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An energy development strategy for the USSR
An energy development strategy for the USSR Minimizing greenhouse gas emissions Alexei A. Makarov and Igor Bashmakov
The second largest national consumer of commercial energy in the world, the USSR also emits large quantities of energy-related C02. This study uses four long-term scenarios of energy use and related emissions to investigate opportunities for reducing the USSR's greenhouse gas emissions over the next 30 years. This paper shows that if no measures are taken to control these emissions, C02 and methane will increase by 1.5 to 2 times the 1990 level by the year 2020. However, this growth can be restrained dramatically through structural changes in the Soviet economy, improved energy efficiency and interfuel substitutions. Abating emissions of carbon in the USSR would entail the widespread implementation of energy policies and, for mort' substantial reductions, higher investments from the Soviet economy. Achieving these goals would also require broad support from the international community. Keywords: USSR; Energy efficiency;Carbon emissions
The USSR, with 289 million people and the producer of one-eighth of global economic output, consumes more energy than any other nation aside from the USA (Table 1). The USSR produces more than 20% of the world's oil and almost 40% of the world's natural gas, and exports a significant share of both. During the 1977-87 period, almost 80% of the growth in the global production of natural gas stemmed from the USSR. S e v e r a l principal characteristics distinguish the Soviet energy balance from those of other countries: Igor Bashmakov is Head, and Alexei Makarov is v~ith the Department of World Energy, Academy of Sciences, 44/2 Vavilov Street, 11733 Moscow, USSR.
0301-4215/91/012987-08 0 1991 Butterworth-Heinemann Ltd
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a high share of natural gas in energy production (38%) and consumption (38%); a large portion of energy exports in total energy production (16%); well-developed cogeneration capabilities; the dominance of industry, construction and agriculture in total end-use energy consumption (54%); and the relatively minor role of electricity in energy end-uses, but the comparatively high degree of centralized heat supply.
At present, the energy sector accounts for 7% of energy consumption and losses in the USSR; industry, construction and agriculture account for 32%; residential and commercial sectors for 15% and transport for 10%. CURRENT GREENHOUSE EMISSIONS
GAS
Fossil fuel combustion in the USSR generated just under 1 billion tonnes of CO2 in 1990. Power plants, the principal source of energy-related CO2 emissions in the USSR, accounted for 36% of this total. By fuel type, coal and other solid fuels generated 38% of the CO2 emitted that year, oil produced 33% and natural gas accounted for 29%. Estimates for 1990 suggest that Soviet energy intensity (the amount of energy required to produce each unit of GNP) exceeded the US level by 30%, the Western European level by 78% and the world's average by 27%. The CO2 intensity (carbon dioxide emissions per unit of primary energy consumption) of the Soviet energy balance remains relatively low 7% lower than in the USA. 1 Only Western Europe has a lower CO2 intensity than the USSR, due primarily to the higher proportion of nuclear power in the Western European fuel mix. 987
An energy development strategy for the USSR Table 1. Comparison of the energy and carbon intensities of the USSR, the USA, Western Europe and the world, 1990 (estimated).
National income ($ billion) a Consumption of primary energy (E J) Energy intensity (G J/S1 000) CO2 emissions (Mt of carbon) u Ratio c (kg of carbonlGJ) Carbon intensity of national income (kg of carbon/S) d
USSR
USA
Western Europe
World
1 430 61.06 42.11 1 018 16.67
2 550 81.76 32.06 1 460 17.85
2 460 58.01 23.58 920 15.86
11 400 376.51 33.03 6 862 18.23
0.70
0.57
0.37
0.60
a In 1983, US$ purchasing power parity (as calculated according to Soviet methodology). In comparison, Summers and Heston estimate GNP purchasing power parity for the USSR in 1985 at ($1980) $1 748. See, R. Summers and A. Heston, 'A new set of international comparisons of real product and price levels estimates for 130 countries, 1950-1985, Review oflncome and Wealth, May 1988, Data Table. b Including non-commercial types of fuel. c Not corrected for consumption of energy resources for non-energy needs. d Carbon emissions produced from burning fossil fuel per unit of national income.
The high ratio of hydrogen to carbon in the Soviet fuel mix stems largely from the USSR's reliance on relatively high quality energy resources. Between 1970 and 1984, this ratio fell by 21% in the USSR due primarily to the increasing share of natural gas in the primary fuel mix. While this trend is consistent with the 22% drop experienced in Western Europe over the same time period, it contrasts significantly with the mere 1% decrease in the USA, where the share of natural gas in the primary fuel mix dropped while those of petroleum and coal increased. MODELING SOVIET GREENHOUSE GAS EMISSIONS This analysis looks at the potential for reducing energy-related greenhouse gas emissions in the USSR over the next three decades. To carry out this examination, the authors developed four scenarios for future energy use and greenhouse gas emissions in the USSR: a reference scenario; a structural change scenario; an energy efficiency scenario; and, an interfuel substitution scenario. In order to account for the range of futures possible for the Soviet economy, three alternative economic growth rates were considered for each scenario: a base case; an optimistic case; and, a pessimistic case. In the base case, national income is assumed to grow at an average rate of 3.0-3.5%/year through 2005 and 2.5-3.0%/year over 2005-2020. The optimistic variation assumes a faster GDP growth rate of 4.5-5.0% from 1990 to 2005 and 3.5-4.0% from 2005 to 2020. In the pessimistic case, GDP grows by 2.2-2.5%/year during the 1990-2005 988
period and by 2.0%/year between 2005 and 2020. In each of the three cases, the current declining trend in energy intensity (elasticity index) was extrapolated. 2 This paper focuses primarily on the results for the base case variation of each of the four scenarios, although the results of the optimistic and pessimistic variations are also presented in certain instances. The reference scenario assumes a continuation of current patterns of energy use and economic growth and structure in the USSR from the present through 2020. However, the Soviet economy cannot sustain the continued growth in energy consumption and the corresponding demand for increasing energy production. If current trends continue, capital and other resources will be required in amounts so vast as to preclude any possibility of realizing any but the pessimistic variation of the reference scenario. The three alternative scenarios investigate the possibilities of averting this bleak future. The varying results reveal which measures present the greatest opportunities for curtailing the growth rates of energyrelated carbon in the USSR. Future Soviet energy production is projected by trying to optimize the quantity and mix of fuels produced while maintaining the minimum levelized supply costs. This projection is carried out using the Energy Research Institute's 'System Octopus,' a computer model which facilitates research on the optimization of national primary energy production and transformation) For this study, the authors used System Octopus to minimize capital and levelized operating costs after designating levels for the following: motor fuel; electricity; centralized heat supply; fuel for boilers and furnaces; oil, gas and coal exports; and non-energy uses of energy reENERGY POLICY December 1991
An energy development strategy for the USSR Tn = Ti - 0.2 ( K e / Y - 0.05)
Table 2. Carbon emissions in the USSR 1990-2020 (rot/C) ~. Scenario
1990
2005
2020
Reference case Structural change Energy efficiency Interfuel substitution
999 999 999 999
1 315 1 260 1 114 1 008
1 650 1 420 1 205 950
a All totals are estimated using the base case economic growth rate. sources. The discount rate applied varied froaa between 8% and 12% depending on the technology. Reference scenario
The reference scenario assumes a continuation of recent Soviet energy and economic patterns. The growth of electricity demand continues to outstrip that of non-electric energy demand; by 2020, the share of primary fuel required for electricity generation increases from 24% at present to 34%, 38% and 29% in the base case, optimistic and pessimistic variations respectively. Levels of oil production in the reference scenario correspond with the maximum economicallymotivated levels. 4 While in the base and optimistic cases the levels of natural gas production are practically the s a m e and also c o r r e s p o n d with economically-motivated levels, in the pessimistic economic growth variation, gas production is about 10% lower due to the lesser demand for power generation. The levels of coal and nuclear energy required for electricity generation vary in each of the three economic growth variations. Within the USSR, however, coal dominates the fuel mix for electricity generation in the Asian regions while nuclear power dominates in the European regions. Current trends in energy development in the USSR would mean a continual rise in greerhouse gas emissions. In the base case variation of the reference scenario, CO2 emissions rise from 999 million tonnes of carbon (mt/C) in 1990 to 1 315 mt/C in 2005 and to 1 650 mt/C in 2020 (Tabile 2). Structural change scenario
The structural change scenario examines the potential impact of redirecting investments from energyintensive and defense industries to less energyintensive industries. Yu. D. Kononov, a specialist in energy and economy at the Siberian Energ~ Institute, has shown that the sum of investments for exploration, exploitation, transformation, transportation and distribution of energy resources should not exceed 5-5.5% of national income. 5 Otherwise, annual rates of economic growth will fall in accordance with the following expression:
ENERGY POLICY December 1991
where: Tn = new rates of national income growth Ti = initial rates of national income growth K e / Y = ratio of gross fixed capital investment in
the energy sector to national income. Maintaining this balance between investments and GDP would entail the implementation of official Soviet policies aimed at reducing the role of energyintensive industries and promoting the growth of the services sector. The structural change scenario attempts to promote these types of shifts in order to lower the intensity of energy use in the USSR. With the broader use of energy-efficient technologies and equipment, energy intensity would decline at a far more rapid rate than at present, as shown in the results of the energy efficiency scenario. 6 The structural change scenario would reduce Soviet energy intensity at an average annual rate of 1.6% between 1990 and 2005 and at a rate of 1.7%/year through 2020. These figures reflect the upper range of those rates recently experienced in industrialized capitalist countries. The success of this scenario, however, hinges on reducing expenditures for military purposes considerably. The imposition of the above structural changes leads to only slightly different levels of energy demand in the base, optimistic and pessimistic variations of the structural change scenario. This result occurs largely because the growth of energyintensive industries is the same irrespective of the overall growth rate of GNP. Because the three economic growth variations do not produce substantially different levels of energy demand in 2020, energy production levels also remain similar in all three cases. The structural changes would have a number of important impacts on the Soviet energy mix. The changes would reduce the share of energy provided by liquid fuels, relatively stabilize the shares of solid fuels and natural gas and increase the shares of renewable and nuclear energy. In addition, the economic restructuring would serve to increase the relative shares of the power, transportation, residential and commercial sectors in total energy demand, while decreasing the shares of heavy industry, construction and agriculture. Levels of greenhouse gas emissions vary only slightly with economic growth in the structural change scenario. When incorporating the base case economic growth rate into the structural change scenario, COz emissions rise to 1 260 mt/C by 2005 and to 1 420 mt/C by 2020. While these levels 989
An energy development strategy for the USSR Table 3. Energy demand in the USSR, 1990-2020 (E J) a. Scenario
1990
2005
2020
Reference case Structural change Energy efficiency Interfuel substitution
58 58 58 58
83 79 69 69
116 99 75 75
a All totals are estimated using the base case economic growth rate.
represent a substantial increase relative to current emissions, the 2020 figure lies 15% lower than the reference scenario emissions projection for that same year (Table 2). Thus, the results of this scenario indicate that by restructuring its economy, the USSR could greatly curb the growth of greenhouse gas emissions without actually undertaking any targeted efforts to control them. The continued electrification of the economy raises the level of emissions from power generation. In the structural change scenario, the growth of electric power demand causes over half the growth of greenhouse gas emissions between 1990 and 2020. As a result, the share of emissions produced by the industry, construction, agriculture, residential and commercial sectors declines.
Energy efficiency scenario The reference scenario limits the scale of energyefficient technologies and equipment incorporated into sectoral activities in 2020 based on the actual production capabilities of Soviet machinery, and the structural change scenario focuses on the potential for structural, not technological, change. The energy efficiency scenario, however, goes beyond the scope of the reference and structural change scenarios to examine the cost-effective technological potential for improving efficiency in the USSR. By investing greater amounts of capital in improved energy efficiency, the USSR could conserve far more energy. The energy efficiency scenario estimates that about 10 EJ of energy can be saved in the year 2005 relative to the structural change scenario (Table 3). The direct capital investments needed to realize this potential would amount to about 60 billion rubles. While the sum appears large, this investment would save energy at a cost less than the marginal cost of energy supply. Approximately 6.3 EJ could be saved at a cost of about 4 rubles per GJ saved. Another 2.9 EJ could be saved in 2005, provided fixed capital investments are increased to about 6-7 rubles per GJ saved. Another 1.8 EJ may be saved by raising investments to 9 rubles per GJ saved. 990
As a rule, the costs of conserving energy are lower than the levelized costs of increasing energy production (Table 4 and Figure 1). Only 25-30% of the cost of making energy-efficiency improvements stem from implementing measures at the point of use. The remaining 70-75% result from the expense and difficulty of expanding domestic production of energy-efficient equipment and materials. Certain peculiarities of the Soviet price system make the domestic manufacture of energy-using equipment only half as expensive as in other nations. 7 Therefore, importing technologies and equipment to further enhance energy conservation would require far more foreign exchange. If the energy sector in the USSR is reoriented after 1990 to incorporate the most advanced technologies and equipment, energy consumption can be reduced by 10 EJ in 2005 and by 24 EJ in 2020 compared with the structural change scenario. The energy efficiency scenario meets the criterion of minimum costs for energy development and does not envisage special measures to reduce greenhouse gas emissions. In the energy efficiency scenario, Soviet energy intensity declines at an average annual rate of 2.1%/ year between 1990 and 2020. Thus, energy intensity drops by 47% by 2020. To conserve that much energy over a four-decade period would prove a major challenge. It took the USA about 70 years to reduce its energy intensity by half, which it did first between 1851 and 1920 and again between 1921 and 1990. The UK achieved its first 50% reduction over a span of 100 years from 1850 and 1950, and its second 50% reduction may be achieved in 50 years (1951 to 2000). ~ The energy efficiency scenario reduces carbon emissions 13% by 2005 and by 18% by 2020 relative to the structural change scenario assuming the base case economic growth rate. This outcome, however, still reflects a 11.5% growth in emissions by 2005 and 20.5% by 2020 relative to the 1990 level. The energy efficiency scenario achieves the largest reductions in carbon emissions in the energy and industrial sectors.
