Ever-greater failure: EU energy policy – Part 2

Deepening the gloom

We take a closer look at the topics of methane emissions, environmental double standards, Extinction Rebellion and the scary advantages this hands Russia’s energy firms – and Russia’s political and economic system – in their competition with the West.

In Part 1 of this three-part article, we looked at Russian president Vladimir Putin’s fabulously successful psychological operations (psyops) efforts in the spheres of energy and climate change. This has raised – perhaps begged – several interesting questions. In Part 2, we examine some of these in more detail, suggesting that the situation may be even worse (or at least more ludicrous) than Part 1 suggested. And we point to some potentially far-reaching consequences for the viability and survival of Mr Putin’s system of rule and the economy over which it presides – and that of the West.

Playing silly bugbears

In Part 1 of this article, we noted in passing the irony of Mr Putin – president of the world’s largest gas exporter – joining the chorus on the latest bugbear of the climate activists: methane leaks and methane emissions.

Maybe this deserves a little more attention.

For this was not just a passing reference, but a major theme in his speech to a summit meeting in April 2021, and made him the global leader most vocal on the subject:

‘It is necessary to reckon with all the factors influencing global warming, without exception. For instance, methane accounts for 20% of anthropogenic emissions. And each tonne creates a greenhouse effect 25-28 times greater than a tonne of CO2. If, let’s say, in the coming 30 years, it were possible to reduce methane emissions by half, then, according to experts, the global temperature by 2050 would decrease by 0.18 degrees. That, by the way, is up to 45% of the difference between the current temperature and the goal of the Paris Agreement’.

Which, he continued, made it:

….extremely important to develop broad and effective international cooperation in the calculation and monitoring of all polluting emissions into the atmosphere.”

An admirable point, except for two things.

First, the world’s biggest methane leaks are consistently recorded in Russia. For instance, one detected in the Russian region of Tatarstan in early June by geomonitoring firm Kayrros SAS – less than a fortnight after a somewhat smaller one – was reported to have been the world’s largest since September 2019.

Second, somewhat like charity, effective pollution monitoring and control begin at home. And it’s generally admitted that, in Russia, they are not up to much.

The system is a combination of centralised and decentralised elements, but the key monitoring bodies are at regional level (oblast, republic or equivalent “federal subject”). These are the regional branches of the Federal Ministry of Natural Resources and Environmental Protection (MPR/Minprirody). And they are notorious for dragging their feet in registering such emissions. Periodically, Gazprom engages in some ritual confession and self-flagellation, as it did over the June leak. But that happened after Kayrros had reported the leak. As it always does: “confessions” simply confirm what has already been revealed by satellite. And nothing much results from such confessions.

Moreover, the financial incentives and penalties involved provide no reason why anything should result.

Companies pay fines to the central government budget for methane and CO2 greenhouse gas emissions. But these aren’t exactly punitive: under the 2016 Government Ordinance on Negative Environmental Impact the penalty was RUB 108/tonne of methane in 2018 and, adjusted annually, reached RUB 116.6/tonne in 2020. The latter sum is equivalent to EUR 1.35. That compares with upwards of EUR 60/tonne (EUA) nowadays under the EU’s Emissions Trading Scheme!

And, incidentally, Minprirody in Moscow is subject to incentives and priorities that point in the same direction. It has both a natural resource function and a control/monitoring function. But it’s the former that determines where Gazprom drills and emits methane – and it’s where the real revenues for the budget are generated. So that function gets the attention and the priority. Control is decidedly subordinate.

Incidentally also, there’s an instructive back-story. I said above that Mr Putin had joined the anti-methane chorus, but it would probably be nearer the truth to say that he had led it:

Before the “conversion” of Russia’s president – who seems fond of the Road to Damascus in more senses than one – Western eco-activists were not actually talking about methane very much or with much emphasis. The topic emerged very discreetly in the course of the anti-fracking debate, but only gained in prominence in 2020, when American LNG and Russian natural gas came into direct competition, prompting a namecalling contest regarding which was was nastier (the French government blocked an US LNG cargo as too dirty, while the US Administration said Russia’s was worse). Last year, soon after Russia signed up to the Paris Climate Accords, the Russian Gas Society (an association of producers including Gazprom. Rosneft, Lukoil and Novatek) had proposed to the government that methane should be excluded from the greenhouse gases list, suggesting that it had not yet been demonised.

