Fossil Fuels – At What Cost?

The report identifies significant government support for Russia's upstream oil and gas sector, totaling US$8.1 billion in 2009 and US$14.4 billion in 2010. These subsidies, primarily in the form of tax holidays and export duty exemptions, are heavily skewed toward the development of new fields in frontier areas, particularly the Arctic, rather than improving recovery efficiency at existing fields. The study highlights the environmental risks associated with Arctic expansion and argues that reforming these subsidies is essential for decarbonizing the economy and meeting international commitments.

• Quantified federal subsidies to oil and gas producers in Russia rose from US$8.1 billion in 2009 to US$14.4 billion in 2010. This increase was primarily driven by the introduction of export customs duty exemptions for new onshore oil fields in East Siberia and increased production at fields eligible for mineral extraction tax (MET) holidays.
• Relief on the mineral extraction tax and export duties constitutes the majority of the identified federal subsidies, accounting for US$9.8 billion in 2010, or 68 per cent of the total value.
• Subsidies are heavily skewed toward the development of new fields, especially in the Arctic, while improved recovery and energy efficiency at existing fields are under-supported. For example, increasing the projected oil recovery factor in Russia by 5 per cent (from 37 per cent to 42 per cent) would yield over 4 billion tonnes of additional recoverable reserves, far exceeding the reserves of new Arctic fields like Prirazlomnoe (72 million tonnes).
• The minimum cumulative amount of subsidies provided under Russia's three production-sharing agreements (Sakhalin-1, Sakhalin-2, and Kharyaga) was estimated at US$5.4 billion in 2008, US$3.5 billion in 2009, and US$4.9 billion in 2010.
• Regulatory loopholes allowing tax minimization through transfer pricing are identified as a significant, though difficult to quantify, form of income support likely worth several billion US dollars.
• The report identifies 30 federal subsidy schemes, with the largest in 2010 being the export duty exemption for East Siberian oil (approx. US$4 billion) and MET tax holidays for East Siberian oil (approx. US$2 billion).
• Russia's energy intensity is among the highest in the world; the IEA estimates that if Russia used energy as efficiently as comparable OECD northern countries in 2008, it could have saved over 200 million tonnes of oil equivalent, roughly 30 per cent of its consumption that year.
• The Russian government uses a 'manual control' approach for export-customs duties on certain fields, such as those in East Siberia and the Caspian Sea, waiving or reducing subsidies once a field reaches an 'acceptable' profitability rate of 15–17 per cent.
• Environmental costs are often externalized, with the Russian government incurring costs for disaster management and oil spill mitigation, particularly in the Arctic, where no proven techniques for cleanup exist.
• Regional subsidies are primarily provided as tax expenditures (profits and property tax) and are considered less significant than federal subsidies due to the high degree of centralization in Russia's fiscal system.

APA

Gerasimchuk, I. (2012). Fossil Fuels – At What Cost? International Institute for Sustainable Development. https://www.iisd.org/system/files/publications/ffs_awc_russia_eng.pdf

Chicago

Gerasimchuk, Ivetta. Fossil Fuels – At What Cost? International Institute for Sustainable Development, 2012. https://www.iisd.org/system/files/publications/ffs_awc_russia_eng.pdf.

Wikipedia

{{cite report |last1=Gerasimchuk |first1=Ivetta |title=Fossil Fuels – At What Cost? |publisher=International Institute for Sustainable Development |date=February 2012 |url=https://www.iisd.org/system/files/publications/ffs_awc_russia_eng.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{gerasimchuk2012fossil, author = {Gerasimchuk, Ivetta}, title = {{Fossil Fuels – At What Cost?}}, institution = {International Institute for Sustainable Development}, year = {2012}, month = feb, url = {https://www.iisd.org/system/files/publications/ffs_awc_russia_eng.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }