The Ecological Consequences of Subsidizing the Energy Sector in Russia

Today the broadest possible interpretation of the concept of "subsidy," counting any state intervention that leads to a reduction in prices compared to the level that would exist under free market conditions as a subsidy, is commonly accepted. Proceeding from this concept, the amounts of tax concessions for energy producers, state investments, customs duties on exported (or subsidies for imported) energy, the nontariff regulation of foreign trade (by setting quotas for the export or import of fuel and energy), and favorable rates for the transportation of energy resources, along with the direct regulation of prices, can then all be considered subsidies to the energy sector. Many countries artificially maintain low prices for energy through direct subsidies for producers. The amount of energy subsidies around the world in 1987 was estimated to be approximately $230 billion (20-25 percent of the value of the fuel resources consumed at world market prices). The elimination of all subsidies would be a condition of declines in the production of energy, and would lead to a 9 percent reduction in the emission of carbon into the atmosphere, provided world price levels for energy remained unchanged.>sup>1>/sup> The most significant energy subsidies existed in the USSR. Thus, in 1987, according to the calculations of B. Larsen and A. Shah, it had 75 percent of all energy subsidies and 18.4 percent of world carbon emissions (second in the world after the United States).