In 2013, Russia launched a bold experiment. Several regions introduced a new electricity pricing system: the more you consumed, the higher the price for additional units. Known as increasing block tariffs (IBT), the reform was introduced as an attempt to move towards market-based energy pricing and away from decades of heavy subsidies.
At first glance, it looked promising. A country known for its vast energy use might finally curb demand and move toward efficiency. But the reality turned out to be far more complicated.
Russian households proved far less responsive to price changes than expected. Electricity demand was almost inelastic, with long-run elasticity around –0.1 (Turdaliev, 2023a). On average, consumption fell by only 0.56% per year, translating into modest carbon reductions of about 0.3 million tons annually (Turdaliev, 2023a). These effects were far smaller than what policymakers had hoped for — hardly a game-changer for the world’s fourth-largest polluter.
The most unexpected outcome was how households adapted. Many families actually bought more appliances — refrigerators, washing machines, or air conditioners — partly because the tariff made efficiency investments more attractive (Turdaliev, 2021).
Among poorer families, however, another trend emerged. Facing higher bills, many switched to dirtier fuels like coal, firewood, or kerosene. These alternatives were cheaper but more polluting, increasing both indoor health risks and greenhouse gas emissions.
In the IBT regions, the likelihood of buying dirty fuels rose by 60%, especially among vulnerable households (Turdaliev & Janda, 2023; Turdaliev, 2025). The very policy intended to save energy inadvertently pushed some families in the opposite direction.
Russia’s experiment offers a cautionary tale for governments worldwide. Price-based tools like block tariffs can encourage efficiency, but without strong social protections, they risk deepening inequalities and worsening environmental outcomes.
Pricing reforms alone are not enough. To fight climate change effectively while protecting households, policies need to combine pricing signals with targeted support — through subsidies, clean fuel alternatives, or safety nets that shield vulnerable groups.
Turdaliev S. (2025). Exploring the Dirty Side: The Heterogeneous Impact of Increasing Block Pricing on the Propensity to Purchase Dirty Fuels. Environment, Development and Sustainability. https://doi.org/10.1007/s10668-025-05973-3. ISSN: 1573-2975.
Turdaliev, S. (2023). Household-Specific Social Norms, the Elasticity of Electricity Demand, and Carbon Emissions Reductions in the Residential Sector: Evidence from a Natural Experiment in Russia. Climate Change Economics, 14(03). https://doi.org/10.1142/S2010007823500173. ISSN: 2010-0078.
Turdaliev S., Janda K. (2023). Increasing Block Tariff Electricity Pricing and the Propensity to Purchase Dirty Fuels: Empirical Evidence from a Natural Experiment. Eastern European Economics, 62(04). https://doi.org/10.1080/00128775.2023.2165948. ISSN: 0012-8775.
Turdaliev, S. (2021). Increasing Block Rate Electricity Pricing and Propensity to Purchase Electrical Appliances: Evidence from a Natural Experiment in Russia. Energies, 14(21), 6954. https://doi.org/10.3390/en14216954. ISSN: 1996-1073.