Category Archives: fossil fuels

A Dirty Business: Russia, Climate Change and the Mining Industry

By Ellie Martus

When people think of Russia and the environment, they tend to think of the big, environmental catastrophes of the Soviet past such as Chernobyl and more recent issues like illegal logging, and hydrocarbon exploration in the Arctic. However, the domestic politics and policy processes surrounding these issues are far more complex and nuanced than they might appear. The politics of climate change is no exception.

As one of the world’s top five contributors to greenhouse gas (GHG) emissions and a major exporter of fossil fuels, Russia’s participation in international efforts to address climate change is vital. However, Russia has been a reluctant player in international negotiations to date. While Russia eventually ratified the 1997 Kyoto Protocol, it failed to sign up for the second commitment period. More recently, the government has signed but not yet ratified the Paris Agreement, although claims it intends to do so. Russia’s domestic policy on climate is weak and offers few incentives for industry to make significant reductions in GHG emissions.

In an article just published in Climate Policy, I look at the role played by Russian industry as a key actor in the country’s domestic climate politics, and examine how industry has responded to domestic and international policy developments. Focusing on the metals and mining sector, I explore how companies perceive the issue of climate change, their willingness to engage in policy debates, the policy options they support and the strategies they adopt to further their agenda.

What I found was that there was widespread acceptance of climate change as a phenomenon across the metals and mining sector, and most companies were willing to report their GHG emissions and to implement energy efficiency measures. Beyond this however, there was significant variation within the sector in terms of how companies responded to policy developments.

Some companies were very active in climate policy debates. For example, a number of companies tried to lobby the government to introduce more far-reaching GHG mitigation regulations and have also advocated greater Russian participation in international climate policy efforts. At the same time, there were a number of companies that vigorously resisted the increased regulation that commitments on climate might bring.

So why the strong difference in opinions within a single industrial sector? The main reasons relate first to reputation, and second to the uneven effect of international and national policy developments. Those metals and mining companies most involved in efforts to reduce their emissions and support policy efforts also operate overseas, and have foreign minority shareholders or foreign stock exchange listings. Companies that operate in countries with more advanced climate policies are more likely to be concerned with their image and make attempts to generate positive ‘environmental PR’.

Second, Russia is home to a number of very large, diversified metals and mining companies that can more easily adapt to changing circumstances. This means they can shift out of mining coal for example and move into producing other metals if required. Dedicated coal companies, however, are not able to do so and this is where we find the greatest resistance to climate policy.

The Special Case of Coal

Within the broader metals and mining sector, coal is something of a special case. Its very existence is directly threatened by climate change mitigation policies that necessitate a shift away from coal. As we might imagine, the coal industry is very resistant to climate policy.

Coal companies employ various strategies to justify this position: they talk up the role of coal in the world’s future energy supplies, and focus on Russia’s role as an ‘environmental donor’ to the world. This is mainly due to the absorptive capacity of the country’s vast forests and the significant (though unintended) drop in Russia’s GHG emissions in the 1990s, as a result of economic decline following the collapse of the Soviet Union.

Coal companies have also been supportive of ‘grassroots’ anti-climate campaigns, which have highlighted the consequences for the inhabitants of Siberia, where much of Russia’s coal is produced. These include unemployment and rises in the cost of electricity, that a shift away from coal would necessarily entail.

So what of the Russian government? As a major coal producing country, the industry is very important for the economy. A significant portion of Russia’s electricity generation comes from coal. Added to this, a great deal of coal mining takes place in single-industry towns or in areas heavily dependent on the industry, which raises important socio-economic concerns for the government. As a result, the Russian government has no plans to phase out coal, and is instead actively seeking to expand the coal industry. The close alignment of coal industry and government interests represents a formidable obstacle to any Russian commitment to climate policy at the domestic and the international level.

About the Author

 

Dr. Ellie Martus is a Fellow at the Department of Sociology, Global Governance GRP, University of Warwick, and a Visiting Fellow at the Australian National University.

