CAN U.S. & RUSSIA JOIN ON CLIMATE, ENERGY & EFFICIENCY?

U.S.-Russia Climate and Energy Efficiency Cooperation: A Neglected Challenge
Andrew Light, Julian L. Wong and Samuel Charap, June 30, 2009 (Center for American Progress)

SUMMARY
With President Obama scheduled for a summit in Moscow with Russian President Dmitri Medvedev July 6-to-8, the think tank Center for American Progress (CAP) released After the ‘Reset’: A Strategy and New Agenda for U.S. Russia Policy (Reset) that calls on the President to use 3 climate and energy issues to enhance U.S.-Russia cooperation.

The CAP policy paper argues for (1) a U.S.-Russia strategic partnership on the international climate change treaty due to be finalized in Copenhagen in December, (2) support from the U.S. for the instituting of a Russian emissions trading market, and (3) a collaboration between Russian and U.S. scientists, engineers and planners to help Russia develop energy efficiencies, improve its energy intensity and reduce its greenhouse gas emissions (GhGs).

After China and the U.S., Russia is the world's 3rd-biggest GhG-emitter (taking EU members individually). Russia’s per capita emissions are rising and are projected to match the world-leading U.S. per capita GhG spew by 2030. Russia is also the 3rd biggest energy consumer in the world and one of the world’s most energy-intensive economies.

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All this makes Russia likely to be a major factor at Copenhagen, and all the moreso because there are voices in Russia preaching against participation. Like some misinformed demagogues in the U.S., there are those in Russia - where the bitter cold of winter is never far from the mind - who preach they will be better off in a warmer world.

With its expanding oil and natural gas industry, its consolidating political power and its severely depressed economy, Russia has fallen far since the Cold War.

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The CAP Reset policy paper reaches far beyond New Energy considerations but suggests the Obama administration can use climate and energy issues to re-engage Russia, an engagement that was completely lost in the waning years of the previous administration.

Engagement on the upcoming Copenhagen climate change debate is potentially crucial and opportune. Resistance from Russia should be expected. While the U.S. is burdened by climate change deniers, Russia is burdened by climate change opportunists who see their nation prospering economically in a warmer climate.

More significant is the reluctance of Russia to take on serious GhG cuts because of the potential costs. The standard for GhG reductions in the Kyoto agreement (and therefore in its likely successor) was emissions in 1990. Russia’s emissions had dropped very low in 1990 due to its economic contraction in the wake of the Soviet Union collapse and the loss of many satellite states. Russia is not likely to meet its 2012 Kyoto obligations, which are 10-to-15% below 1990 levels, and it will take serious, economy-hampering action for Russia to drop its present GhGs near 1990 levels before the 2020s.

Russia's need to cut emissions offers the U.S. something to offer. (click to enlarge)

In response to Russia's recalcitrance, the CAP paper says the smart U.S. play is to see Russia’s resistance to serious GhG cuts as an opening gambit and go on negotiating.

The policy paper makes a special point of suggesting something the President, by most reports, is already quite adept at: Be prepared to listen next week. Effective istening was not, it is said, among Mr. Obama’s predecessor’s job skills.

When President Obama begins to talk, he needs to talk to President Medvedev in economic terms. He needs to convince Russia of the economic opportunity in GhG cuts. (It will be a good warm-up for Mr. Obama before taking on the Senate in September.)

The President can talk about the common threat both nations face and use the common threat to build trust. He can then offer cooperation in 2 areas where the U.S. has strength and experience that Russia can use: (1) Building an emissions trading market and (2) advancing energy efficiency. These are ways that Russia can gain economically while attending to climate change. These are ways the U.S. and Russia can work together on something more economically profitable for Russia than arms control and nonproliferation. The arms control and nonproliferation agreements, and even perhaps a climate change agreement, can evolve in the context of improved dialogue.

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COMMENTARY
Russia, the CAP paper predicts, could be key to success at Copenhagen. It was crucial to ratification of the Kyoto Protocol. After the first round of commitments to Kyoto, the requisite 55 countries had ratified but they did not meet the requisite 55% of world GhGs. Only when Russia, with its globally 3rd-ranking GhGs, kicked in did the agreement become official.

If conservatives in the U.S. and China refuse to ratify the new agreement that emerges at Copenhagen, Russia could once again be pivotal. For this reason, it would be a good idea, the CAP paper concludes, for Mr. Obama to bring Russia in early rather than allowing it a spoiler’s leverage.

How? By offering it more economic development for coming in than for staying out.

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First, emissions trading. Russia owns a lot of potential offsets that are worth a lot of money on world emissions markets. One estimate puts the value of credits Russia could generate from New Energy and emissions reduction projects funded by EU countries looking to offset their own emissions at 1.5 billion euros. At the frontier of the fight against global climate change, that’s a lot of "cash on the barrelhead" (as they used to say on the American frontier and as the still say in the Russian oil industry).

