III. EE&FSU

EE&FSU Development Trends

• All of the economic and energy indicators examined here fell sharply following the collapse of the region’s communist governments in the late 1980s and early 1990s. Prior to this collapse, the EE&FSU region’s real GDP rose steadily until 1989. The dramatic events that followed produced a sharp decline in economic output that continued until 1993. The region’s GDP then remained static until 1999, when economic growth returned.
• Both energy consumption and carbon dioxide emissions in the EE&FSU region continued to decline until the late 1990s. Energy consumption increased towards the end of the period, however, while carbon dioxide emissions remained stable. The decline during the transition away from communism was so significant that the EE&FSU region’s energy consumption and carbon dioxide emissions in 2001 were lower than their 1980 levels.
• Population change reacted less sharply to the political and economic changes impacting the region. However, population was impacted as well. The EE&FSU region is unique in that its population actually declined between 1991 and 2001, after growing steadily until 1990. This reflects the region’s increasing mortality, particularly among men, as well as rising emigration and falling birth rates.

• The rocky transition from command-based to market-based economies during the late 1980s and early 1990s drastically reduced the EE&FSU region’s energy consumption. Between 1980 and 1988, demand grew from 63 quads to 78 quads. By 2001, regional energy consumption had fallen to 53 quads, of which fossil fuels accounted for 47 quads.
• During the 1980s and 1990s, the importance of nuclear and hydroelectric power in the EE&FSU region doubled. In 1980, non-fossil fuels accounted for 6% (3.4 quads) of total energy consumption. In 2001, non-fossil fuels’ share had risen to 12%. During this time, absolute consumption of non-fossil energy increased 82% to 6 quads.
• Nuclear and hydroelectric energy’s share of consumption grew disproportionately for several reasons. First, hydroelectric plants in particular can be operated at very low cost once they have been built while fossil plants require consistent expenditures on fuel. This made it cheaper to intensify use of existing hydroelectric sources and phase out fossil energy as demand declined.
• Second, even if the fuels for thermal power plants were very cheap, obtaining them became more difficult after the collapse of the command economies. The distribution of petroleum and petroleum products was thrown into disarray when the Soviet Union collapsed.
• Natural gas consumption has the largest share in the EE&FSU region’s fuel portfolio, having risen from 26% to 45% between 1980 and 2001. Though its share rose throughout, consumption of natural gas actually declined between 1989 and 2001, but the region’s total energy consumption declined faster.

• The EE&FSU region’s countries experienced a significant decline in per capita income in the early 1990s as they struggled to shift from centrally-planned to market-based economies. Overall, the region’s per capita GDP fell 20% between 1980 and 2001, from $7,553 per person to $6,069 per person.
• Within the region, declines were not equally severe or prolonged. The countries of the FSU suffered an especially acute economic collapse between 1989 and 1998. During this period, the FSU’s per capita income fell by half, from more than $8,700 to about $4,300, before rebounding to end the period at $5,161 in 2001. Russia’s per capita income was $6,458 in 2001, 12% lower than in 1992.
• Some of countries of Eastern Europe endured a shorter and less severe downturn than the countries of the FSU. In 2001, Poland, Slovakia, and the Czech Republic had equivalent or higher per capita incomes than in the final years of the Warsaw Pact and the Soviet Union. Other countries in Eastern Europe, particularly those in the southeast part of the region, suffered harsher economic downturns.
• Following the fall of communism, energy consumption also declined across the EE&FSU region. Overall, between 1980 and 2001, per capita energy demand declined 11%, from 164 million Btu to 130 million Btu.
• Changes in per capita energy consumption varied between countries within the EE&FSU region. In large part, these differences reflect differing industrial compositions. In many countries, per capita consumption did not rebound, reflecting the permanent closure of some energy intensive industries.

• Between 1980 and 2001, the EE&FSU region’s energy intensity only declined an average of –0.1% per year, from 21,776 Btu per $1995-PPP to 21,419 Btu per $1995-PPP.
• This modest decrease masks the significant declines experienced by some countries in Eastern Europe. Some of these countries were beginning to use energy less intensively prior to the fall of communism. These declines accelerated following the transition to market economies. For example, the average annual change in the energy intensity of the countries of the former Czechoslovakia between 1980 and 1990 was a 1.4% decline. Between 1980 and 2001, it was a 3.5% decline.
• This declining trend likely reflects Eastern European countries’ early attempts at market reforms and their subsequent broad conversion to freer markets. Reforms led to reallocation of capital and labor, which meant closure of money-losing, energy-intensive industries.
• The modesty of the region’s aggregate change reflects the rise of energy intensities in the disproportionately influential countries of the FSU, particularly Russia. Over the entire period, the FSU’s energy intensity rose an average of 0.2% per year. This growth likely derived in part from the maintenance of price controls on energy products. This may have kept energy consumption from falling as rapidly as economic output.

