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Balancing Growth and Environment

The energy resources fueling economic growth are also a major factor contributing to environmental damage like in this industrial zone in the Tyumen region. Vladimir Filonov
Every summer, the 15,000 residents of Nikel worry about the wind.

The wind blows southward for most of the year, carrying toxic fumes from the local nickel smelter away from the Murmansk region town just seven kilometers from the Norwegian border. As a result, the countryside south of the town is a brown moonscape of bald hills, barren of plant life for kilometers around.

But summertime atmospheric conditions sometimes push the sulfur dioxide fumes to the north instead, toward Nikel's homes. Then it is not just the plant life that suffers.

"Last summer, Nikel residents called us to complain that it was difficult to breathe and that the rain was burning holes in their umbrellas," said Nina Lesikhina of Bellona, an environmental organization with a branch in Murmansk.

This year, the situation is not much different. "Every time the wind blows north or northeast, it brings sulphur dioxide into town," said local resident Denis Shershov. "In the summertime, that's about once every three days."

The nickel-producing Pechenganickel plant, which belongs to Norilsk Nickel affiliate Kola GMK, emitted 108,000 tons of sulfur dioxide in 2006, or more than four times the emissions of all Norway, Bellona said.

Nikel's proximity to Norway makes the plant, which is the lifeblood of the town, an increasingly sore point between the two countries. Last July, when atmospheric conditions were unfavorable, a scientist from the Norwegian Institute of Atmospheric studies said on Norwegian television that the sulfur dioxide concentrations in Nikel were so high that residents in the entire region would have to be evacuated under Norwegian standards. Norway has been asking Kola GMK for decades to bring down pollution levels

In Nikel, people just keep going to work, hoping that the weather will keep the fumes blowing south.

Inefficient and Wasteful

One of the biggest causes of environmental degradation is that the Soviet legacy of inefficiency has finally caught up with Russia. As old infrastructure and production facilities are stretched to the limit, they use up more fuel and water. Few of those facilities have been updated to meet new environmental and efficiency standards, since the law that sets environmental regulations does not encourage it.

Russia has the least efficient economy in the world, the International Energy Agency said in its most recent study on the issue, conducted in 2006. To produce one unit of output, Russia uses almost double the amount of energy as China and up to four times as much as some industrial countries.

Forty percent of all energy consumption is lost, a third of which is lost in the housing sector, according to Greenpeace.

Losses from natural gas flaring at oil fields amount to more than 50 billion cubic meters a year, according to the IEA.

Russia's water intake per gross domestic product unit is 50 times what it is in Britain, Natural Resources and Environment Minister Yury Trutnev told NTV on June 8.

At the same time as domestic demand for energy is soaring, Russia tries to meet its export obligations, and inefficiency is becoming more costly. Carbon emissions and pollution are growing, nuclear power plants are operating past their planned life spans, and new energy projects that threaten to further contaminate the environment are being approved.

One example is the Turukhanskaya hydropower plant to be constructed by Hydro-OGK in the Krasnoyarsk region starting in 2010. The project for what will be Russia's most powerful hydropower plant was conceived in the Soviet period but was shelved in the late 1980s after a public outcry.

The proposed project involves building the plant by damming the Lower Tunguska River, flooding about a million hectares of forest and tundra, some of which contains buried nuclear waste, and displacing the indigenous Evenk population -- all at a price tag of $13 billion. There is no local energy demand, and the electricity is to be channeled to European Russia via a 3,500-kilometer system of power lines. Critics have labeled the project as wasteful, dangerous and unnecessary.

Indigenous populations of Arctic regions like the Yamal peninsula are also threatened by new development. The peninsula is traditionally home to 34,000 people who lead a nomadic lifestyle based on deer herding. Yamal has been targeted by Gazprom as a "strategic resource base" for oil and gas. There are already 220 oil and gas fields in Yamal, including four new ones opened this year. The permafrost on which the infrastructure for the industry is built is likely to thaw out as global warming continues, threatening significant oil leakage onto the tundra.

