Russia’s energy sector operates on a grand scale. In 2010, Russia was the largest oil producer, the largest producer and exporter of natural gas and the fourth-largest energy consumer (after China, the United States and India). It has exceptional reserves of natural gas, oil, coal, uranium, metals and ores. It has major potential for hydropower and other renewables and, in Siberia, one-fifth of the world’s forests. The sheer size of the country and its resources mean that energy policy choices made by the Russian authorities in the coming years will help to shape not only the prospects for national economic development in Russia, but also global energy security and environmental sustainability.
There is greater scope to use energy more efficiently in Russia than in almost all other countries. According to the World Energy Outlook 2011, if Russia had used energy as efficiently as comparable OECD countries in each sector of the economy in 2008, it could have saved more than 200 million tonnes of oil equivalent (Mtoe), equal to 30% of its consumption that year. These savings would bring Russia’s energy intensity very close to that of Canada, which is the OECD country most similar to Russia in terms of average annual temperatures and of the share in GDP of energy and heavy industry. Reducing the energy intensity of Russian GDP is a key priority in Russia alongside the goal to modernize ageing infrastructure and the economy as a whole. The aim to reduce Russia’s energy intensity by 40% by 2020, compared to that of 2007, was announced by President Medvedev in 2008 and its achievement would have substantial implications for energy use and CO2 emission reduction in Russia.
The country’s energy mix is dominated by fossil fuels, natural gas accounting for 54% of the primary energy mix ─ an increase from 43% in 1991 largely due to a drop in the share of oil and coal. Growth in gas demand in the 1990s was encouraged by domestic pricing policies that kept gas prices low, while those for coal and oil were liberalised. The unstable transition years of the 1990s resulted in little investment in new infrastructure or maintenance across all sectors: industrial, transport, residential and transformation. The high average age of Russian infrastructure means low average efficiency but also means that Russia’s “room to manoeuvre” is much greater than that of many other leading industrial economies. The sheer size of the country and its natural resource endowments mean that energy policies and modernisation goals made by the Russian government in the near term will help to shape not only the prospects for national economic development in Russia, but also global energy security and environmental sustainability.
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