Interfuel substitution scenario The interfuel substitution scenario was created by modifying the energy efficiency scenario to maximize the use of energy resources that do not produce greenhouse gases. This scenario was created in two steps: the first step incorporated a nuclear power variant and the second step integrated a renewable energy variant. In the first step, nuclear power's share in electricity and heat production was gradualENERGY POLICY December 1991
A n energy development strategy for the USSR
Table 4. Selected Soviet energy efficiency measures, 1990-2005.
Regulated electric drive Efficient lighting G a s turbine and combined cycle plants Low capacity multi-fuel boilers Centralized ovens with efficiency × 2-3 Insolation of steam supply networks Control and m e a s u r e m e n t in energy use Switch small boilers to high grade fuels C h a n g e inefficient ovens to large boilers Improved gas compressors in pipelines Shift from harvesters to site threshing A d v a n c e d technologies for ind. heating Scrap recycling in steel industry Insolation of cattle breeding buildings Reduction of electric transmission losses A u t o m a t i o n of heating stations Replacing wet c e m e n t clinker with dry m e t h o d Improved brick production
Annual energy savings in 2005" {EJ)
Total capital cost 1990-2005 b (Rubles)
Levelized cost c Soviet approach (Rubles/G J)
Western approach
_4 i[. 1 I).7 1).7 0.6 0.5 0.5 0.4 0.3 0.3 q).3 ,).2 ,).4 3.2 3.2 E).2 9.2 0.1
3.7 8.5 5.0 3.3 1.2 0.4 1.7 0.3 0.7 4.7 0.2 0.18 0.4 1.3 0.4 1.4 0.9
0.7 2.41 1.64 1.09 0.47 0.24 1.11 0.20 0.53 3.38 0.19 0.22 0.42 1.85 0.52 1.93 1.80
10.82 2.99 2.18 1.27 0.55 0.28 1.41 0.23 0.54 3.95 0.22 0.27 0.42 2.29 0.57 1.86 1.80
Notes: a A n n u a l energy savings in 2005 with volume of penetration for 1991-2005. b S u m of capital cost during 1991-2005. c Two approaches were applied to levelized cost calculaticns: 1) The Soviet approach calculated in accordance with the formula: L C = (En + 1/T + OC) * CAP, where L C = levelized cost; En := normative ratio for payback of capital investment (En = 0.12); T = lifetime of investment; OC = ratio of operating cost to capital cost ( O C = 0.05). C A P = investment. 2) The W e s t e r n approach which is based on: L C = [ACCR * CAP) + OPER] fuel savings; A CCR = i~ (1 - (1 + i) ** - 1 ) - annual capital change rate; i = discount rate (i = 0.1); l = lifetime of investment); O P E R = annual operating costs. Source: Authors.
iy increased. The limits of nuclear power production were determined on the basis of growth in demand for electricity and heat. That is, the penetration of nuclear was constrained by the retirement rates of fossil-generating capacity, the technological limitations of electricity and heat supply systems and the limitation of nuclear power mainly to provide baseload power generation and supply heat to large consumers. The additional use of nuclear energy for electricity and heat supply requires significantly larger expenditures in the energy sector. By exploiting all technically feasible nuclear capacity in combination with maximum cost-effective energy efficiency, it is possible - from a technical point of view - to stabilize greenhouse gas emissions after 2005 at a level exceeding that of 1990 by only 1%. Similarly, it is technically possible to reduce the level of emissions in absolute terms after 2020. However, this result will require 110 billion rubbles in additional costs (Figure 1). The increment of investment required for the maximum development of nuclear energy was offset somewhat by savings resulting from a slow down in the growth of coal and gas production. Estimates nevertheless show that an additio:aal investment of about 600 rubles per tonne of carbon reduced is required for an additional decrease in ENERGY POLICY December 1991
greenhouse gas emissions. Thus, the cost of using nuclear power to cut emissions is higher than that of using intensive energy conservation in the USSR, as also appears to be the case in the U S A . 9 Another way to reduce emissions is by drawing a greater share of energy from renewable energy sources - hydroelectric power (including microplants), wind, solar, geothermal power and energy extracted by means of heat pumps. The scale of use of these technologies is determined by economic competitiveness and a country's mechanical engineering capabilities. The interfuel substitution scenario assumes electricity output from hydropower plants reaches 360 billion kWh by 2005 and 500 billion kWh by 2020 - a far larger hydro contribution than in the previously described scenarios. In total, the additional contribution made by renewable energy sources relative to the energy efficiency scenario would total 0.6 EJ in 2005 and 1.6 EJ in 2020. Expanding the use of renewable energy would entail considerable growth in expenditures for energy development due to renewables' higher capital costs. While the additional investments appear to be higher than in the nuclear scenario, the impact in terms of carbon savings appears to be far lower. To reduce emissions by one tonne per year would require an additional investment of about 1 000 rubles through 991
An energy development strategy for the USSR 14
12
Efficiency with Western technology 10
Supply cost
Efficiency
1-
0
"i
I
1
I
I
5
10
15
20
25
Exajoules
Figure 1. Soviet efficiency potential by 2010 shadow supply cost v efficiency cost. Source: EnergyResearch Institute of the USSR Academyof Sciences. 2005. By 2020, however, this cost should drop to about 700 rubles.
Technological means of suppressing greenhouse gas emissions Technical measures are being developed to suppress emissions of CO2. Areas of investigation include the possibilities of: (1) absorbing CO2 from thermal plant's gas emissions and using it to compress oil fields and, therefore, increase production; and, (2) using boiler gas emissions in greenhouses as a means to increase production of vegetables, etc. It is hard to assess the success of this work or to set terms for its practical realization. An optimistic outlook envisions these measures reducing CO2 emissions by 5% and 10% by the years 2005 and 2020 respectively. According to some estimates, installing facilities for scrubbing CO2 at large thermal power plants may raise investment costs per unit of capacity by between 1.7 and 3 times current costs and electricity production costs by 60-100%. I° If these estimates are taken into account and if the factor of growth is assumed to equal 2.5, capital costs per tonne of carbon reduction would total 325 rubies. In that case, 16.3 billion rubles would be required to reduce 992
emissions of CO2 by 50 million tonnes annually through 2005, and 29.3 billion rubles would be needed to reduce emissions by 90 million tonnes through 2020.
Measures for controlling greenhouse gas emissions Estimates of CO2 and methane emissions combined for 1990 in the USSR total 1.1 billion tonnes of carbon. If present economic and energy development trends continue, the combined emissions total will grow steadily and, depending on the rate of economic growth, will increase by 150% to 200% by 2020. Present trends are expected to change in the USSR, however, motivated by reasons not directly connected to global warming. The USSR may choose a more energy-efficient development path to ensure its own economic well-being in coming years. In the process, such shifts would bring about significant reductions in carbon emissions. The structural change scenario reflects substantial carbon reduction opportunities, but its realization would entail: •
de-militarizing world politics and making the transition to genuine disarmament; ENERGY POLICY December 1991
An energy development strategy for the USSR
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curtailing military spending "reorienting military production towards the production of consumer and capital goods; implementing radical economic reforms that would harmonize society's economic interests, stimulate initiative and create the conditions for a transition to efficient resource use; restructuring the Soviet economy so as to reduce the share of resource and energyintensive industries in the production c,f consumer and capital goods; and further integrating the USSR into the world economy with the aim of raising the efficiency of the Soviet economy.
