Report - UNDP Russia

• Russia’s energy efficiency remaining lessthan half that of developed countries;• Slower progress towards energy efficiency inRussia during the coming decade andincreased export of energy-intensivecommodities with low levels of processing(metals, paper etc.);• Oil & gas continuing to dominate primaryenergy consumption structure for thecoming decade (75% of the total). Thehydro-electric and nuclear energy industrieswould grow, but relatively slowly. Efficiencyof the oil & gas industry could be increasedto some extent by an end to gas flaring;• Continued dominance of natural gas as thefeedstock to fuel-fired power stations,despite limited changeover to coal in somelocations;• Continued low levels of oil product export(2-2.5 times less than exports of crude oil byvolume);• Government energy priorities remainfocused on increase of extraction capacitiesand development of transport infrastructurefor the oil & gas industry. Development ofnuclear and hydro-electric generating due tointerest of government companies in thesesegments;• Most innovative activity remains in the oil &gas sector and supporting industries.Innovative energy scenarioDecreasing income from oil & gas exportsdue to general worsening of the internationalenergy market after the world crisis or todifficulties in further development of energyresources lead the government and business topartial restructuring of the fuel & energy sectorand of the economy as a whole. Thegovernment’s long-term investment policy takesaccount of new global tends towards energyefficiency. These factors in combination couldhave the following consequences:• Shift of government and private investmentsfrom extensive development of the fuel &energy sector to its modernization.Achievement of greater refining depth andincrease of oil product export volumestowards the level of crude oil exports;• Energy efficiency innovations and muchgreater use of existing mechanisms forenergy saving;• Development of market institutions in theenergy sector, including ending ofsubsidized energy use and improvement ofcontract mechanisms;• Indirect energy efficiency incentives forindustry and households including flexiblepricing mechanisms, subsidies, exemptionsand other economic instruments toencourage voluntary energy savingbehavior;• Increasing the share of renewable energysources (not including large hydro-electricstations) to 4-5% of total electricity generation(stated objective of the Ministry of Energy);• Significant narrowing of the gap in energyintensity of GDP between Russia anddeveloped countries. The ratio of energyproduction to GDP in Russia is still 3-4 timeshigher than the world average;• Government focus on freeing additional fuel& energy resources through improvedenergy efficiency. Targeting of competitiveadvantages in ‘new energy’ (energyefficiency and use of alternative energies);• Focus of innovation in the fuel & energysector and related industries, as well as in thedefense industry, led by state companies.Diversification scenarios (after 2020–2025)Diversification scenarios assume that, inthe long-term, the government chooses andimplements a diversification policy. Goodinstitutional environment is created fordevelopment of other economic sectors (inaddition to the fuel & energy sector and defenseindustry).• Energy efficiency of the Russian economycomes closer to that of developed countries(though Russia remains much more energyintensive due to export-oriented productionof energy-intensive commodities such aspaper, fertilizers and metals);22 National Human Development Report in the Russian Federation 2009