11 April 2012

Russian energy efficiency laws gain traction

Legislation on energy efficiency has begun to gain traction in Russia. The growing importance of foreign investment in construction projects has generated widespread public interest in green construction in general and energy efficiency in particular, according to The Moscow Times. Earlier lack of interest can be largely explained by the low cost of energy and a lack of competition in the real estate sector. Improving energy efficiency is of strategic importance for the modernization of Russia's economy, that would overcome Germany in the next 25 years

Construction worker in Moscow. © Igor Dvoretskiy

With little incentive to maximize the quality of new buildings, Russian investors have generally chased short-term payoffs, rather than spend extra on energy efficiency measures that would see significant savings only over the longer term, writes Ksenia Bruk, Associate Salans, in her article "Energy Efficiency Laws in Russia - Starting the Journey", published by The Moscow Times.

The main legal provisions in the sphere of energy efficiency are those contained in the federal “Energy Efficiency Law” adopted in November 2009. This law provides for several important ways of encouraging energy conservation and improving energy efficiency.

In addition, the law includes state support for investment in energy conservation in the form of incentives provided in tax legislation and establishment of administrative liability for various violations of laws.

Legislation does contain some key tax measures for stimulating increased energy efficiency. But it does not establish sufficient sources of financing for such measures and  private entities lack the effective tax and other stimuli to increase energy efficiency, the article says.

“We believe the stimulus for wide-ranging energy efficiency measures should first come from the government, in the form of adequate financial and organizational support, and not only to state and municipal organizations, but to private companies as well,” Bruk concludes in her article.

Energy efficiency of importance for modernization

Improving energy efficiency  is of strategic importance for the modernization of Russia's economy. Russia can save 45 percent of its total primary energy consumption, according to a report from International Finance Corporation (IFC). The largest technical energy efficiency potential can be found in the residential, electricity generation, and manufacturing sectors.

Roughly half of Russia’s potential energy savings can already be achieved through financially viable investments.

Becoming member of the World Trade Organization (WTO) will offer a transparent and predictable environment for trade and foreign investment. It could give a boost to investments in improving energy efficiency.

Russian economy would overtake Germany in 25 years

Russia's economic forecast is often as gloomy as predictions  about its weather. But а top manager at Goldman Sachs sees brighter days for the world's largest country, saying the Russian economy  could outpace Germany's in the next 25 years.

Ask about Russia's future, and а litany of problems ranging from an impending demographic crisis to an overdependence on energy and raw materials will paint а picture of impending doom.

But Jim O'Neill, the Chairman  of Goldman Sachs Asset Management who coined the term BRIC, says despite the "serious chal!enges Russia faces, "there is no reason not to Ье optimistic about its future.

ln fact, O'Neill says even without "dramatic growth rates," Russia has the potential for higher per capita GDP than the other BRICS and "аll  other European countries."

O'Neill also says if Russia manages  to avoid crisis, "its GDP could overtake that of ltaly as soon as 2017, and in the decade 2020 to 2030 steadily sweep past France, the UK and ultimately Germany," the Globalist daily cites O'Neill as saying.

Although Russia still has many proЬiems to tackle, O'Neill sees demographics as the lynchpin behind dynamic Russian economic growth.

"Based опlу оп our coпservative conseпsus demographic assumptions, Russia's GDP could grow to USD7 trillion Ьу 2050, around four times where it is today. lf its population simply stops decliniпg, Russia could quite easily become as large as Brazil, at around USD10 trillion in 2050. ''

Despite the danger of over-reliance on oil and natural gas, O'Neil cites the blockbuster IPOs of Russian tech companies Yandex and Mail.ru as proof that the country is heading in the right direction.

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