And duplicity can be assumed. Mr Putin is now Talking the Talk, which makes him sound accommodative to Western publics and politicians. But, aside from occasional ritual confessions, Gazprom isn’t – and much less is it Walking the Walk. Nor, as we’ve seen, is Minprirody or its local agencies. So Mr Putin is able to get the credit for saying the politically correct thing, while Russia’s energy firms have a free hand to go on acting, profitably, just as before.

Too much detail? Well, maybe. But one thing is for sure: it’s detail that hasn’t figured very prominently in the anti-methane rhetoric of the climate activists!

Double standards

The last point might be generalised. Consistency and fairness are, of course, not conspicuous features of public policy discourse generally – least of all that of climate activists. But it’s worth pointing out a certain systematic asymmetry here, because it has serious practical consequences.

Generally, Western companies adhere to much higher and stricter environmental monitoring and reporting standards than Russian ones. But the heat is on EU and US oil and gas companies, not Russia’s. Many Western oil and gas companies are subject to discriminatory treatment from banking and financial institutions. Some are taken to court and forced to pay hefty sums in fines. One Dutch court has gone even further: overriding mere market signals and the cost-benefit calculus that normally governs the actions of private capital, it simply ordered Shell to cut its emissions! By 2030, these must be reduced by 45% compared to 2019 levels.

But Russian companies are spared such tribulations. Why?

Well, one reason is that the Putin regime has a tight grip on politics and society and doesn’t give much scope to climate alarmism and environmental opposition – any more than it does to opposition of any other sort. There are environmental issues: how could there not be, in a country so profuse in its resources and so prone to climate emergency? There are also genuine ecoactivists, some of them very brave and forthright. But their voices are not heard much and they achieve almost nothing. One consequence of which is that Mr Putin can, with impunity, spout all the inconsistencies he likes about methane (or anything else) in international forums: for practical purposes he won’t be called out on these contradictions at home – or pressured effectively there to act in accordance with his rhetoric.

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Another reason is that the regime has a very clear view of the country’s energy companies: they are a Good Thing and their success is vital to the country’s economic and foreign policy success. And, it might be added, to the regime’s survival. So acting on environmental angst, if it would compromise that success, doesn’t have much priority.

And the third reason is that Western climate extremists tend to leave Russia alone and concentrate their fire on Western companies.

Debunking XR

Now, as I said above, this has serious practical consequences. Of these, more in a moment. But first, a little digression. In Part 1 of this article we painted climate extremists like Extinction Rebellion as violent and as dupes or willing tools of the Kremlin. Isn’t that a little harsh? Or maybe even a little paranoid?

Broadly speaking, it’s neither. Consider a characteristically excellent piece written by Eric Alexiev for Bulgaria Analytica in 2019, on XR and its predecessor the Occupy movement, exploring their common roots and exposing their modus operandi (MO). Non-violence? Hardly: Mr Alexiev points to XR co-founder Roger Hallam’s frequent talk of the “backfire effect”, giving the example of:

a very small group of “peasants” agitating landowners into violence, thus providing optics that galvanize the rest of the public into rebelling.

Summarising the group’s MO as follows: 

“…first you must agitate the public, then provide them with a scapegoat of a justification for their irrationality to weaponize their behaviour and stoke the public discord”,

Mr Alexiev comments:

Does this sound strictly and avowedly like a movement with interests in nonviolence?”

Wise words. He also notes drily that a global map provided by the XR website to help participants find local chapters to get involved “leaves a few big players on the world’s stage entirely blank, chiefly Russia and China.” (this, incidentally is despite XR’s claims of “global reach”). He also notes the prominence of Occupy veterans in the programmes of Russia Today (RT), “Putin’s main propaganda organ in the West”.

So, no, we don’t need to give the benefit of the doubt to Mr Hallam and his XR friends. Some of them undoubtedly know exactly what they are doing (much as Lenin probably had few illusions about the German General Staff when he accepted its offer of a train ride in 1917). Human motives vary, so some – especially in movement’s rank-and-file – are probably sincere in believing routine denials that, for instance, a crackdown on shale gas increases energy dependence on Russia. And many others no doubt couldn’t care less. The classic definition of “useful idiots” is “naive or misguided persons who can be manipulated to advance political causes by opponents they formally claim to oppose”. So maybe it doesn’t matter: a mixture of cynical cunning and bona fide idiocy would do very nicely for Mr Putin’s purposes. The important thing is that the cause should be advanced. And it is being advanced – big time!

Putin’ on a good show

We have digressed, however. We were talking of asymmetry and its serious practical consequences. The point is that, while Western energy companies are subjected to all sorts of restraints, Gazprom and other Russian oil and gas companies enjoy a near-free ride in exploring and developing the country’s energy resources – and therefore its energy export potential. They can just disregard pressure from Russia’s own ecoactivists, as well as international calls for independent emission monitoring and verification. They can fill the demand gap left by Western companies’ inability to invest in E&P. And they can benefit from the resultant rising gas prices.

The upshot of all this is that Moscow is raking in billions in imperial energy rent from Europe – a fact which the climate alarmists are mysteriously silent about. And the most important consequence of this is that the country’s repressive regime continues to be funded.

For the situation is a matter of increasing competitive advantage, not only for Russian energy firms, but also for Russia as an economic and political system.

On the face of it, Russia doesn’t have much going for it apart from its oil and gas industry (except, perhaps, for an armaments sector capable of exporting significant volumes of hardware that, if not the highest of high-tech, is at least of decent quality and acceptably priced).  Arguably, indeed, in the words of the late Senator John McCain, Russia is just a big ‘gas station, masquerading as a country’. Arguably, too, a statesman who really loved his country would long ago have set about the prosaic task of transforming Russia into a diversified, consumer-oriented economy devoted to solving its own considerable domestic problems rather than punching above its economic and demographic weight in pursuit of anachronistic dreams of national greatness and influence.

But you’ve really got to hand it to Mr Putin for the way he has turned a really weak position to his advantage. His psyops have been superb, building on the way the EU elite combines a surplus of missionary zeal with a deficit of plain common sense.

Just consider! After at least a decade of source and route diversification, the EU today is more dependent on Russian gas, not less. Thanks to climate policies, EU consumers are no nearer to self-sufficiency and energy independence, but instead locked into long-term reliance on Moscow. Unless the EC reverses its fast-track climate action plan, at least in part and temporarily, energy prices will continue to soar and defy gravity, as oil and gas companies are reluctant to invest in E&P, despite market signals.

And I stress “long-term”: EU energy demand will remain high and the gap between this demand and what can be supplied by the EU itself will grow inexorably: what green tech could potentially provide would be limited and in the long term, while what the EU’s conventional energy companies can supply will decline, given the vendetta against fossil fuels and the drop in E&P investments. The CEO of US energy major Chevron, Mike Wirth, has warned of high energy prices in the long run, given the backlash against fossil fuels and the industry’s difficulties in accessing capital markets. “Eventually things work out, but eventually can be a long time,” observed Mr Wirth.

And Mr Putin? Simple: unless something radical changes, this situation guarantees him lifetime rule of Russia and indefinite funding for his aggressive actions both at home and abroad. Not bad for a gas-station manager! Maybe he’s earned it…

A tectonic geopolitical shift?

Meanwhile, Mr Putin’s adversaries on the world stage should, prima facie, be in a strong position. Their populations far exceed Russia’s and their economies outweigh Russia’s even more heavily – and are quite innovative in parts and at least not basket cases. But these societies (with Mr Putin’s help) seem intent on making the most of their weaknesses, divisions and anxieties. They appear locked in bizarre and inexorable self-destructive mode.

