THE SOVIET ENERGY-CONSERVATION DILEMMA

We have made an extensive analysis of the structure of energy-use in the USSR, since 1960. Based on this work, we find that the opportunities for energy conservation in the USSR are truely enormous. Were the energy intensities of the major activities in the USSR to fall to the levels of Western Europe, energy-use in the USSR in 1985 would have been one third lower than it actually was. The problems in obtaining increased efficiencies are more institutional than technical: the USSR has had little economic incentive to invest in more efficient energy-use. Energy prices are determined by a central pricing authority and have not kept pace with world energy prices or with the costs of domestic energy production. The dilemma for the USSR is that energy inefficiency is really a product of all the other inefficiencies in the Soviet economy and can only improve if the entire economy improves. Changes in the mix of goods produced could also lower Soviet energy-use in industry and for freight. However, economic reform may also bring a surge in the demand for personal mobility, home comfort, and greater activity in the service sector, important sectors of energy growth in the West. Thus economic structural change in the USSR will be a two edged sword.