Russia’s Largest Obstacle: An Outdated Fuel and Energy System

This Post was submitted by Climate Scorecard Russia Country Manager Michael Oshchepkov

Emissions from motor vehicles is a major obstacle to achieving the Russian goal of reducing energy intensity of GDP by 25% by 2025 and reducing automobile emissions by 60% by 2030.

Currently, motor vehicles in Russia run mainly on petroleum products. Only about 1.67 of private cars, 14.57% of light commercial vehicles and 0.67% of commercial vehicles are using more environmentally friendly natural gas as a fuel. The share of electric cars in Russia is still less than 0,05%. Reducing emissions from motor vehicles by 60% by 2030 requires switching to gas all commercial vehicles and a significant part (up to 50%) of private cars. In addition, significant subsidies will be required to stimulate the purchase of electric cars.

In 2020, the Energy Development Strategy of the Russian Federation for the period up to 2035 was approved. This document also affects the natural gas market.

The Energy Strategy of the Russian Federation 2035 sets the following goals for the volume of methane consumption by vehicles:
→ by 2024 – 2.7 billion m3
→ by 2035 – 10-13 billion m3

Figure 1 Forecast of the development of the NGV industry in Russia

Source: Natural Gas Vehicles Association of Russia (not public data)

In the period from 2021 to 2023, the accelerated development of the industry is expected, primarily due to plans for the construction of new CNG stations.

In accordance with the subprogram “Development of the NGV market” approved by the Government of the Russian Federation, being implemented within the framework of the state program “Development of Energy” there will be 26 subjects of the Russian Federation (the list is provided in Table 10), which will receive the subsidy for the construction of CNG stations. The amount of the subsidy in 2021 is 36 million rubles per facility (about 500 thousand dollars, which is 30% of the standard cost of building one CNG station).

Besides, to stimulate the growth of methane consumption, the Government has approved subsidies to support the retrofitting of vehicles for using methane as fuel. The submitted subsidy can cover up to 50% of the cost of retrofitting.

In 2020, the Ministry of Industry and Trade of the Russian Federation approved support measures in the form of subsidizing a part of the cost of factory serial CNG and LNG systems. However, in 2021 (as of 28.02.2021), these measures have not been prolonged. The approval of subsidies under this question is expected in May-June 2021.

It should be noted that all federal support measures exist in the form of inter-budget transfers, which means, that they are sent to the subjects of the Federation, where the final distribution of subsidies takes place.

Unfortunately, not a single analytical agency in Russia has calculated the volume for investments to achieve this goal. It is also unclear how many transport units should be converted to natural gas. Nevertheless, Russia plans to significantly expand the electric car market by stimulating local production of its own cars. So, the Russian company KAMAZ plans to start production of the budget electric vehicle “KAMA-1” (figure 1) in 2023, costing less than two thousand dollars. It is also planned that government subsidies will further reduce the cost of the car by 25%, making the car the most affordable electric car in the world.

Figure 2 The prototype of the first Russian serial electric car “KAMA-1”

Source: Saint-Petersburg State Polytechnic University

The main cause of Russian greenhouse gas emissions from automobiles and other sources is an outdated fuel and energy system. In the structure of greenhouse gas emissions in Russia the extraction. processing and use of fossil fuels rank make up 84% of total emissions (figure 2).

Figure 3 Structure of greenhouse gas emissions in Russia, 2020

Source: The Ministry of Natural Resources and the Environment of the Russian Federation

The Russian energy sector is about 20% dependent on coal, which is the largest source of greenhouse gases. At the same time, coal cannot be squeezed out by more environmentally friendly fuels, since the eastern region of the country is isolated from the unified energy system of Russia. Coal is the only source of heat and energy for that region which includes the Far East and Eastern Siberia. In addition, it is necessary to modernize the fuel and energy complex in the western and central parts of the country.

The development of new environmentally friendly energy technologies is very important for the country since these technologies will become the basis of the global energy complex in the future. If Russia misses the development of clean energy technologies, it will lose its competitive position in the global energy sector and will have to buy these technologies from other countries.

Strategies for Overcoming Your Country’s Climate Change

To overcome the obstacles identified in the previous sections firstly, Russia should develop a national system for accounting for greenhouse gas emissions. Secondly, a program to support the development of greenhouse gas capture technologies for the energy sector is needed. In addition, it is necessary to connect isolated regions of the country to a unified energy system and reduce the use of coal for generating heat and energy. Thirdly, it is necessary to support the implementation of a program for the development of domestic electric transport and the transfer of cars that use petroleum products to other more environmentally friendly fuels – i.e., natural gas. It is also necessary to create conditions for attracting foreign investment in the development of renewable energy sources in the country.

Contact Persons
Prime Minister of the Russian Federation Mikhail Mishustin;
Minister of Energy of the Russian Federation Nikolay Shulginov


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