In terms of protest, discourse and policy alike, the trend is towards more rather than less extreme variants: assumptions about global warming are becoming more alarmist, the sense of climate emergency more pressing, and resistance to fracking and E&P generally fiercer and more categorical. The deeper the energy crisis gets, with gas prices breaking the $900 per thousand cubic metre barrier, the more fiercely will proponents of crash-course climate action dig their heels in. Proponents like EC Vice President Frans Timmermans, who recently told the EU Parliament that sky-high energy prices ‘must’ speed up green transition. That, in the context of the rising in global emission shares of China, India and Russia, is surely Malthusianism bordering on delusion.

Calls for degrowth both of the EU economy and of the population are becoming more frequent and closer to the mainstream. And not just calls. Estimates of the annual global costs of climate actions in the years up to 2030 vary between $5 trillion and $6.9 trillion. That’s equivalent to 5-6% of likely GDP over the period, so it could just swallow up any economic growth achieved – that of the EU, especially, has been below 3% for most of the 2010s.

Degrowth is already happening and is likely to intensify, with direct and indirect carbon taxes resulting in a dramatic drop in living standards, Even more extreme policies incentivising lower birthrates, less transport use and lower meat consumption – with a view to fighting climate change – will further drive divisions and a collapse in the quality of life in the EU and the US.

Russian psyops will go deep, aggravating all of this, amplifying economic effects – as well those of the West’s genuine and quite remarkable talent for shooting itself in the civilisational foot. These psyops don’t just aim to generate uncertainty and panic through price shocks, exploiting a lack of response from EU and NATO governments. Instead, as in the classic anti-shale gas scare campaign, Moscow’s grey and black propaganda seeks to build on half-truths or entirely fictitious stories covering the whole natural gas value chain – from upstream to downstream.

Secondary or induced turbulence – involving inflation, falling living standards, unemployment and social aftershocks caused by high energy prices – could overlay pandemic-fed fears and divisions, kicking off an existential crisis within the EU and NATO. The pattern is identical in all Mr Putin’s psyops – anti-shale, climate alarmism, and now the pandemic saga. You build on deficits of information, knowledge, and action. You turn these deficits into scepticism. And then you watch this scepticism translate first into uncertainty and anxiety, then into fear – and ultimately into a panic that precludes solidarity and rational, consensus-based actions.

On the Western side, there’s a failure of policy, of policy-making processes and of the mobilisation of consent. EU and NATO governments seem incapable of identifying and pursuing an optimal and shared cost-benefit strategy that meets both growth and security goals. In their current state, EU climate policies in particular directly contradict essential national security interests – military, political, economic and social. Moreover, as a classic case of top-down policy engineering, they have not been certified in a straightforward democratic process of public voting in EU member states. Instead they have emerged in an interplay between EU bureaucrats, climate lobbyists, and corporate, academic and NGO groups, each with its own axe to grind. A messy process—abetted by Mr Putin’s psyops.

Result, perhaps: societies and governments in the EU and NATO are overwhelmed with protests and Kremlin-backed subversion. Meanwhile, Mr Putin is sitting pretty in Moscow, untroubled by social and political turbulence because of his absolute power at home. Unable to provide a credible and successful development and growth model, he nevertheless has massive negative power – exploring cracks in the West’s policy and security shield, turning them into opporunities to increase Russia’s wealth (and his own), and to buttress his system’s short-to-medium term viability.

Meanwhile also, incidentally, Beijing’s cyber-communists – who just possibly do have a long-term model – are quietly waiting to inherit the earth.

A chilling scenario? Certainly. A possible one? Definitely. An inevitable one? I think not. But unless intelligent action is taken on various fronts– and taken soon – Mr Putin will continue to enjoy powerful policy leverage over EU governments. In which case the future could look depressingly like that.

The final part of this article will make a few suggestions on what such action might consist of.

Ilian Vassilev

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