The Impact of Efficient Carbon and Gas Pricing on the Russian Electricity Market

Abstract

The paper examines the possible interactions of various policy proposals to introduce carbon taxation, adjust the domestic price of gas to export parity and build a major electricity interconnector, and their impact on carbon emissions and the fuel mix of the Russian electricity supply industry. Without raising gas prices, a carbon tax of €25/tonne CO2 reduces emissions by 13% and the output of coal-fired plant by nearly 50%, with the major impact at €6.3-12.5/tonne. Moving gas prices to export parity substantially offsets this effect, and requires higher carbon taxes to reduce emissions by the same amount, as does building the prospective interconnector "Ural-Siberia".