But unless Russia's energy strategy changes, the number of such projects will only grow, said Igor Bashmakov, director of the Center for Energy Efficiency. "Low-energy efficiency is a big factor in emissions of greenhouse gases and polluting chemicals," he said.

Environmental degradation, though not factored into the budget, comes at a high price. A new report by the World Bank says Russia loses up to 6 percent of GDP to workers' deteriorating health, with environmental factors like pollution causing about 40,000 deaths per year.

Air pollution is "high" or "extremely high" in 69 percent of Russian cities, affecting 55 percent of the Russian population, according to a 2007 report by the Natural Resources and Environment Ministry. Sixty-five percent of Russians view the environmental situation in their neighborhood as "bad" or "very bad," a Levada Center survey found in April.

Six Russian cities are on the Blacksmith Institute's list of the 30 dirtiest places in the world -- Bratsk (Irkutsk region), Dzerzhinsk (Nizhny Novgorod region), Magnitogorsk (Chelyabinsk region), Norilsk (Krasnoyarsk region), and Rudnaya Pristan and Dalnegorsk (both in the Primorye region).

Growth by Any Means

Many of the environmental problems have carried over from the Soviet era, when environmental impact was not something the rapidly industrializing country was concerned about. In the early 1990s, when awareness of many issues hit the public consciousness, the environment was one of them. The groundwork of environmental legislation was laid with the 1992 law "On Environmental Protection." Schoolchildren took environmental classes and a special Federal Ecological Fund was created to help municipalities modernize their aging equipment and infrastructure by using money from environmental impact fines, foreign donors and the government.

But starting in 2000, the year Vladimir Putin became president, environmental legislation steadily weakened. The first step in the policy redirection was tacking the State Committee for Environmental Protection (then called Goskomekologia) onto what was then called the Natural Resources Ministry, which has always been primarily concerned with extracting resources rather than protecting them.

"There was a conscious choice made by the government, with the idea of lifting extra obstacles from economic growth," said Igor Chestin, director of the World Wildlife Fund.

In 2001, the Federal Ecological Fund was closed after the passage of a new budget. The following year, a new version of the environmental law was passed that scrapped the "polluter pays" principle. Although the fines were later reinstated, they are now the lowest among CIS countries, according to World Bank data.

The practice of establishing the fines is extremely bureaucratic and prone to corruption. For example, the Federal Water Resources Agency calculates the norms for the concentration of polluting agents in sewage waste that a facility is allowed to dump into a certain river. The company then goes to the Federal Environmental, technological and Atomic Inspection Service, or Rostekhnadzor, to submit their sewage discharge calculations for every chemical. Based on these calculations, Rostekhnadzor sets a "maximum allowable limit" for polluting above the norm. The idea behind this second limit is to give the company some slack while it is working on bringing down pollution to normal levels.

Nikolai Gudkov, spokesman for the Natural Resources and Environment Ministry, conceded that the system was problematic.

Vladimir Filonov / MT
Industrial cities like Magnitogorsk, built in the 1930s, still account for much of the country's production and pollution.
"In practice, companies overstate their calculations when they go to Rostekhnadzor in order to set the maximum levels higher and extend the limit agreements every time those run out," Gudkov said.

Only 10 percent of all sewage waste disposed into Russia's rivers and lakes goes through an adequate purifying process, a figure that has been shrinking over the years as sewage facilities age and become ineffective, according to a 2007 report by the Natural Resources and Environment Ministry. As a result, half of surface waters in Russia do not meet sanitary standards.

But total fines for environmental damage to water sources in all of Russia were only 5 billion rubles in 2006, Gudkov said. Ninety percent of that amount comprised payments for exceeding the maximum allowable limit.

"That means that virtually nobody stays within the norm," Gudkov said.

The system works the same way for air and soil pollution, he said.

Fines are so low that industries have little incentive to modernize their equipment and infrastructure instead of paying fines and polluting.

