas emissions in Russia is the energy sector. It accounts for about 84% of the Russian emissions, which is in absolute terms more than 2.3 billion tonnes of CO2-equivalent. If current volumes of emissions due to introduction of a “fee on carbon” an additional annual financial burden on the power industry about $35 billion in 2020 (that’s about 2.5% of Russia’s GDP in 2015) and more than $80 billion by 2030.

Further this amount will be distributed through the increase of energy tariffs for firms and households. The result is that the population will be the main victim of the “struggle for the climate”. First, the Russians will feel the increase in inflation due to a General increase in energy prices across the country. Secondly, there will be a sharp increase of tariffs for utilities, primarily electricity and heat. According to the data, which led the Governor of the Kemerovo region Aman Tuleyev, after the introduction of a “fee on carbon,” the price of electricity and heat in Russia may increase 2.7 times.

Even if we assume that the head of Kuzbass exaggerated by the growth of public utilities, still the consequences for citizens will be very serious. In his report “Fighting for the climate: who will be the losers,” we estimate that by 2020, when it prompts you for “carbon fee”, its relative size in the production of one kWh of electricity generated by gas generation (i.e. with the lowest carbon emissions), should exceed 50 cents. For coal generation, this figure will amount to about 90 cents.

Even worse would be the case in heat supply, taking into account, to put it mildly, not quite good condition of this sector. For the production of thermal energy for heating consumes about 33% of primary energy consumption in Russia. That is, one third of all volumes of “release fees” will be collected through the tariffs for heat.

Supporters of the introduction of “carbon tax” claim that the rising prices of traditional fuels will stimulate the processes of modernization and energy saving. As a result, sooner or later the negative effects will be minimized. However, even when applying the most modern technologies and equipment, the growth of the heat tariff will be about 15-25% depending on the region. (The basis for the calculation was taken the model of “alternative boiler house”, which the Ministry plans to introduce for the calculation of long-term prices for heat for consumers).

In addition to the increase of prices for utilities, a severe blow will be inflicted on workers in the most carbon-intensive sectors of the Russian economy, primarily in the coal industry. There will be a sharp worsening of the socio-economic situation in mono-cities, where the dominant are mining enterprises. All of these single-industry towns in Russia, the number 31 with a total population of about 1.5 million people. But it’s the little things when it comes to the future of all mankind.

The point of view of the authors, whose article published in the “Opinions” section, may not coincide with editorial opinion.