FAKULTÄT AGRARWISSENSCHAFTEN Aus dem Institut für Agrarpolitik und Landwirtschaftliche Marktlehre (420) Universität Hohenheim Fachgebiet: Agrar- und Ernährungspolitik (420a) Prof. Dr. Harald Grethe Carbon Taxation in Russia: Prospects for a Double Dividend and Improved Energy Efficiency Dissertation zur Erlangung des Grades eines Doktors der Agrarwissenschaften vorgelegt der Fakultät für Agrarwissenschaften von Anton Orlov aus Novosibirsk, Russland 2012 Die vorliegende Arbeit wurde am 17. Oktober 2012 von der Fakultät Agrarwissenschaften der Universität Hohenheim als „Dissertation zur Erlangung des Grades eines Doktors der Agrarwissenschaften“ angenommen. Tag der mündlichen Prüfung: 18. April 2013 Leiter des Kolloquium: Prof. Dr. Markus Rodehutscord Berichterstatter, 1. Prüfer: Prof. Dr. Harald Grethe Mitberichterstatterin 2. Prüferin: Prof. Dr. Martina Brockmeier 3. Prüfer: Prof. Dr. Tilman Becker 2 Acknowledgements I thank the Eastern Europe Centre to give me the opportunity to do this PhD work within the ERASMUS MUNDUS project. My special thanks go to Dr. Jochem Gieraths and Melanie Dahms. I thank Professor Harald Grethe, who supervised my PhD work. I am particularly grateful for his motivation. He allowed me the freedom to complete this PhD thesis, but also provided constructive comments and discussion. I thank Professor Martina Brockmeier for being the second reviewer of my PhD thesis as well as for her valuable comments and discussion. I thank Professor Scott McDonald for his CGE model, STAGE, on which my work was based. Also, I would like to thank him for his motivation, helpful comments and discussion. I also thank all of my colleagues from the Agricultural and Food Policy Group (420a), University of Hohenheim, for the great atmosphere. Especially, I would like to thank Andre Deppermann, Edda Thiele, Melanie Chadeayne, Khalid Siddig, Ole Boysen, Dorothee Flaig, Ulrich Kleinwechter, Nuray Duman, Jonas Luckmann, and Alex Staus. Finally, I am very thankful for the unconditional support of my parents and brother. 3 Publications Based on the Thesis Parts of this thesis are based on work which has been accepted for publication in peer- reviewed international journals: 1) Orlov, A., Grethe, H., 2012. Carbon taxation and market structure: a CGE analysis for Russia. Energy Policy 51, 696-707. 2) Orlov, A., Grethe, H., McDonald, S., 2013. Carbon taxation in Russia: prospects for a double dividend and improved energy efficiency. Energy Economics 37, 128-140. The first manuscript, which forms the basis of Sections 3.2.2 and 7.5, has been published in Energy Policy. The second manuscript, which provides the basis of Sections 3.2.1, 7.3 and 7.4, has been published in Energy Economics. Anton Orlov is the lead author of both articles. He developed the concepts, drafted all text parts and carried out model developments and simulations. Model developments and results were intensively discussed with the co-authors. Furthermore, co-authors significantly contributed to embedding the analysis in a political context and refining the manuscripts. 4 Contents List of Tables ...................................................................................................................... 9 List of Figures .................................................................................................................. 11 Abbreviations ................................................................................................................... 13 Summary ................................................................................................................................. 15 Zusammenfassung .................................................................................................................. 18 1 Introduction ......................................................................................................................... 23 2 Energy Efficiency and GHG Emissions ............................................................................ 28 2.1 Energy Intensity ............................................................................................................. 28 2.2 Greenhouse Gas Emissions ............................................................................................ 29 2.3 Energy Saving Potential ................................................................................................. 31 2.4 Summary of the Chapter ................................................................................................ 37 3 Theoretical Background ..................................................................................................... 38 3.1 Economics of Energy Efficiency .................................................................................... 38 3.1.1 Energy Efficiency Gap ............................................................................................ 38 3.1.2 Environmental Policy and Technology Diffusion ................................................... 41 3.1.3 Environmental Policy and Innovation ..................................................................... 41 3.2 Optimal Environmental Taxation ................................................................................... 42 3.2.1 Double Dividend Hypothesis .................................................................................. 42 3.2.2 Environmental Taxation under Imperfect Competition .......................................... 51 3.2.3 Environmental Taxation and Distributional Effects ................................................ 56 3.2.4 Environmental Tax Differentiation ......................................................................... 58 3.3 Summary of the Chapter ................................................................................................ 59 4 The Tax System and Tax Interactions ............................................................................... 61 4.1 Structure of Government Revenues ............................................................................... 61 4.2 Trade Taxes .................................................................................................................... 62 4.3 Domestic Taxes .............................................................................................................. 65 4.4 Tax Interactions: Relevance of Export Taxes ................................................................ 69 4.5 Summary of the Chapter ................................................................................................ 75 5 Energy Markets ................................................................................................................... 76 5.1 Gas Market ..................................................................................................................... 76 5.1.1 Supply ...................................................................................................................... 76 5.1.2 Demand ................................................................................................................... 78 5.1.3 Challenges for Gas Policy ....................................................................................... 81 5.2 Crude Oil and Oil Products Market ................................................................................ 83 5 5.2.1 Supply ...................................................................................................................... 83 5.2.2 Demand ................................................................................................................... 84 5.2.3 Challenges for Petroleum Policy ............................................................................. 85 5.3 Coal Market .................................................................................................................... 85 5.3.1 Supply ...................................................................................................................... 85 5.3.2 Demand ................................................................................................................... 86 5.3.3 Challenges for Coal Policy ...................................................................................... 88 5.4 Electricity Market ........................................................................................................... 88 5.4.1 Supply ...................................................................................................................... 88 5.4.2 Demand ................................................................................................................... 92 5.4.3 Challenges for Electricity Policy ............................................................................. 96 5.5 Summary of the Chapter ................................................................................................ 98 6 Database and Model Framework ....................................................................................... 99 6.1 Database ......................................................................................................................... 99 6.1.1 Overview of the Database ..................................................................................... 100 6.1.1.1 Energy Consumption ................................................................................ 100 6.1.1.2 CO2 Emissions and Energy Consumption ................................................ 102 6.1.1.3 Tax Rates .................................................................................................