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Russian oil industry & Paris Agreement: challenges and risks

UDK: 669.162.254.004.18
DOI: 10.24887/0028-2448-2019-9-50-55
Key words: Paris UN Climate Agreement, UN Framework Convention on Climate Change, Kyoto Protocol, Energy Security Doctrine, oil industry, carbon budget, carbon crunch, principle of ever raising "increasing ambitions", global warming, global stocktake, alternative energy, greenhouse gas mitigation, carbon tax, nationally determined contributions (NDC)
Authors: S.A. Roginko (Institute of Europe of RAS, RF, Moscow; Financial University under the Government of the Russian Federation, RF, Moscow), G.I. Shmal (Union of Oil & Gas Producers of Russia, RF, Moscow)

The article deals with the risks generated by the Paris UN Climate Agreement for the Russian oil sector, relevant for all enterprises of the industry. Agreement is assessed from the point of view of the provisions of the Energy Security Doctrine of the Russian Federation approved by the President of the Russian Federation this year, as an international climate construction posing threats and challenges for Russia. The risks built in the type of the commitments, assumed by the countries under the Paris Agreement, including primarily the principle of ever raising "increasing ambitions" and the mechanism of the so-called global stocktake, are studied.

Particular attention is paid to the threats associated with the promotion of the idea of the carbon tax, including the direct burden on the oil companies and the emergence of an anti-market handicap for alternative energy projects, and the risks of non-market restrictions that lead to a decrease in global demand for oil and oil products from Russia. The article assesses possible financial losses of the leading Russian oil companies at different rates of carbon tax and the possibility of new type restrictions for our oil exports. Recommendations are given on possible hedging of the relevant risks, in particular, in connection with the situation of the US withdrawal from the Paris agreement announced by President Donald Trump.

References

1. URL: https://www4.unfccc.int/sites/submissions/indc/Submission%20Pages/ submissions.aspx

2. Doktrina energeticheskoy bezopasnosti Rossiyskoy Federatsii (Energy Security Doctrine of the Russian Federation), URL: http://www.kremlin.ru/acts/news/ 60516

3. Stockman L., IEA acknowledges fossil fuel reserves climate crunch, URL: http://priceofoil.org/2012/11/12/iea-acknowledges-fossil-fuel-reserves-climate-crunch/

4. McGlade Ch., Ekins P., The geographical distribution of fossil fuels unused when limiting global warming to 2 °C, Nature, 2015, V. 517, pp. 187–190. https://www.nature.com/articles/nature14016

5. Höhne N., Elzen M., Admiraal A., Analysis beyond IPCC AR5: Net phase out of global and regional greenhouse gas emissions and reduction implications for 2030 and 2050, The Agreement on Climate Transformation 2015, URL: https://www.pbl.nl/sites/default/files/cms/publicaties/pbl-215-act-factsheet-net-phase-out-of-global...

6. Hausfather Z., Why the IPCC 1.5C report expanded the carbon budget, URL: https://www.carbonbrief.org/analysis-why-the-ipcc-1-5c-report-expanded-the-carbon-budget

7. Decision 1/CP.21. (FCCC/CP/2015/10/Add.1), Adoption of the Paris Agreement, URL: https://unfccc.int/resource/docs/2015/cop21/eng/10a01.pdf

8. UNEP emissions-gap-report-2017, URL: https://www.unenvironment.org/resources/

9. URL: https://en.wikipedia.org/wiki/File:Paris_agreement_emission_reduction_targets.png

10. UNEP emissions-gap-report-2018, URL: https://www.unenvironment.org/resources/

11. Decision FCCC/CP/2018/L.16 Matters relating to Article 14 of the Paris Agreement and paragraphs 99–101 of decision 1/CP.21, URL: https://unfccc.int/sites/default/files/resource/FCCC_CP_2018_L.16.pdf

12. Proceedings of Conference of the Parties Twenty-first session Paris, 30/11 – 11/12/2015, Decision -/CP.21, Adoption of the Paris Agreement. UNFCCC, 2015

13. State and trends of carbon pricing, 2017, World Bank, URL: https://openknowledge.worldbank.org/handle/10986/28510

14. Ivanter A., Kudiyarov S., Tales of the Paris Forest (In Russ.), Ekspert, 2017, no. 26(1035), pp. 28-32, URL: http://expert.ru/expert/2017/26/skazki-parizhskogo-lesa/

15. New U.N., Climate report says put a high price on carbon, The New York Times, Oct. 8, 2018, URL: https://www.nytimes.com/2018/10/08/climate/carbon-tax-united-nations-report-nordhaus.html

16. Republican Platform 2016, Republican National Convention, Cleveland 2016, URL: https://www.npr.org/2016/07/19/486571605/2016-republican-national-convention-partys-platform .

