HOW RUSSIA-EU COULD COOPERATE IN SHAPING FUTURE ENERGY RELATIONS

The importance of renewables for EU-Russia energy relations should grow. Despite declarative statements of mutual interest, shared objectives and cooperation in decarbonization policy, there has been very limited cooperation . The EU has set ambitious plans to decarbonize its economy and energy sector by 2050. However, in Russia energy policy is dominated by hydrocarbon exports, decarbonization targets are modest, and there are major problems with their implementation. Different understandings of energy security and types of energy governance provide major obstacles to decarbonization cooperation and trade. However, there exists significant potential for mutual gain and cooperation in the longer term.

The EU-Russia energy relationship, as energy trade in general, has traditionally been dominated by hydrocarbons; gas, oil and coal. The EU and Russia are positioned at opposite ends of the commodity chain, concerned by distinct though overlapping security priorities; security of energy demand and security of supply respectively, with both seeking a degree of stability of pricing. Transition to a low carbon economy incorporates an additional dimension to the established patterns of energy trade, raising the question of how much the process of decarbonization will change relations between energy consumers and suppliers.

Whilst conflict in Ukraine led to the suspension of some of formal forms of energy cooperation (for example the EU-Russia Energy Dialogue), a convergence of commercial interests between energy companies, Russia, the EU and its member states has left energy trade largely unaffected. An analysis of the implications of climate change and decarbonization policies on this relationship is under-considered.  This is an important aspect of EU-Russia relations given the stated climate policies of each actor, commitments made at the Paris climate change conference in 2015 and the explicit objective of developing a decarbonization related trade relationship.

The EU has ambitious plans to achieve 80-95% decarbonization by 2050 primarily to combat climate change though also to manage energy import dependency.

Divergent interests and drivers of energy policy in the EU and Russia, including conceptions of energy security and attitudes towards climate change, affect the commitment to decarbonization objectives and their implementation. The Russian decarbonization and climate change policy is markedly less ambitious than that of the EU and characterized by a failure to implement relatively modest policy objectives.  Divergence in ideas and approaches to energy policy between the EU and Russia exists and is a factor in explaining the fact that explicit declarative shared objectives have not yet led to any significant cooperation on decarbonization related to energy efficiency and renewables policy. Whilst decarbonization policies have not yet added significant new strand to the (hydrocarbon dominated) EU-Russia energy relationship there is some overlap of interests, and there is a limited coalition in Russia advocating policy change that would increase this overlap. There exists the potential for mutual interest in improving energy efficiency and related technology trade, and renewable energy trade too. Importantly, energy efficiency and renewables are relatively less politicized issues, and represent a potential basis for cooperation including the resumption of the suspended EU-Russia energy dialogue and work towards the stated mutual objectives.

Some commonality of interests is required to facilitate a new partnership of trade, expertise and finance related to energy decarbonization. The decarbonization agenda of the EU-Russia energy dialogue is potentially promising as it less rooted in the asymmetry of a consumer-supplier, import-export relationship. Decarbonization could serve to strengthen the informational and institutional dimensions of the Russian-European relationship, but also the material basis of the relationship in terms of technology transfers and Renewable Energy Source (RES) flows.  Decarbonization is in the interest of both sides and a priority.  The EU-Russia cooperation on renewables is currently underdeveloped. In terms of self-interest, the EU’s motivation lies in the understanding that addressing global climate change requires the cooperation of other major economies, and that, in terms of decarbonizing its energy supply, there are synergies with Russia. The EU’s decarbonization policy could be considered threatening to Russia in the long term, since security of demand would be undermined by the EU’s steadily declining market for Russian hydrocarbon exports. However, in the short to medium term (at least until 2030), in the absence of significant progress in electricity storage technology, gas is considered to be important back-up capacity to intermittent renewable energy production, which could be a strong basis for deeper EU/Russian Federation cooperation. If the decarbonization element of the EU-Russia dialogue is to be more than empty rhetoric and ambitious objectives, the development of this partnership requires a degree of commonality in understandings of climate policy. This means commitment to policy making and implementation; the political will to develop renewable energy and increase energy efficiency, in both the EU and Russia.  

The development of a hydrocarbon energy relationship supplemented by renewable energy (and technology) trade, is contingent on a sufficient convergence of interests and political will in implementing such policies in addition to the existing and less onerous non-binding commitment to such objectives. What is also required is a shared understanding of the benefits to be gained from cooperation. This means a shared commitment to decarbonization policies even if the drivers of this commitment do not overlap completely and are based to different extents on economic, security or power concerns (including on the international stage).  

In terms of policy discourse, joint statements within the EU-Russia energy dialogue discuss a shared understanding of the potential for strong mutual benefit in developing a decarbonized relationship predicated on the trade of renewable energy (technology and physical flows) and energy efficiency technology. However, the desired partnership and strong basis for deeper EU/RF cooperation remains ambitious and largely declarative. Whilst a convergence of commercial interests and infrastructural interlinkages sustain gas trade despite poor political relations, there is little similar convergence of commercial-economic interests in relation to decarbonization.  The diversification of energy suppliers is now considered an EU priority, with political and financial support offered to realize projects that would not otherwise be commercially viable.  

The central role of the hydrocarbon trade for ensuring long-term economic growth has resulted in insufficient political will to develop, maintain and implement decarbonization objectives. Commitment to climate policy in Russia has varied slightly, but generally has been low. The priority is security of demand for energy exports. In contrast, environmental security concerns remain a priority in the EU, despite concerns regarding economic costs of decarbonization and the link between security of supply and climate policy, which decreases demand for imported energy. These differences provide a significant obstacle to cooperation on decarbonization objectives. However, the argument which has been advanced is that ideas about energy policy and security are contested and subject to change and there exists significant potential for mutual gain and cooperation in the longer term, particularly in an area less politicized than other aspects of the EU-Russia (energy) relationship. There is little evidence yet of collectively held norms related to the relative importance of the environmental dimension of energy security, and insufficient recognition of the economic potential of decarbonization policies in Russia.

The EU-Russian hydrocarbon relationship will continue to take precedence over cooperation on decarbonization objectives. In the short to medium term Russia will remain a strategic provider of natural gas supplies to the EU, just as the EU will remain a strategic export market for Russian gas. The development of EU renewables will contribute to maintaining gas demand because of a growing reliance on gas as back-up capacity and also as a cleaner transition fuel than coal. Russia is likely to continue to meet a substantial if not increasing volume of this (even if the percentage of imports decreases). This will maintain, and could deepen, the EU Russia gas relationship through to at least 2035. Even in the context of decarbonization, natural gas will remain a core component of the EU-Russia energy relationship. Decarbonization policy practice may reflect cooperative discourse if it is successfully framed either in economic and/or environmental terms in Russia. The EU and Russia will continue to have a significant energy relationship for decades to come, and this will be significant for broader foreign relations and also for the successful implementation of the Paris climate conference which requires the active participation of both actors.