•
•
•
This set of measures will effectively reduce the energy intensity of national income and, as a consequence, decrease carbon emissions by 30-40% compared to current trends. This reduction would total 75-100 million tonnes by 2005, and 31)0-640 million tonnes by 2020. Thus, as a result of measures not connected directly with the control of the greenhouse effect, the USSR's share of global carbon emissions would remain unchanged.~2 Stabilizing emissions at the 1990 level (as shown in the interfuel substitution scenario), however, would require greater effort and additional expenditures, including the following major contributions: •
•
•
the implementation of additional energy efficiency measures that would reduce the nation's energy intensity by 2. l%/year, cutting primary energy consumption by an additional 24 EJ in 2020. This effort would cut carbon emissions by 140 million tonnes by 2005 and by 210 million tonnes by 2020 relative to the structural change scenario; the maximal use of nuclear energy, increasing its share in the energy balance in 2020 to 15.5 EJ. This measure would cut carbon emissions by 75 million tonnes by 2005 and by 160 million tonnes by 2020 compared to the structural change scenario. 13 However, such a rate of nuclear energy development will require large investments; the maximal use of renewable sources of energy, with enormous associated investment requirements. This policy would reduce carbon emissions by 30 million tonnes by 2005 and by 100 million tonnes by 2020.
Emissions can be reduced by employing technological means for their suppression, including: •
reducing methane leaks from 2% to 1% of gross withdrawals of natural gas, which would
ENERGY POLICY December 1991
cut emissions by about 50 million tonnes of carbon equivalent by 2020; and, scrubbing or otherwise physically removing carbon from fuels, which optimistically could cut emissions by 50 million tonnes by 2005 and by 90 million tonnes by 2020.
•
Therefore, applying all the additional measures could theoretically reduce emissions by 25% of the 1990 level. However, even the stabilization of emissions at the 1990 level seems utopian since it would require great material resources and investments from the economy, possibly stunting economic growth and further dropping the declining standard of living. At the same time, a realistic policy should, in some measure, bear an imprint of a utopia; otherwise the policy may turn into a pragmatic attachment to the current situation, useless for solving complex problems.14 This analysis limits the measures considered for reducing carbon emissions to those which increase energy development investment costs by less than 15%. With this constraint, the growth of emissions can be halted in the period between 1995 and 2000. Emissions growth can be reduced by 14% in 2005, followed by a steady decline leading to a 25% reduction in 2020 relative to the reference scenario. Additional goal-oriented steps in energy efficiency and accelerated nuclear energy development would make a major contribution. These efforts would cost about 200 and 130 billion rubles respectively over the next 20 years. Technical measures for emission suppression are also possible, but their total contribution to the solution of this problem may not be very significant. Renewable sources of energy seem to be the least promising option for reducing greenhouse gas emissions in the USSR due to their relatively high costs. Implementing the above-listed measures would place total additional costs for decreasing Soviet greenhouse gas emissions at 3% of GNP. Effective international cooperation could create favourable conditions for solving the problem of emissions growth. The requirements for successful cooperation include: •
• •
granting soft credits for importing energy conservation equipment to the USSR by international monetary institutions; creating joint ventures with Western companies to produce energy-saving hardware; exchanging and conducting international analyses of energy efficiency to identify the scale and structure of potential energy conservation, including the possible terms and conditions of its realization; 993
An energy development strategy for the USSR •
•
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•
e m b e d d i n g in public consciousness the idea that saving e n e r g y is the principal, a n d most e c o n o m i c a l l y effective, m e a n s for solving m a n y global e n e r g y d e v e l o p m e n t p r o b l e m s ; e x p a n d i n g c o o p e r a t i o n in the field of n u c l e a r safety, in c o n j u n c t i o n with cost r e d u c t i o n s of n e w g e n e r a t i o n of n u c l e a r p o w e r plants; p r o m o t i n g c o o p e r a t i o n to achieve cost reductions for r e n e w a b l e sources of e n e r g y ; i m p l e m e n t i n g j o i n t p r o g r a m m e s for m i n i m i z ing m e t h a n e leakage at all stages from p r o d u c tion to c o n s u m p t i o n ; a n d , i m p r o v i n g t e c h n o l o g i e s for r e m o v i n g a n d seq u e s t e r i n g CO2.
Some Soviet experts believe that climate c h a n g e s in o u r c o u n t r y m a y be f a v o u r a b l e , at least for agriculture. T h e f i n a n c i n g of g o a l - o r i e n t e d efforts to reduce emissions will be possible only w h e n experts agree o n the certain a n d possibly catastrophic c o n s e q u ences of global w a r m i n g . 1This comparison includes fuels used for non-energy purposes. 2In considering the author's assumptions about economic growth, the reader must bear in mind that official Soviet statistics are not very reliable in estimating real GNP growth. Most recent data available in the West indicate that from 1984 to 1988 real income in the USSR grew at an average rate of 1.8%/year (Directorate of Intelligence, CIA, Handbook of Economic Statistics 1989, Report CPAS 89-10002, Government Printing Office, Washington, DC, September 1989, p 33). Hence, while Soviet figures show a declining energy intensity in past years, CIA figures do not. Some analysts will therefore consider the author's pessimistic scenario
994
as rather optimistic, given the current difficulties in the Soviet economy. The authors themselves would not necessarily disagree with such an argument. 3Energy Research Institute, Oil in the Structure of the Energy Sector: Scientific Principles for Long-Term Forecasting, Nauka, Moscow, 1989, p 26. 4Economically-motivated levels are determined using the energy optimization system which minimizes total life-cyclecosts without taking social, environmental and other costs and considerations into account. 5Yu. D. Kononov, 'Energetichesky complex SSSR', Economika, Moscow, 1983, pp 253-256. 6A.A. Makarov, 'A new stage in the development of the power industry of the USSR', Energeticka i transport, No 4, 1989, p 57. 7While the official exchange rate is 1.7 ruble = US$1, this study assumes that, in the case of capital investments and operatifig costs of energy production and conservation, the exchange rate is closer to 1 ruble = US$ 2.5-3. Hence, it is cheaper to produce the technology within the USSR than elsewhere. ~Note that these comparisons are of economic systems which include the use of fuelwood and draft animals. '~B. Keepin and G. Kats, 'Greenhouse warming: comparative analysis of nuclear and efficiency abatement strategies', Energy Policy, Vol 18, No 6, December 1988, pp 538-561. ~°H.C. Cheng and T. Steinberg, 'A study on the systematic control of CO2 emissions from fossil-fueled power plants in the U.S.', Environmental Progress, Vol 7, No 4, November 1986, pp 245-259. ~In 1989-90, the USSR planned to reduce its armed forces by 12%, its military budget by 14% and its production of weapons by 20%. ~2A.A. Bestchinsky and I.A. Bashmakov, 'Energy: hopes and expectations', Energia: Ekonomika, Tekhnika, Ekologia, No 6, 1987, pp 11-17. t3T.B. Gobb, D.G. Steers, T.D. Vaselka and A.M. Wolsky, 'The effect of acid rain legislation on the economics of CO2 recovery from power plants', Environmental Progress, Vol 7, No 4, 1986, P4PG247-256. • Golitsyn, 'Climate and economic priorities', Kommunist, No 6, 1988, pp 97-105.