Nuclear Plants Nearby

In another move, a government system to assess environmental impact was scrapped in 2006 with the passage of a new Building Code, making it legally possible to develop a potentially dangerous project without first consulting with environmental experts or even the people living in the neighborhood.

"The weakness of the environmental assessment law was that it was excessive: even if you just had a shoe-repair shop, you had to have an expert conclusion of your environmental impact," said Chestin of the WWF. "That argument was used to justify getting rid of it, but in the end, the baby was thrown out with the bath water."

As a result, neither a state environmental assessment nor a public discussion are legally required for the Evenkiiskaya hydropower plant or planned nuclear power plants in St. Petersburg and Kaliningrad.

"The only tools we have today are public opinion and corporate responsibility," Chestin said.

However, without clear and functional legislation, the effect of these tools is limited.

Public awareness of environmental issues has been low. "Information about pollution levels and the state of the environment has become a little bit more accessible since the Soviet period, but people don't care enough to pay attention to these problems," said Elena Armand, a representative of the United Nations Development Program in Russia. "Also, their awareness is largely shaped by television, so it's up to the government to focus on environmental education."

The Problem: The Environment
What the Government Is Doing:Solutions:
Eight years after Vladimir Putin started sidelining environment issues, new President Dmitry Medvedev in June signed a decree ordering the government to develop legislation that encourages efficiency in electricity, construction, housing and transportation.

Reinstate mandatory environmental impact assessments, including public hearings, for potentially dangerous projects
Raise fees for polluters while streamlining legislation, making it transparent and easier for companies to follow.

The Natural Resources and Environment Ministry is working on legislation that would get rid of temporary "maximum allowable limits" for emissions and increase environmental impact fines for exceeding norms. The ministry is also considering tax cuts for companies that have cleaned up and an updated list of critical polluting agents. The ministry will present its plans to the Cabinet in October.

Introduce legislation that will stimulate companies to invest into cleaner technology, like accelerated amortization for clean facilities and possible tax breaks.
Reform the administrative system of environmental management and control, and improve coordination between various agencies.
Invest in standardized environmental monitoring across Russia.

The Education and Science Ministry plans to "an intense development of environmental education," including the reinstatement of 1990s-era environment classes in schools

Strengthen legislation about special protected natural areas.
Set clear goals for improving efficiency and quality of air, water, and soil in five, 10 and 20 years.

The Kremlin raised the profile of environmental issues by adding the word "environment" to the Natural Resources and Environment Ministry and making June 5 the national Day of the Environmentalist.

Develop clear mechanisms for improving energy efficiency, both on supply and demand side, especially in the housing sector.
Continue to increase public awareness about the issue.

- MT

While key business players are interested in improving their efficiency and international image in order to become more competitive on the world market, smaller polluting industries have been lobbying the State Duma to pass environmentally lax legislation, such as the new Building Code and Forest Code, both approved in 2006. Starting this year, the Duma does not have an environmental committee at all, for the first time since 1994.

Meanwhile, environmental groups that criticize polluting industries and potentially dangerous projects have been repeatedly accused of various misdeeds. "Business is usually silent, while the government accuses us of compromising industrial growth and spying for Norway," said Vitaly Servetnik of the Nature and Youth environmental organization in Murmansk.

In June, Natural Resources and Environment Minister Trutnev accused environmentalists of "working against Russia's image" when they issued a statement critiquing the development of a bobsled slope for the Sochi Olympic Games as destructive to the ecosystem of the Western Caucasus, a protected nature reserve and UNESCO World Heritage site. Both UNESCO and UNEP subsequently concluded that the development plans would "compromise all other efforts for environmental safety." Early this month, Prime Minister Vladimir Putin moved the planned bobsled site away from the reserve.

In a paradox, environmental groups have also been accused of working for the government. "Georgia accused us of accepting funds from the Russian government when we opposed the Baku-Ceyhan pipeline project," said Chestin of the WWF. "When we are accused of lacking patriotism, I just wonder where that money is."