Because Russia is not officially linked to the EU Emissions Trading Scheme (ETS) or any other emissions trading market, the U.S. can offer Russia help in capitalizing and marketing its assets. China has more ready capital to offer but virtually no experience with emissions markets. The EU has a wealth of experience with the ETS but little capital. The U.S. has some capital and some experience in building markets. It built the successful SO2 cap&trade system that turned back the acid rain problem in the 1990s and is currently creating regional and voluntary GhG markets, including the Western Climate Imitative, the Regional Greenhouse Gas Initiative, the Midwestern Initiative and the Chicago Climate Exchange.

President Obama could offer U.S. trading centers and a pilot trading platform for the sale of GhGs from one or a few of Russia’s industrial sectors to Mr. Medvedev. He could toss in guidance in setting up inventory systems, tracking systems for GhG sources and sinks and systmes for building the architecture and infrastructure of trading. He could also promise links to bigger markets and access to capital when Russia is ready.

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The genius of this strategy is that it is likely to get Russia’s oligarchs and oilmen pushing at Mr. Medvedev (and Mr. Putin, his handler) to do the deal because there is so much opportunity (meaning money) in it. And the unstated lesson will be that there’s a lot of gold in return for getting involved in the global climate change fight.

There is something else Mr. Obama can offer Russia: Improved energy efficiency and energy intensity. This would be in keeping with the economic modernization goals the Kremlin clearly seeks.

The policy paper’s strong insistence on a strategic offer of Energy Efficiency technology is based on the 3 things: Russia needs it, Russia wants it and the U.S. can help Russia get what it needs and wants.

Russia ranks with Ukraine and Saudi Arabia in the lowest quadrant of energy efficiency and energy intensity. (click to enlarge)

The Russian government has been talking about improving its energy efficiency and its energy intensity (the amount of energy consumed per unit of gross domestic product). Prime Minister Putin issued a government order earlier this year (thoroughly reported in the September 25, 2008, issue of Russian Analytical Digest)calling for a big improvement in the Russian electric power sector’s energy efficiency. In June 2008, President Medvedev signed a decree aimed at reducing Russia's energy intensity 40% below its 2007 level by 2020. Why?

Because Russia’s energy intensity is higher than any of the world’s 10 top energy-consuming countries. It is 3.1 times the EU’s energy intensity and more than twice the U.S. energy intensity.

Russia’s poor performance to date in these areas means there is a lot of room for improvement and the U.S. has already been developing effective programs for improving efficiency and intensity – in China. A Lawrence Berkeley National Laboratory/DOE program in partnership with the Chinese government, the top 1,000 energy-consuming Chinese industries and Chinese scientists and engineers has made major improvements in China’s efficiency and intensity.

The U.S. partnership with China in the "Top 1000" program produced quick and important results. (click to enlarge)

Such a collaboration could also help Russia create something like the U.S.’s joint EPA/DOE Energy Star program. Energy Star established energy efficiency standards and energy efficiency compliance codes for a full range of product categories and practices to which businesses comply in buildings and facilities. It has been successful over 17 years and in 15,000+ private- and public-sector organizations. In 2008, the U.S. obtained savings of $19 billion through the Energy Star program.

The policy paper suggests President Obama propose a similar partnership with Russia, promising the big economic advantages that come with energy efficiency and, only coincidentally, facilitating big cuts in Russia’s GhGs.

Funding for such a program could come from public-private partnerships on both the U.S. and Russian sides. It would be an opportunity for U.S. and Russian scientists to collaborate on technologies that benefit both countries. New technologies emerging from the process Could be shared.

The geopolitics of the President’s upcoming summit with Russia are complex and multidimensional. Nuclear midnight is no longer quite the threat it was during Cold War days. But the world is facing another existential threat. This time it is a hot threat. It is not from war but from weather so vast it is not local but global and time so extended it is not weather but climate. And against the threat of warming caused by global climate change Russia and the U.S. find themselves on the same side, facing a common threat. It is time for their leaders to learn to work together.

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QUOTES
- From the CAP policy paper: “The build up to the climate summit in Copenhagen is making it clear that broad-based involvement by all countries—but especially the developed countries and major emerging economies in the developing world—is needed to create a consensus on global climate change action. Most of the attention is focused on the United States, the European Union, China, and India as the major players necessary to forge a global deal, and there is insufficient thought given to the role Russia could play in a post-Kyoto agreement. There are however at least two reasons—besides the fact that Russia is a Kyoto signatory and a major emitter—to engage Russia directly in Copenhagen.”

First, the low-hanging and quickly profitable fruit of efficiency. Later, New Energy. (click to enlarge)

- From the CAP policy paper: “Russia and the United States were incapable of discussing important issues in the final months of the Bush presidency. The Obama administration now has the opportunity to build a relationship of trust and cooperation to fight a common threat. Working together on advancing energy efficiency in Russia and demonstrating the economic advantages of attending to climate change offers both countries an ideal platform for a new era of constructive diplomacy and joint action. Climate and energy efficiency can also expand the U.S.-Russia relationship beyond the traditional areas of arms control and nonproliferation. President Obama should capitalize on this opportunity starting next week in Moscow when he meets with Medvedev. Confronting this neglected challenge may very well wind up being a key to solving the climate crisis.”