Russia warns of spike in prices if renewable energy transition is rushed

Russia has warned that a rushed transition away from fossil fuels risks driving electricity prices higher, responding to German comments that an EU carbon tax may make renewables more attractive in Russia.

Russia is ready to support global efforts against the negative consequences of climate change but any push to renewables should be gradual, Deputy Energy Minister Pavel Snikkars said on Wednesday. 

"We are not ready for sharp price volatility in the electric power sector, that's why we will act more gradually in the renewables part," Snikkars said.

Some sceptics of a rapid shift to renewable energy say that falling investment in fossil fuel supplies will lead to higher prices. Supporters say renewables will provide cheaper power.

Over the weekend, German Foreign Minister Annalena Baerbock said she expected the European Union's proposed carbon border tax to encourage a switch to renewable energies in Russia.

In the past Baerbock had said that Moscow uses energy prices to "blackmail" Europe, which receives around a third of its gas from Russia.

Carbon inflation

Russia's exports of commodities and power to Europe have been in the spotlight because of winter price rises and supply disputes, at a time when tensions between Moscow and the West are escalating over Ukraine.

In July, the EU proposed a CO2 tariff on imports of polluting goods to the trading bloc from 2026. That would make some companies pay a border tax on carbon-intensive products including electricity, steel and aluminium.

Such a tax is likely to hit Russia the hardest, according to a joint study by two European climate think tanks.

Alexandra Panina, a board member at state power utility Inter RAO, which exports to Finland and the Baltic states, said the company was closely watching how the proposed tax developed.

She also expressed optimism about joint cooperation with the EU on green energy.

Panina said Inter RAO was currently facing obstacles in supplying low-carbon and cheap power to the region and that the tax could drive inflation in Europe.

"Introduction of a carbon border tax would speed up inflation, which beat multi-year records last year, and would lead to an additional rise of prices to all the goods in the EU," she said.

Inter RAO expects its electricity exports to double in 2021 to more than 21 billion kilowatt hours.

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