Finding itself in the post-Paris world: Russia in the new global energy landscape

Because the Russian economy relies heavily on exports of fossil fuels, the primary source of human-induced greenhouse gas (GHG) emissions, it may be adversely impacted by Paris Agreement-based climate policies that target reductions in GHG emissions. Applying the MIT Economic Projection and Policy Analysis (EPPA) model to assess the impacts of the Paris Agreement on the Russian economy, this study projects that climate-related actions outside of Russia will lower the country’s GDP growth rate by about one-half of a percentage point. The Paris Agreement is also expected to raise Russia’s risks of facing market barriers for its exports of energy-intensive goods, and of falling behind in the development of low-carbon energy technologies that most of the world is increasingly adopting. The researchers argue that to address these risks, the country needs a new comprehensive development strategy that accounts for the post-Paris global energy landscape. They offer suggestions for key elements of such a strategy, including diversification of the economy, moving to low-carbon energy sources and investing in human capital development. The study simulates three simple diversification scenarios showing that redistribution of incomes from the energy sector to the development of human capital would help avoid the worst possible outcomes.