ENERGY POLICY December 1991
The second largest national consumer of commercial energy in the world, the USSR also emits large quantities of energy-related C02. This study uses four long-term scenarios of energy use and related emissions to investigate opportunities for reducing the USSR's greenhouse gas emissions over the next 30 years. This paper shows that if no measures are taken to control these emissions, C02 and methane will increase by 1.5 to 2 times the 1990 level by the year 2020. However, this growth can be restrained dramatically through structural changes in the Soviet economy, improved energy efficiency and interfuel substitutions. Abating emissions of carbon in the USSR would entail the widespread implementation of energy policies and, for mort' substantial reductions, higher investments from the Soviet economy. Achieving these goals would also require broad support from the international community. Keywords: USSR; Energy efficiency;Carbon emissions
The USSR, with 289 million people and the producer of one-eighth of global economic output, consumes more energy than any other nation aside from the USA (Table 1). The USSR produces more than 20% of the world's oil and almost 40% of the world's natural gas, and exports a significant share of both. During the 1977-87 period, almost 80% of the growth in the global production of natural gas stemmed from the USSR. S e v e r a l principal characteristics distinguish the Soviet energy balance from those of other countries: Igor Bashmakov is Head, and Alexei Makarov is v~ith the Department of World Energy, Academy of Sciences, 44/2 Vavilov Street, 11733 Moscow, USSR.
0301-4215/91/012987-08 0 1991 Butterworth-Heinemann Ltd
• • • •
•
a high share of natural gas in energy production (38%) and consumption (38%); a large portion of energy exports in total energy production (16%); well-developed cogeneration capabilities; the dominance of industry, construction and agriculture in total end-use energy consumption (54%); and the relatively minor role of electricity in energy end-uses, but the comparatively high degree of centralized heat supply.
At present, the energy sector accounts for 7% of energy consumption and losses in the USSR; industry, construction and agriculture account for 32%; residential and commercial sectors for 15% and transport for 10%. CURRENT GREENHOUSE EMISSIONS
GAS
Fossil fuel combustion in the USSR generated just under 1 billion tonnes of CO2 in 1990. Power plants, the principal source of energy-related CO2 emissions in the USSR, accounted for 36% of this total. By fuel type, coal and other solid fuels generated 38% of the CO2 emitted that year, oil produced 33% and natural gas accounted for 29%. Estimates for 1990 suggest that Soviet energy intensity (the amount of energy required to produce each unit of GNP) exceeded the US level by 30%, the Western European level by 78% and the world's average by 27%. The CO2 intensity (carbon dioxide emissions per unit of primary energy consumption) of the Soviet energy balance remains relatively low 7% lower than in the USA. 1 Only Western Europe has a lower CO2 intensity than the USSR, due primarily to the higher proportion of nuclear power in the Western European fuel mix. 987
An energy development strategy for the USSR Table 1. Comparison of the energy and carbon intensities of the USSR, the USA, Western Europe and the world, 1990 (estimated).
National income ($ billion) a Consumption of primary energy (E J) Energy intensity (G J/S1 000) CO2 emissions (Mt of carbon) u Ratio c (kg of carbonlGJ) Carbon intensity of national income (kg of carbon/S) d
USSR
USA
Western Europe
World
1 430 61.06 42.11 1 018 16.67
2 550 81.76 32.06 1 460 17.85
2 460 58.01 23.58 920 15.86
11 400 376.51 33.03 6 862 18.23
0.70
0.57
0.37
0.60
a In 1983, US$ purchasing power parity (as calculated according to Soviet methodology). In comparison, Summers and Heston estimate GNP purchasing power parity for the USSR in 1985 at ($1980) $1 748. See, R. Summers and A. Heston, 'A new set of international comparisons of real product and price levels estimates for 130 countries, 1950-1985, Review oflncome and Wealth, May 1988, Data Table. b Including non-commercial types of fuel. c Not corrected for consumption of energy resources for non-energy needs. d Carbon emissions produced from burning fossil fuel per unit of national income.
The high ratio of hydrogen to carbon in the Soviet fuel mix stems largely from the USSR's reliance on relatively high quality energy resources. Between 1970 and 1984, this ratio fell by 21% in the USSR due primarily to the increasing share of natural gas in the primary fuel mix. While this trend is consistent with the 22% drop experienced in Western Europe over the same time period, it contrasts significantly with the mere 1% decrease in the USA, where the share of natural gas in the primary fuel mix dropped while those of petroleum and coal increased. MODELING SOVIET GREENHOUSE GAS EMISSIONS This analysis looks at the potential for reducing energy-related greenhouse gas emissions in the USSR over the next three decades. To carry out this examination, the authors developed four scenarios for future energy use and greenhouse gas emissions in the USSR: a reference scenario; a structural change scenario; an energy efficiency scenario; and, an interfuel substitution scenario. In order to account for the range of futures possible for the Soviet economy, three alternative economic growth rates were considered for each scenario: a base case; an optimistic case; and, a pessimistic case. In the base case, national income is assumed to grow at an average rate of 3.0-3.5%/year through 2005 and 2.5-3.0%/year over 2005-2020. The optimistic variation assumes a faster GDP growth rate of 4.5-5.0% from 1990 to 2005 and 3.5-4.0% from 2005 to 2020. In the pessimistic case, GDP grows by 2.2-2.5%/year during the 1990-2005 988
period and by 2.0%/year between 2005 and 2020. In each of the three cases, the current declining trend in energy intensity (elasticity index) was extrapolated. 2 This paper focuses primarily on the results for the base case variation of each of the four scenarios, although the results of the optimistic and pessimistic variations are also presented in certain instances. The reference scenario assumes a continuation of current patterns of energy use and economic growth and structure in the USSR from the present through 2020. However, the Soviet economy cannot sustain the continued growth in energy consumption and the corresponding demand for increasing energy production. If current trends continue, capital and other resources will be required in amounts so vast as to preclude any possibility of realizing any but the pessimistic variation of the reference scenario. The three alternative scenarios investigate the possibilities of averting this bleak future. The varying results reveal which measures present the greatest opportunities for curtailing the growth rates of energyrelated carbon in the USSR. Future Soviet energy production is projected by trying to optimize the quantity and mix of fuels produced while maintaining the minimum levelized supply costs. This projection is carried out using the Energy Research Institute's 'System Octopus,' a computer model which facilitates research on the optimization of national primary energy production and transformation) For this study, the authors used System Octopus to minimize capital and levelized operating costs after designating levels for the following: motor fuel; electricity; centralized heat supply; fuel for boilers and furnaces; oil, gas and coal exports; and non-energy uses of energy reENERGY POLICY December 1991
An energy development strategy for the USSR Tn = Ti - 0.2 ( K e / Y - 0.05)
Table 2. Carbon emissions in the USSR 1990-2020 (rot/C) ~. Scenario
1990
2005
2020
Reference case Structural change Energy efficiency Interfuel substitution
999 999 999 999
1 315 1 260 1 114 1 008
1 650 1 420 1 205 950
a All totals are estimated using the base case economic growth rate. sources. The discount rate applied varied froaa between 8% and 12% depending on the technology. Reference scenario
The reference scenario assumes a continuation of recent Soviet energy and economic patterns. The growth of electricity demand continues to outstrip that of non-electric energy demand; by 2020, the share of primary fuel required for electricity generation increases from 24% at present to 34%, 38% and 29% in the base case, optimistic and pessimistic variations respectively. Levels of oil production in the reference scenario correspond with the maximum economicallymotivated levels. 4 While in the base and optimistic cases the levels of natural gas production are practically the s a m e and also c o r r e s p o n d with economically-motivated levels, in the pessimistic economic growth variation, gas production is about 10% lower due to the lesser demand for power generation. The levels of coal and nuclear energy required for electricity generation vary in each of the three economic growth variations. Within the USSR, however, coal dominates the fuel mix for electricity generation in the Asian regions while nuclear power dominates in the European regions. Current trends in energy development in the USSR would mean a continual rise in greerhouse gas emissions. In the base case variation of the reference scenario, CO2 emissions rise from 999 million tonnes of carbon (mt/C) in 1990 to 1 315 mt/C in 2005 and to 1 650 mt/C in 2020 (Tabile 2). Structural change scenario
The structural change scenario examines the potential impact of redirecting investments from energyintensive and defense industries to less energyintensive industries. Yu. D. Kononov, a specialist in energy and economy at the Siberian Energ~ Institute, has shown that the sum of investments for exploration, exploitation, transformation, transportation and distribution of energy resources should not exceed 5-5.5% of national income. 5 Otherwise, annual rates of economic growth will fall in accordance with the following expression:
ENERGY POLICY December 1991
where: Tn = new rates of national income growth Ti = initial rates of national income growth K e / Y = ratio of gross fixed capital investment in
the energy sector to national income. Maintaining this balance between investments and GDP would entail the implementation of official Soviet policies aimed at reducing the role of energyintensive industries and promoting the growth of the services sector. The structural change scenario attempts to promote these types of shifts in order to lower the intensity of energy use in the USSR. With the broader use of energy-efficient technologies and equipment, energy intensity would decline at a far more rapid rate than at present, as shown in the results of the energy efficiency scenario. 6 The structural change scenario would reduce Soviet energy intensity at an average annual rate of 1.6% between 1990 and 2005 and at a rate of 1.7%/year through 2020. These figures reflect the upper range of those rates recently experienced in industrialized capitalist countries. The success of this scenario, however, hinges on reducing expenditures for military purposes considerably. The imposition of the above structural changes leads to only slightly different levels of energy demand in the base, optimistic and pessimistic variations of the structural change scenario. This result occurs largely because the growth of energyintensive industries is the same irrespective of the overall growth rate of GNP. Because the three economic growth variations do not produce substantially different levels of energy demand in 2020, energy production levels also remain similar in all three cases. The structural changes would have a number of important impacts on the Soviet energy mix. The changes would reduce the share of energy provided by liquid fuels, relatively stabilize the shares of solid fuels and natural gas and increase the shares of renewable and nuclear energy. In addition, the economic restructuring would serve to increase the relative shares of the power, transportation, residential and commercial sectors in total energy demand, while decreasing the shares of heavy industry, construction and agriculture. Levels of greenhouse gas emissions vary only slightly with economic growth in the structural change scenario. When incorporating the base case economic growth rate into the structural change scenario, COz emissions rise to 1 260 mt/C by 2005 and to 1 420 mt/C by 2020. While these levels 989
An energy development strategy for the USSR Table 3. Energy demand in the USSR, 1990-2020 (E J) a. Scenario
1990
2005
2020
Reference case Structural change Energy efficiency Interfuel substitution
58 58 58 58
83 79 69 69
116 99 75 75
a All totals are estimated using the base case economic growth rate.
represent a substantial increase relative to current emissions, the 2020 figure lies 15% lower than the reference scenario emissions projection for that same year (Table 2). Thus, the results of this scenario indicate that by restructuring its economy, the USSR could greatly curb the growth of greenhouse gas emissions without actually undertaking any targeted efforts to control them. The continued electrification of the economy raises the level of emissions from power generation. In the structural change scenario, the growth of electric power demand causes over half the growth of greenhouse gas emissions between 1990 and 2020. As a result, the share of emissions produced by the industry, construction, agriculture, residential and commercial sectors declines.
Energy efficiency scenario The reference scenario limits the scale of energyefficient technologies and equipment incorporated into sectoral activities in 2020 based on the actual production capabilities of Soviet machinery, and the structural change scenario focuses on the potential for structural, not technological, change. The energy efficiency scenario, however, goes beyond the scope of the reference and structural change scenarios to examine the cost-effective technological potential for improving efficiency in the USSR. By investing greater amounts of capital in improved energy efficiency, the USSR could conserve far more energy. The energy efficiency scenario estimates that about 10 EJ of energy can be saved in the year 2005 relative to the structural change scenario (Table 3). The direct capital investments needed to realize this potential would amount to about 60 billion rubles. While the sum appears large, this investment would save energy at a cost less than the marginal cost of energy supply. Approximately 6.3 EJ could be saved at a cost of about 4 rubles per GJ saved. Another 2.9 EJ could be saved in 2005, provided fixed capital investments are increased to about 6-7 rubles per GJ saved. Another 1.8 EJ may be saved by raising investments to 9 rubles per GJ saved. 990
As a rule, the costs of conserving energy are lower than the levelized costs of increasing energy production (Table 4 and Figure 1). Only 25-30% of the cost of making energy-efficiency improvements stem from implementing measures at the point of use. The remaining 70-75% result from the expense and difficulty of expanding domestic production of energy-efficient equipment and materials. Certain peculiarities of the Soviet price system make the domestic manufacture of energy-using equipment only half as expensive as in other nations. 7 Therefore, importing technologies and equipment to further enhance energy conservation would require far more foreign exchange. If the energy sector in the USSR is reoriented after 1990 to incorporate the most advanced technologies and equipment, energy consumption can be reduced by 10 EJ in 2005 and by 24 EJ in 2020 compared with the structural change scenario. The energy efficiency scenario meets the criterion of minimum costs for energy development and does not envisage special measures to reduce greenhouse gas emissions. In the energy efficiency scenario, Soviet energy intensity declines at an average annual rate of 2.1%/ year between 1990 and 2020. Thus, energy intensity drops by 47% by 2020. To conserve that much energy over a four-decade period would prove a major challenge. It took the USA about 70 years to reduce its energy intensity by half, which it did first between 1851 and 1920 and again between 1921 and 1990. The UK achieved its first 50% reduction over a span of 100 years from 1850 and 1950, and its second 50% reduction may be achieved in 50 years (1951 to 2000). ~ The energy efficiency scenario reduces carbon emissions 13% by 2005 and by 18% by 2020 relative to the structural change scenario assuming the base case economic growth rate. This outcome, however, still reflects a 11.5% growth in emissions by 2005 and 20.5% by 2020 relative to the 1990 level. The energy efficiency scenario achieves the largest reductions in carbon emissions in the energy and industrial sectors.
Interfuel substitution scenario The interfuel substitution scenario was created by modifying the energy efficiency scenario to maximize the use of energy resources that do not produce greenhouse gases. This scenario was created in two steps: the first step incorporated a nuclear power variant and the second step integrated a renewable energy variant. In the first step, nuclear power's share in electricity and heat production was gradualENERGY POLICY December 1991
A n energy development strategy for the USSR
Table 4. Selected Soviet energy efficiency measures, 1990-2005.
