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Global Warming: The Gathering Storm

Russia resurrects the Kyoto Protocol and the prospect of either mandatory CO2 emissions cuts for U.S. utilities, or the start of a global trade war.
Fortnightly Magazine - August 2004

enter into force. This will give the EU access to Russia's surplus CO 2 allowances and enable the EU to achieve its Kyoto target more efficiently. Russia's greenhouse gas emissions are about 30 percent below its 1990 emissions levels due to the closing of Russia's Soviet-era industries, making Russia a large potential net exporter of CO 2 allowances.

The agreement also secures EU access to Russia's vast natural gas reserves, which are now closer than ever, with the Czech Republic, Cyprus, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia having joined the EU on May 1, 2004. Russia owns 28 percent of known global natural gas reserves--by far the richest in the world. In 2003, 43 percent of the EU's natural gas supply came from Russia. 3 The EU's dependence on Russian natural gas is predicted to grow considerably over the next 25 years as the EU moves to replace its carbon-intensive coal generation with natural gas. Natural gas is expected to be the fastest-growing fuel source in Western Europe, with an average annual growth rate of 2 percent. 4 Under the agreement, Russia committed to increase the domestic price of natural gas to industrial users to cover costs, profits and investment needed for exploitation of new fields, thereby eliminating what the EU perceived as an unfair advantage to Russian industry. According to an EU press release, "Increasing domestic energy prices will encourage a more efficient use of energy resources in Russia and it is thus mutually supportive of the Kyoto goals." 5

Finally, the agreement provides the EU with the opportunity to export energy-efficient technology to Russia through the Joint Implementation (JI) framework, thereby generating additional CO 2 allowances to help the EU meet its Kyoto goals. Two examples are EU-Russia projects to eliminate oil spillage and to reduce flaring and venting of natural gas. Oil companies in Russia lose about 20 million tons of oil each year to spillage, comprising 5 percent of the total extracted annually. The EU estimates that eliminating these losses alone would generate energy savings almost as great as Russia's annual production of natural gas:

This represents a huge amount of green house gas emissions that can be reduced with a view to mitigating climate change ... [as] the EU and Russia must work together to implement the Climate Change Convention and the Kyoto Protocol, and co-operation should include capacity building regarding the monitoring of greenhouse gases and reporting in particular emissions trading and Joint Implementation. 6

Russia also flares, vents, and otherwise loses a huge quantity of natural gas, the recovery of which presents major opportunities for EU investment under Kyoto's JI framework. A substantial amount of Russian natural gas-comprised mainly of methane that is 23 times more potent than CO 2 as a greenhouse gas-is vented directly into the atmosphere and lost from pipelines to the EU. Around 5 percent of world natural gas production is lost to flaring and venting (80 percent and 20 percent, respectively). Global CO 2 emissions from flaring during oil and gas extraction are equivalent to about 10