The Effects of Climate Change on Russia’s Economy and Governance
By Raphael Piliero and Marissa Zupancic, UNA-NCA Advocacy Fellows
Russia’s Changing Climate
Climate change, which describes the warming of the planet and the eventual effects like increased severe storms, affects the politics and economies of all countries to varying degrees. Increased tropical storms from climate change have caused 2020’s hurricane season to be the second most active in history, with storms impacting parts of the United States. In the Amazon, deforestation decreases the amount of trees absorbing carbon dioxide emissions from the air. Because unabsorbed carbon dioxide emissions contribute to rising global temperatures, this in turn leads to damaging effects from climate change like severe storms. Russia presents a unique case of the effects of climate change on a country’s energy, agriculture, and sociopolitical stresses as it experiences “milder winters; melting permafrost; changing precipitation patterns; the spread of diseases; and increased incidence of drought, flooding, and other extreme weather events,” all as a result of climate change.
Effects on Russia’s Economy
While the environmental damage from climate change is clear, ripple effects hamper Russia’s economy, as well. Historically, Russia’s economy has been cyclical due to its reliance on prices–specifically oil prices. The use of unconventional oil, or the combination of seismic imaging, horizontal drilling and multistage fracturing, has increased in the United States, but not in Russia. This means, in the global competitive market for oil, as long as Russia fails to adapt, Russian oil will continue to rise in price while countries like the US. will decrease their oil prices with efficient technology. Because the technology behind unconventional oil leads to lower prices, Russia’s oil prices will not be competitive in the global market compared to the US.
Russia’s oil for the transportation industry is one of its last markets for oil. As climate change progresses and damages more regions, it will become increasingly difficult to extract oil and natural resources — previously hospitable regions for extraction will be rendered unusable. Moreover, the expanding market for electric cars and battery technology in other parts of the world threatens the demand for Russian exported oil. Therefore, the availability of oil alternatives will lower oil prices, while the costs of extraction will rise due to greater difficulty in securing oil from warming regions. Unless Russia adapts, higher prices for Russian oil and other countries’ sustainability measures may hurt Russia’s economy in the future. Despite these circumstances, analysts offer a promising solution — if Russia hopes to continue to be an “energy superpower,” it must focus on increasing its technology to make oil more cost-effective and competitive in the global market. An alternative to Russia’s shrinking oil market could be increasing its production of natural gas, but this product is even less profitable than oil. Also, countries like Qatar have cheaper natural gas than Russia, making Russian natural gas less competitive in the world market. Because Russia’s actions to mitigate climate change or continue with the status quo both present negative consequences to the country’s economy, the country will be negatively impacted to some degree with either approach.
Countries like the United States are trying to increase power from renewable energy in order to mitigate the effects of climate change, meaning further concern for the Russian economy. With technology like solar panels and wind turbines, renewable energy is becoming more affordable. Global initiatives, such as the Paris Agreement, that seek to reduce greenhouse gas emissions (like carbon dioxide) threaten Russia’s fossil fuel exports, a fundamental component of their economy. With countries switching to more renewable energy initiatives, models predict Russia’s GDP will decrease by 0.5% while the country falls behind in implementing energy technology with low carbon emissions — another hit to its economy.
With the challenges presented, Russia has the opportunity to expand its renewable energy profile and technology. Businesses in Russia are currently supporting renewable energy, with oligarchs interested in exporting renewable energy systems. Some Russian authorities are also hoping to close the technology gap in renewable energy technology in the country. Russia currently has less than one percent of its energy generated from wind and solar power, with room for improvement. It also ranks fourth in the world in carbon dioxide emissions. However, Russia’s energy generation carbon footprint is lower than other countries’ because of its reliance on carbon-free nuclear power and hydropower plants. Even though Russia produces a significant share of the carbon dioxide emissions globally, the country currently has a strong foundation in zero-carbon energy sources — but its reliance on extracting and selling its own fossil fuels remains a contributor to greenhouse gas emissions.
While Russia admits that warming temperatures from climate change may cause issues in public health and shrinking permafrost, the Russian government plans to harness the “positive effects” of global climate change. Through building dams and growing drought-resistant crops, Russia aims to adjust to and appreciate the positive impacts of climate change. With warming temperatures, Russia will not have to use as much energy in traditionally colder regions and can expand its agricultural areas to grow crops. Even though Russia may benefit from some of the effects of climate change, the global threat to humans and the environment are concerning. Temperatures in Russia are rising 2.5 times faster than other regions in part due to Russia’s “proximity to the Arctic region”, with mitigation efforts necessary to minimize possible detrimental effects. Extreme weather events like heat waves, fires, disease-carrying insects and floods pose a substantial threat to Russia as climate change continues. While Russia may have some benefits like longer growing seasons for crops, climate change has deadly effects that should not be ignored.
For Russia, the climate crisis is fundamentally an economic crisis — the countermeasures to spur adaptation will likely involve resources that go beyond oil and gas. As a hydrocarbon-reliant economy, Russia’s failure to diversify means being on the “losing side” of the energy future. However, for many Russians this problem remains in the distant future — creating a more sustainable future economy is less pressing than creating economic opportunity in the short term. Over 20 million Russians live in poverty, and life expectancy rates rival those of North Korea. For those existing and struggling in an economy wholly reliant on oil and gas, creating an energy sea-change remains a pipe dream.
