Impact of market reforms on USSR energy consumption Scenarios for the next decade

In the post-1973 period the energy efficiency gap has widened considerably between the USSR and the West. The paper's econometric estimate shows that Soviet energy over-use is predominately system-policy determined. Key elements of economic perestroika are examined which are believed to shape future energy efficiency. Focus is directed on energy price reform that aims at bringing low domestic energy prices closer to world prices. Using alternative exchange rates, estimates are presented for the current degree of disjunction between the two sets of prices. Scenarios running to the year 2000 are constructed to illustrate the consumption implications of various market-oriented options. Most scenarios indicate that a marked reversal is possible with appropriate pricing and exchange rate policies and the creation of microincentives for Soviet energy-users to act as cost-minimizers.