17. Roginko S., Prince Lemon's new taxes, or who needs a carbon tax (In Russ.), Neft' i kapital, 2018, no. 10, pp. 44-50.

The article deals with the risks generated by the Paris UN Climate Agreement for the Russian oil sector, relevant for all enterprises of the industry. Agreement is assessed from the point of view of the provisions of the Energy Security Doctrine of the Russian Federation approved by the President of the Russian Federation this year, as an international climate construction posing threats and challenges for Russia. The risks built in the type of the commitments, assumed by the countries under the Paris Agreement, including primarily the principle of ever raising "increasing ambitions" and the mechanism of the so-called global stocktake, are studied.

Particular attention is paid to the threats associated with the promotion of the idea of the carbon tax, including the direct burden on the oil companies and the emergence of an anti-market handicap for alternative energy projects, and the risks of non-market restrictions that lead to a decrease in global demand for oil and oil products from Russia. The article assesses possible financial losses of the leading Russian oil companies at different rates of carbon tax and the possibility of new type restrictions for our oil exports. Recommendations are given on possible hedging of the relevant risks, in particular, in connection with the situation of the US withdrawal from the Paris agreement announced by President Donald Trump.

References

1. URL: https://www4.unfccc.int/sites/submissions/indc/Submission%20Pages/ submissions.aspx

2. Doktrina energeticheskoy bezopasnosti Rossiyskoy Federatsii (Energy Security Doctrine of the Russian Federation), URL: http://www.kremlin.ru/acts/news/ 60516

3. Stockman L., IEA acknowledges fossil fuel reserves climate crunch, URL: http://priceofoil.org/2012/11/12/iea-acknowledges-fossil-fuel-reserves-climate-crunch/

4. McGlade Ch., Ekins P., The geographical distribution of fossil fuels unused when limiting global warming to 2 °C, Nature, 2015, V. 517, pp. 187–190. https://www.nature.com/articles/nature14016

5. Höhne N., Elzen M., Admiraal A., Analysis beyond IPCC AR5: Net phase out of global and regional greenhouse gas emissions and reduction implications for 2030 and 2050, The Agreement on Climate Transformation 2015, URL: https://www.pbl.nl/sites/default/files/cms/publicaties/pbl-215-act-factsheet-net-phase-out-of-global...

6. Hausfather Z., Why the IPCC 1.5C report expanded the carbon budget, URL: https://www.carbonbrief.org/analysis-why-the-ipcc-1-5c-report-expanded-the-carbon-budget

7. Decision 1/CP.21. (FCCC/CP/2015/10/Add.1), Adoption of the Paris Agreement, URL: https://unfccc.int/resource/docs/2015/cop21/eng/10a01.pdf

8. UNEP emissions-gap-report-2017, URL: https://www.unenvironment.org/resources/

9. URL: https://en.wikipedia.org/wiki/File:Paris_agreement_emission_reduction_targets.png

10. UNEP emissions-gap-report-2018, URL: https://www.unenvironment.org/resources/

11. Decision FCCC/CP/2018/L.16 Matters relating to Article 14 of the Paris Agreement and paragraphs 99–101 of decision 1/CP.21, URL: https://unfccc.int/sites/default/files/resource/FCCC_CP_2018_L.16.pdf

12. Proceedings of Conference of the Parties Twenty-first session Paris, 30/11 – 11/12/2015, Decision -/CP.21, Adoption of the Paris Agreement. UNFCCC, 2015

13. State and trends of carbon pricing, 2017, World Bank, URL: https://openknowledge.worldbank.org/handle/10986/28510

14. Ivanter A., Kudiyarov S., Tales of the Paris Forest (In Russ.), Ekspert, 2017, no. 26(1035), pp. 28-32, URL: http://expert.ru/expert/2017/26/skazki-parizhskogo-lesa/

15. New U.N., Climate report says put a high price on carbon, The New York Times, Oct. 8, 2018, URL: https://www.nytimes.com/2018/10/08/climate/carbon-tax-united-nations-report-nordhaus.html

16. Republican Platform 2016, Republican National Convention, Cleveland 2016, URL: https://www.npr.org/2016/07/19/486571605/2016-republican-national-convention-partys-platform .

17. Roginko S., Prince Lemon's new taxes, or who needs a carbon tax (In Russ.), Neft' i kapital, 2018, no. 10, pp. 44-50.


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