Russia’s Economy and Foreign Policy
Such short-termism is unsustainable. Whether Russia adapts or not, the world is moving away from oil and gas. When attempting to predict Russia’s response, it is necessary to consider its previous responses to economic shocks– President Vladimir Putin came to power following the instability of the 1990s, pledging to restore order and macroeconomic stability to a fledgling and weak democratic power. In the early 2000s, oil and gas prices soared, and Putin’s popularity soared with it, seemingly as evidence of his success in creating Russian stability. As such, a central claim to his legitimacy is the ability to deliver economic success to Russians.
Russian economic downturn, by eroding the implicit promise made, creates a clear stability risk for Putin. Putin, ever concerned about losing his hold on power, typically responds by emphasizing a different threat to stability — the West. Blaming economic challenges on western aggression, Putin “exports troubles” abroad, relying on a nationalistic agenda to distract from problems at home. Claims of western interference in Russian economics aren’t new for Putin — he blames the West for everything from the economic downturn following “shock therapy” of the 1990s to ruble depreciation following energy price dips in 2014. For Putin, Russian energy challenges stem from an attempt in the West to contain Russia, to diminish it as a great power. This resonates for Russians, aware of their history — wary of invasions from the West by Napoleon in 1812 and Hitler in 1941, Russians carry skepticism towards western influence. Putin recognizes the extent of this distrust, and can blame economic challenges on supposed Western containment. The Russian government has laid the groundwork for resistance to climate action, labeling international efforts as a challenge to Russia’s status as an energy superpower.
The past timing of Russian economic troubles are closely correlated with Russian aggressions abroad — in 2014, Russia suffered a catastrophic shock in energy prices. That same year, Russia annexed Crimea, with Putin claiming reunification as the only way to protect Russian speakers residing in the countries of the former Soviet Union.
To understand the full impacts of climate change on Russia, one must understand the relationship between economic decline and Russian foreign policy, as economic factors are a likely effect of climate change. However, positing a direct, causal relationship between economic decline and lash-out is likely too simplistic — others have argued other factors are at play. A reasonable argument exists that aggression in Crimea was due not to economic factors, but rather to a long-standing cultural and historical attachment to the peninsula, surrendered by the Soviet Union. Meanwhile, others argue that the relationship between prosperity and military activities goes the other direction, as oil revenue allows Putin to finance military build-ups. However, it is indisputable that Putin has attempted in the past to blame the West for economic troubles, and energy remains a potent area for this pattern to continue. Russia declined to ratify the Paris Accords, under pressure from their energy industry to maintain Russian energy independence and security — the result has been that climate leadership is carried out instead by non-Russian nations. Were new emissions standards to be inaugurated, or electric vehicles to expand massively, Russia would allege that this was an attempt by Western nations to undermine their economy.
Potential Solutions
Based on previous economic challenges and subsequent aggression in the international sphere, the future seems clear — deleterious effects on the Russian economy due to climate change and subsequent adaptations, followed by Russian hostility directed towards the West. While such tensions haven’t escalated militarily against the U.S., the possibility nonetheless looms that Russia, facing a ruined economy, could inadvertently escalate a conflict. The stakes couldn’t be higher — the two largest nuclear powers engaged in conflict poses an existential risk to all.
Yet, this need not be the inevitable — the US (and other nations) can encourage Russian energy diversification to blunt the impact of worldwide energy changes. The US should make clear that a shift to renewable energy is not intended as a means of diminishing Russian economic influence. Even if Putin remains skeptical of such suggestions, the promise of a collaborative, unified front on energy may assuage his fears and convince him that Russia will be an authentic partner in addressing a new challenge. As climate change is a threat to the economies and political systems of all nations, countermeasures should be framed as beneficial, not negative for Russia. As part of that, the international community (and the US in particular) should emphasize that steps taken are intended to ease the effects on Russia.
However, this requires a sober recognition on the part of Russia that until their current economy is adequately diversified, it is rendered unsustainable by climate change (even absent a renewable transition). While Russia has resisted diversification away from hydrocarbons for decades, the time has come for reforms. In recent years, the IMF has laid out a series of steps that Russia could take. One step concerns finance — Russia should work to create a more friendly investment climate for domestic and international businesses, beginning by strengthening property rights and contract enforcement to reduce the risk of arbitrary abrogations of business deals. As part of this, Russia should become comparatively more open to global trade, attempting to create preferential trade agreements with countries beyond the near abroad. Additionally, Russia should allocate a greater amount of budgetary focus towards innovation in science and technology, with a proportionately smaller focus on military and natural resource spending.
This may seem like an insurmountable goal, but Russia has recognized the need for diversification, as well as its vulnerability to climate change. A recent government climate report emphasized climate change’s disproportionate effect on Russia, as well as the need for sweeping steps to be taken. Similarly, Putin has indicated openness to reforms aimed at securing greater capital investment, as part of a broader diversification strategy. While he has resisted reforms thus far, climate change may prove to be the impetus for change, particularly as its economic effects become clear.
While these steps are no silver bullet, they begin an important process for the Russian economy — transitioning from a one-trick pony to a modernized, diversified economy. Anything else renders the country vulnerable to climate change and adaptations in the 21st century, and leave the rest of the world vulnerable as a result.