• Between 1980 and 2001, carbon dioxide emissions in the EE&FSU region fell an average of 1.5% per year, from 4,300 MMT to 3,148 MMT. The bulk of this decline took place during and after the fall of communism, though emissions had begun to fall during the 1980s in some Eastern European countries. Between 1991 and 2001, carbon dioxide emissions declined an average of 3.5% per year.
• While all countries in the EE&FSU region experienced a reduction in carbon dioxide emissions in the second half of the period, the nature and degree of decline varied considerably. For example, between 1991 and 2001, carbon dioxide emissions in the Former Czechoslovakia, the FSU, and Poland, fell an average of 5.7%, 3.7%, and 1.2% per year, respectively.
• The Former Czechoslovakia and the FSU experienced the most severe decline in per capita emissions. This reflects both their rapid decline in energy consumption and the decreasing share in their energy portfolio of carbon-intensive fossil fuels, particularly coal.
• In recent years, there has been considerable convergence of per capita carbon dioxide emissions within the EE&FSU region. For example, between 1980 and 2001, the difference in carbon dioxide emissions per capita between Poland and the former Czechoslovakia declined from 9.4 metric tons per person to 1.8 metric tons per person.

• Between 1980 and 2001, carbon dioxide intensity in the EE&FSU region fell from 1.49 metric tons per thousand $1995-PPP to 1.27 metric tons per thousand $1995-PPP. Despite the decline, the region continues to have the highest carbon dioxide intensity in the world.
• Between 1980 and 2001, the average carbon dioxide intensity for Poland, the FSU, and the Former Czechoslovakia declined from 1.76 metric tons per thousand $1995-PPP to 1.05 metric tons per thousand $1995-PPP.
• Poland and the former Czechoslovakia experienced particularly sharp reductions in their carbon dioxide intensities between 1980 and 2001.
• Carbon dioxide intensity in Russia and the remainder of the FSU countries declined more slowly. In part, this reflected the continuation of energy subsides, in contrast to Eastern Europe’s quicker and more comprehensive embrace of market-reforms.

• At about 1,500 bkwh, electricity consumption in the EE&FSU region was roughly the same in 1980 as it was in 2001. This lack of overall change masks the rise in electricity consumption during the 1980s and the decline that followed the collapse of the region’s communist governments. Between 1989 and 1998, demand in the EE&FSU region fell 24%, from 1,934 bkwh to 1,463 bkwh.
• The countries of the FSU, especially Russia, accounted for the bulk of this decline. FSU consumption fell from a peak of 1,491 bkwh in 1989 to 1,069 bkwh in 1998. It then remained largely constant until 2001.
• By contrast, Eastern European consumption remained relatively constant following the collapse of communism. Between 1989 and 2001, Polish electricity consumption fell less than 10%, from 131 bkwh to 119 bkwh.
• Electricity demand in the EE&FSU continued at a relatively high level in part because of the maintenance of price subsidies for both producers and consumers. These subsidies mitigated the impact of the region’s falling real income levels.

• Between 1980 and 2001, electricity intensity in the EE&FSU region increased at an average annual pace of 0.7%, from 531 kwh per $1995-PPP to 615 kwh per $1995-PPP.
• Between 1980 and 1989, the region’s electricity intensity grew only 0.5% per year. This leapt to 3.3% per year during the period between 1990 and 1995, before falling an average of 2.8% per year between 1996 and 2001.
• The sharp increase in regional electricity intensity during the early 1990s reflects the disproportionate influence of the FSU countries (especially Russia). The FSU experienced especially sharp increases in electricity intensity because many governments chose to maintain energy subsidies. This kept electricity consumption from declining as rapidly as real GDP.
• The decline in FSU electricity intensity in the late 1990s in part reflects the phasing out of some energy subsidies.
• Poland, the Czech Republic, and Slovakia all had relatively stable electricity intensities until the early 1990s, after which they declined steadily. Reduced electricity intensity levels in Eastern Europe during the 1990s suggest a gradual rationalization of the region’s industrial mix, as inefficient heavy industries declined relative to less electricity-intensive, higher-value-added activities.