Regulated electric drive Efficient lighting G a s turbine and combined cycle plants Low capacity multi-fuel boilers Centralized ovens with efficiency × 2-3 Insolation of steam supply networks Control and m e a s u r e m e n t in energy use Switch small boilers to high grade fuels C h a n g e inefficient ovens to large boilers Improved gas compressors in pipelines Shift from harvesters to site threshing A d v a n c e d technologies for ind. heating Scrap recycling in steel industry Insolation of cattle breeding buildings Reduction of electric transmission losses A u t o m a t i o n of heating stations Replacing wet c e m e n t clinker with dry m e t h o d Improved brick production
Annual energy savings in 2005" {EJ)
Total capital cost 1990-2005 b (Rubles)
Levelized cost c Soviet approach (Rubles/G J)
Western approach
_4 i[. 1 I).7 1).7 0.6 0.5 0.5 0.4 0.3 0.3 q).3 ,).2 ,).4 3.2 3.2 E).2 9.2 0.1
3.7 8.5 5.0 3.3 1.2 0.4 1.7 0.3 0.7 4.7 0.2 0.18 0.4 1.3 0.4 1.4 0.9
0.7 2.41 1.64 1.09 0.47 0.24 1.11 0.20 0.53 3.38 0.19 0.22 0.42 1.85 0.52 1.93 1.80
10.82 2.99 2.18 1.27 0.55 0.28 1.41 0.23 0.54 3.95 0.22 0.27 0.42 2.29 0.57 1.86 1.80
Notes: a A n n u a l energy savings in 2005 with volume of penetration for 1991-2005. b S u m of capital cost during 1991-2005. c Two approaches were applied to levelized cost calculaticns: 1) The Soviet approach calculated in accordance with the formula: L C = (En + 1/T + OC) * CAP, where L C = levelized cost; En := normative ratio for payback of capital investment (En = 0.12); T = lifetime of investment; OC = ratio of operating cost to capital cost ( O C = 0.05). C A P = investment. 2) The W e s t e r n approach which is based on: L C = [ACCR * CAP) + OPER] fuel savings; A CCR = i~ (1 - (1 + i) ** - 1 ) - annual capital change rate; i = discount rate (i = 0.1); l = lifetime of investment); O P E R = annual operating costs. Source: Authors.
iy increased. The limits of nuclear power production were determined on the basis of growth in demand for electricity and heat. That is, the penetration of nuclear was constrained by the retirement rates of fossil-generating capacity, the technological limitations of electricity and heat supply systems and the limitation of nuclear power mainly to provide baseload power generation and supply heat to large consumers. The additional use of nuclear energy for electricity and heat supply requires significantly larger expenditures in the energy sector. By exploiting all technically feasible nuclear capacity in combination with maximum cost-effective energy efficiency, it is possible - from a technical point of view - to stabilize greenhouse gas emissions after 2005 at a level exceeding that of 1990 by only 1%. Similarly, it is technically possible to reduce the level of emissions in absolute terms after 2020. However, this result will require 110 billion rubbles in additional costs (Figure 1). The increment of investment required for the maximum development of nuclear energy was offset somewhat by savings resulting from a slow down in the growth of coal and gas production. Estimates nevertheless show that an additio:aal investment of about 600 rubles per tonne of carbon reduced is required for an additional decrease in ENERGY POLICY December 1991
greenhouse gas emissions. Thus, the cost of using nuclear power to cut emissions is higher than that of using intensive energy conservation in the USSR, as also appears to be the case in the U S A . 9 Another way to reduce emissions is by drawing a greater share of energy from renewable energy sources - hydroelectric power (including microplants), wind, solar, geothermal power and energy extracted by means of heat pumps. The scale of use of these technologies is determined by economic competitiveness and a country's mechanical engineering capabilities. The interfuel substitution scenario assumes electricity output from hydropower plants reaches 360 billion kWh by 2005 and 500 billion kWh by 2020 - a far larger hydro contribution than in the previously described scenarios. In total, the additional contribution made by renewable energy sources relative to the energy efficiency scenario would total 0.6 EJ in 2005 and 1.6 EJ in 2020. Expanding the use of renewable energy would entail considerable growth in expenditures for energy development due to renewables' higher capital costs. While the additional investments appear to be higher than in the nuclear scenario, the impact in terms of carbon savings appears to be far lower. To reduce emissions by one tonne per year would require an additional investment of about 1 000 rubles through 991
An energy development strategy for the USSR 14
12
Efficiency with Western technology 10
Supply cost
Efficiency
1-
0
"i
I
1
I
I
5
10
15
20
25
Exajoules
Figure 1. Soviet efficiency potential by 2010 shadow supply cost v efficiency cost. Source: EnergyResearch Institute of the USSR Academyof Sciences. 2005. By 2020, however, this cost should drop to about 700 rubles.
Technological means of suppressing greenhouse gas emissions Technical measures are being developed to suppress emissions of CO2. Areas of investigation include the possibilities of: (1) absorbing CO2 from thermal plant's gas emissions and using it to compress oil fields and, therefore, increase production; and, (2) using boiler gas emissions in greenhouses as a means to increase production of vegetables, etc. It is hard to assess the success of this work or to set terms for its practical realization. An optimistic outlook envisions these measures reducing CO2 emissions by 5% and 10% by the years 2005 and 2020 respectively. According to some estimates, installing facilities for scrubbing CO2 at large thermal power plants may raise investment costs per unit of capacity by between 1.7 and 3 times current costs and electricity production costs by 60-100%. I° If these estimates are taken into account and if the factor of growth is assumed to equal 2.5, capital costs per tonne of carbon reduction would total 325 rubies. In that case, 16.3 billion rubles would be required to reduce 992
emissions of CO2 by 50 million tonnes annually through 2005, and 29.3 billion rubles would be needed to reduce emissions by 90 million tonnes through 2020.
Measures for controlling greenhouse gas emissions Estimates of CO2 and methane emissions combined for 1990 in the USSR total 1.1 billion tonnes of carbon. If present economic and energy development trends continue, the combined emissions total will grow steadily and, depending on the rate of economic growth, will increase by 150% to 200% by 2020. Present trends are expected to change in the USSR, however, motivated by reasons not directly connected to global warming. The USSR may choose a more energy-efficient development path to ensure its own economic well-being in coming years. In the process, such shifts would bring about significant reductions in carbon emissions. The structural change scenario reflects substantial carbon reduction opportunities, but its realization would entail: •
de-militarizing world politics and making the transition to genuine disarmament; ENERGY POLICY December 1991
An energy development strategy for the USSR
• •
curtailing military spending "reorienting military production towards the production of consumer and capital goods; implementing radical economic reforms that would harmonize society's economic interests, stimulate initiative and create the conditions for a transition to efficient resource use; restructuring the Soviet economy so as to reduce the share of resource and energyintensive industries in the production c,f consumer and capital goods; and further integrating the USSR into the world economy with the aim of raising the efficiency of the Soviet economy.
