Russia: An Economic Chill
Subsidies cost Russia $39.3 billion in 2010, says IEA, but that understates the economic impact. Russia's spending to heat homes is double that of its Arctic neighbor, Canada, in terms of energy "intensity" (heat consumed per unit of GDP), even though Canada has colder average temperatures. Russia has more people living in colder regions, a relic of Soviet planning that forced large numbers of people into frigid frontiers that the government sought to industrialize, especially for extraction of natural resources.
The payoff of that investment is Russia's rank as the world's largest natural gas producer and exporter, but there has been a price. Some 60 percent of the natural gas it produces is sold at cheap subsidized rates to Russian businesses and private consumers, and fires inefficient district heating systems. It's not uncommon for apartment dwellers in winter to open their windows to vent unwanted warm air. At least one quarter of the heat generated in these distribution systems is lost, and Russia's energy waste is reckoned to be equal to all the energy consumed in France.
Not only is Russia losing export revenue due to its subsidy system, but its Siberian fields are being depleted. The International Energy Agency now projects that both the United States and China will overtake Russia in natural gas production over the next 25 years.
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