Picking Up the Pieces

Eight years after the first attack on environmental legislation, the rhetoric appears to be changing. President Dmitry Medvedev signed a decree in early June ordering the government to develop legislation that encourages efficiency in electricity, construction, housing and transportation. In an apparent domino effect, Trutnev spoke out in favor of "green forests, clear rivers and clean air" -- the word "environment" was added to his ministry's name in May -- and Education and Science Minister Andrei Fursenko promised "an intense development of environmental education," including a reinstatement of ecology classes.

On June 5, the national Day of the Environmentalist, as decreed by Putin in July 2007, was observed for the first time.

Environmentalists are cautiously optimistic about the sudden interest at the very top of the government. But they worry that the interest may be purely rhetorical and predict that the process of reinstating environmental standards into legislation and practice will be difficult.

"Our political vertical has gotten so high that even if certain decisions are shaped at the top of the government, they fall apart by the time they trickle down to the bottom," said Armand of the UNDP.

Meanwhile, businessmen are worried that the pro-environment flag-waving will simply burden them with yet another tax, and legislation may be used preferentially for ends that have nothing to do with environmental preservation.

"We have seen that Russian legislation can be applied inconsistently, and companies may or may not be prosecuted for past environmental infringements," said Brook Horowitz, executive director of the International Business Leaders Forum in Russia. "Russia's environmental regulations have also lost credibility because they have been used for ulterior motives, as a tool to twist business' arms."

A series of high-profile environmental checks have been carried out into multibillion-dollar oil and gas projects in recent years, and the checks were only dropped after the projects' private owners ceded control to state-owned Gazprom.

Market forces are already affecting business practices in environmental management because global companies have to operate under international governance and management standards, Horowitz said. "However, companies that have mega infrastructure from the Soviet period cannot replace it overnight," he said. "There is simply not enough money or resources in Russia to do it quickly."

Ideally, regulations should stimulate companies to change their technologies gradually, instead of bankrupting the business altogether, Chestin of the WWF said. One way to do this is to raise the environmental impact fines gradually. If a company is aware that fines will double in five years, it can adjust accordingly and restructure without stopping production.

Many of these adjustments will be costly, but some of them are virtually free. "In Moscow, energy efficiency standards are quite strict for new residential construction, but they are not a factor in the final cost of a building," said Bashmakov of the Center for Energy Efficiency. On average, a new building in Moscow uses half the energy of an old building to heat 1 square meter, he said.

Improving efficiency will be far less costly than increasing energy production, the World Bank report said. Investing $320 billion into energy efficiency would cut Russia's energy consumption by 45 percent and is three times cheaper than investing in resource extraction, it said.

The Natural Resources and Environment Ministry is working on legislation that would get rid of temporary "maximum allowable limits" for emissions and increase environmental impact fines for exceeding norms, ministry spokesman Gudkov said. The ministry is also considering tax cuts for companies that have cleaned up and an updated list of critical polluting agents. The ministry will present its plans to the Cabinet in October.

Small Steps in Nikel

Norway in 2001 offered 270 million kroner ($53 million) to Nikel's metals plant to undertake reconstruction efforts aimed at reducing pollution by 90 percent by 2010. The agreement, signed with Norilsk Nickel and the Nordic Investment Bank, has led to no visible results, with the money sitting in the bank untouched.

But as Medvedev started talking about the environment in early June, Nikel made the news as if on cue. Foreign Minister Sergei Lavrov met with Norwegian Foreign Minister Jonas Gahr St??re on June 9, and the two discussed pollution in the region, among other issues. The next day, the Kola GMK chief Yevgeny Potapov announced to the ministers that Nikel's plant would likely be closed and production moved to Monchegorsk, a larger metals town about 200 kilometers to the southwest.

A final decision on the future of Nikel's facilities and their employees will be made in October, Norilsk Nickel representative Maria Uvarova said.

Editor's Note: This is the eighth in a series of reports about the key challenges facing Russia today. Previous reports can be found at

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