•
•
•
This set of measures will effectively reduce the energy intensity of national income and, as a consequence, decrease carbon emissions by 30-40% compared to current trends. This reduction would total 75-100 million tonnes by 2005, and 31)0-640 million tonnes by 2020. Thus, as a result of measures not connected directly with the control of the greenhouse effect, the USSR's share of global carbon emissions would remain unchanged.~2 Stabilizing emissions at the 1990 level (as shown in the interfuel substitution scenario), however, would require greater effort and additional expenditures, including the following major contributions: •
•
•
the implementation of additional energy efficiency measures that would reduce the nation's energy intensity by 2. l%/year, cutting primary energy consumption by an additional 24 EJ in 2020. This effort would cut carbon emissions by 140 million tonnes by 2005 and by 210 million tonnes by 2020 relative to the structural change scenario; the maximal use of nuclear energy, increasing its share in the energy balance in 2020 to 15.5 EJ. This measure would cut carbon emissions by 75 million tonnes by 2005 and by 160 million tonnes by 2020 compared to the structural change scenario. 13 However, such a rate of nuclear energy development will require large investments; the maximal use of renewable sources of energy, with enormous associated investment requirements. This policy would reduce carbon emissions by 30 million tonnes by 2005 and by 100 million tonnes by 2020.
Emissions can be reduced by employing technological means for their suppression, including: •
reducing methane leaks from 2% to 1% of gross withdrawals of natural gas, which would
ENERGY POLICY December 1991
cut emissions by about 50 million tonnes of carbon equivalent by 2020; and, scrubbing or otherwise physically removing carbon from fuels, which optimistically could cut emissions by 50 million tonnes by 2005 and by 90 million tonnes by 2020.
•
Therefore, applying all the additional measures could theoretically reduce emissions by 25% of the 1990 level. However, even the stabilization of emissions at the 1990 level seems utopian since it would require great material resources and investments from the economy, possibly stunting economic growth and further dropping the declining standard of living. At the same time, a realistic policy should, in some measure, bear an imprint of a utopia; otherwise the policy may turn into a pragmatic attachment to the current situation, useless for solving complex problems.14 This analysis limits the measures considered for reducing carbon emissions to those which increase energy development investment costs by less than 15%. With this constraint, the growth of emissions can be halted in the period between 1995 and 2000. Emissions growth can be reduced by 14% in 2005, followed by a steady decline leading to a 25% reduction in 2020 relative to the reference scenario. Additional goal-oriented steps in energy efficiency and accelerated nuclear energy development would make a major contribution. These efforts would cost about 200 and 130 billion rubles respectively over the next 20 years. Technical measures for emission suppression are also possible, but their total contribution to the solution of this problem may not be very significant. Renewable sources of energy seem to be the least promising option for reducing greenhouse gas emissions in the USSR due to their relatively high costs. Implementing the above-listed measures would place total additional costs for decreasing Soviet greenhouse gas emissions at 3% of GNP. Effective international cooperation could create favourable conditions for solving the problem of emissions growth. The requirements for successful cooperation include: •
• •
granting soft credits for importing energy conservation equipment to the USSR by international monetary institutions; creating joint ventures with Western companies to produce energy-saving hardware; exchanging and conducting international analyses of energy efficiency to identify the scale and structure of potential energy conservation, including the possible terms and conditions of its realization; 993
An energy development strategy for the USSR •
•
• •
•
e m b e d d i n g in public consciousness the idea that saving e n e r g y is the principal, a n d most e c o n o m i c a l l y effective, m e a n s for solving m a n y global e n e r g y d e v e l o p m e n t p r o b l e m s ; e x p a n d i n g c o o p e r a t i o n in the field of n u c l e a r safety, in c o n j u n c t i o n with cost r e d u c t i o n s of n e w g e n e r a t i o n of n u c l e a r p o w e r plants; p r o m o t i n g c o o p e r a t i o n to achieve cost reductions for r e n e w a b l e sources of e n e r g y ; i m p l e m e n t i n g j o i n t p r o g r a m m e s for m i n i m i z ing m e t h a n e leakage at all stages from p r o d u c tion to c o n s u m p t i o n ; a n d , i m p r o v i n g t e c h n o l o g i e s for r e m o v i n g a n d seq u e s t e r i n g CO2.
Some Soviet experts believe that climate c h a n g e s in o u r c o u n t r y m a y be f a v o u r a b l e , at least for agriculture. T h e f i n a n c i n g of g o a l - o r i e n t e d efforts to reduce emissions will be possible only w h e n experts agree o n the certain a n d possibly catastrophic c o n s e q u ences of global w a r m i n g . 1This comparison includes fuels used for non-energy purposes. 2In considering the author's assumptions about economic growth, the reader must bear in mind that official Soviet statistics are not very reliable in estimating real GNP growth. Most recent data available in the West indicate that from 1984 to 1988 real income in the USSR grew at an average rate of 1.8%/year (Directorate of Intelligence, CIA, Handbook of Economic Statistics 1989, Report CPAS 89-10002, Government Printing Office, Washington, DC, September 1989, p 33). Hence, while Soviet figures show a declining energy intensity in past years, CIA figures do not. Some analysts will therefore consider the author's pessimistic scenario
994
as rather optimistic, given the current difficulties in the Soviet economy. The authors themselves would not necessarily disagree with such an argument. 3Energy Research Institute, Oil in the Structure of the Energy Sector: Scientific Principles for Long-Term Forecasting, Nauka, Moscow, 1989, p 26. 4Economically-motivated levels are determined using the energy optimization system which minimizes total life-cyclecosts without taking social, environmental and other costs and considerations into account. 5Yu. D. Kononov, 'Energetichesky complex SSSR', Economika, Moscow, 1983, pp 253-256. 6A.A. Makarov, 'A new stage in the development of the power industry of the USSR', Energeticka i transport, No 4, 1989, p 57. 7While the official exchange rate is 1.7 ruble = US$1, this study assumes that, in the case of capital investments and operatifig costs of energy production and conservation, the exchange rate is closer to 1 ruble = US$ 2.5-3. Hence, it is cheaper to produce the technology within the USSR than elsewhere. ~Note that these comparisons are of economic systems which include the use of fuelwood and draft animals. '~B. Keepin and G. Kats, 'Greenhouse warming: comparative analysis of nuclear and efficiency abatement strategies', Energy Policy, Vol 18, No 6, December 1988, pp 538-561. ~°H.C. Cheng and T. Steinberg, 'A study on the systematic control of CO2 emissions from fossil-fueled power plants in the U.S.', Environmental Progress, Vol 7, No 4, November 1986, pp 245-259. ~In 1989-90, the USSR planned to reduce its armed forces by 12%, its military budget by 14% and its production of weapons by 20%. ~2A.A. Bestchinsky and I.A. Bashmakov, 'Energy: hopes and expectations', Energia: Ekonomika, Tekhnika, Ekologia, No 6, 1987, pp 11-17. t3T.B. Gobb, D.G. Steers, T.D. Vaselka and A.M. Wolsky, 'The effect of acid rain legislation on the economics of CO2 recovery from power plants', Environmental Progress, Vol 7, No 4, 1986, P4PG247-256. • Golitsyn, 'Climate and economic priorities', Kommunist, No 6, 1988, pp 97-105.
ENERGY POLICY December 1991