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The Political Struggle in Eliminating Coal

By Stephen Zhao

Advancements in renewable energy and natural gas have appeared to make coal a thing of the past, with the costs of solar, wind, and gas generated electricity approaching or even undercutting that of coal power. Yet, while market conditions no longer favour coal, its political importance prevents an easy transition to these other energy sources. As such, successful management of the coal energy transition will need to account for political roadblocks that will arise from a push towards reducing coal use.

Recently, countries such as China, Germany and the United States have backtracked in their efforts to reduce coal consumption. With the cancellation of China’s mining moratoriums, repeals of Obama-era environmental regulations under the Trump administration in the US, and the revival in coal capacity construction in Germany post-2008, these are just some examples of nations  reversing previous political efforts to limit coal, actions which are typically preceded by some form of political backlash or resistance.

Smoke rising from nearby coal-fired power plants in the Shanxi Province, China (Source: NY Times | Kevin Frayer | Getty Images)

A common factor amongst these aforementioned nations is also the trading regime governing their coal market. One key difference between coal and other fossil fuels is that it has much more domestic-oriented market dynamics. Over 90% of coal production and 85% of coal consumption lies within ten countries, of which about 70% of both production and consumption lie within China, India, and the United States alone. Whilst efforts to reducing consumption of oil and gas in one country often hurt producers in another, this is not the case with coal.

Countries with the biggest coal markets (i.e. China, India, Germany and the United States) tend to be both producers and consumers, which severely complicates the politics of reducing coal use within these markets. The presence of both production and consumption activities can generate a strong political coalition in the coal industry’s favour. Since most of the coal produced would be consumed domestically, the industry would be severely resistant to any attempts to reduce the domestic demand for coal. As geographically concentrated sources of employment and economic activity, local communities and political actors tend to work together  in defending the coal industry within the policy making process.

US President Donald Trump signalling his support for coal mining at a rally during the 2016 presidential campaign (Source: CNBC | Dominick Reuter | AFP | Getty Images)

Moreover, supporting for the coal industry’s commercial activities is substantial. In 2016, the United States Bureau of Labour counted approximately 57,000 individuals employed in coal production. However, if these calculations also include those working in supporting services,  the total increases 30% to around 74,000 employees. As an integrated supply chain, the coal industry is also tied to other economic interests such as railways, steel and heavy metal production, and the financial industry. The collapse of coal companies could cause severe disruptions in supply, leading to considerable loss of business or resulting in defaults on loans. All these factors mean that a rapid decline in coal consumption would create substantial dissatisfaction and backlash from a large number of political stakeholders.#

The decline of coal’s competitiveness in the market paradoxically enhances its political voice. In China, the prospect of mass unemployment for the country’s 5.2 million coal miners has made the Communist Party think twice about its broad stroke policies to reduce coal capacity. Disaffected miners in Pennsylvania and Ohio helped propel President Trump’s electoral victory in 2016. After a boom in natural gas, struggling coal-based power companies in Germany have managed to secure lenient provisions in the European Union Emissions Trading Scheme (EU ETS), allowing them to remain competitive. If efforts to reduce coal use are to get anywhere, something must be done to compensate the losers of the energy transition.

Local villagers carrying coal from the local open-cast mine in Jharia, India (Source: Zimbio | Daniel Berehulak |Getty Images AsiaPac)

Moving forward, solutions may need to incorporate compromises with community and commercial coal interests in order to succeed. Germany has recently taken to paying utility companies to shut down their coal plants. Whilst an expensive option, this initiative helps ease the strain on these firms’ bottom line and allows for a smoother wind down of the industry. Such policies, incorporated with a real focus to invest in communities losing out due to  coal industry decline, can help alleviate the political pressure that builds to protect coal.

Unfortunately there is no single, simple path for this energy transition to take, and despite optimism surrounding the market competitiveness of renewables and natural gas, reducing and eliminating coal will be far more complicated than just a matter of simple economics.

This blog post is based on a larger work about trading regimes and coal reduction policy. To read more about the trading regimes and the political economy of coal, click here.

A more optimistic picture is presented in reports as part of Coal Transitions project, available to download from the project website.

About the Author

 

Stephan Zhao is a Researcher at the Munk School of Global Affairs, University of Toronto.