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A garden not without carbon

The announcement of the European Commission on the preparation of a “borderline carbon corrective mechanism” triggered a heated discussion of the Russian law on the internal carbon regulation. In their suggestions, representatives of the Russian Social and Ecological Union have repeatedly emphasized the need to adopt legislation regulating emissions.

“The dream was shattered” not so unexpectedly: carbon caps have been talked about in the European Union for years. True, it was previously planned to introduce them by 2025, and now we are talking about the end of 2021. The Europeans explain this rush by the post-covid reality: the idea is to stabilize economy through environmentally friendly carbon-free solutions.

Tightening regulation on greenhouse gas (GHG) emissions and carbon regulation is part of a global plan aimed at achieving a complete decarbonization of the global economy by 2050. “Carbon markets are an important tool for enhancing ambitions to reduce greenhouse gases,” this provision is enshrined in Article 6 of the Paris Agreement. According to the World Bank, 58 emission control instruments have been developed, implemented, or are planned to be introduced worldwide. Of the major exporting EU countries, only Turkey and Russia have not introduced a greenhouse gas regulation system.

If the European Union adopts new carbon regulations, Russia has a lot to lose: 42% of all Russian exports go to European countries. If domestic producers do not begin to reduce their carbon footprint in the near future, products and raw materials will become uncompetitive.

 “Carbon tax on imported to the EU will become a new significant challenge for Russian exporters, especially in such industries as petrochemicals, metallurgy and fertilizer production,” the economists of the BCG consulting company believe. “If we do not take into account some of the goods and services that are not yet included in the carbon trading system, then the base subject to the new tax will be about 100-160 million tons, which will lead to an additional burden for exporters from Russia of about $ 3-4.8 billion per year”.

The Bill on state regulation of greenhouse gas emissions, developed by the Ministry of Economy of Russia could become a real guide to the “carbon-free harmonization” of the economy; it has been under discussion for several years already. And the country does have a basis for the introduction of carbon regulation in the country: several basic documents have been adopted on the reduction of greenhouse gas emissions: the Climate Doctrine of the Russian Federation with a comprehensive plan for its implementation until 2020, the Environmental Security Strategy of the Russian Federation for the period until 2025, the Roadmap for the implementation of a set of measures aimed at improving state regulation of greenhouse gas emissions adopted in 2016.

The currently available version of the law has been greeted with considerable misgivings among the parties involved in the discussion. It does not completely suit the representatives of civil society either. They propose to return to the document the provisions on market mechanisms and stricter measures to regulate the turnover of carbon units: the project should fix a payment for over-limit greenhouse gas emissions: “accounting and strict regulation of emissions is the only effective driver of modernization of the Russian economy.” At the same time, civil society representatives believe that the law should be adopted as soon as possible: not so long ago, Greenpeace Russia sent a letter with such a request to the Ministry of Economic Development. On the urgent need for such transformations for Russia - the adoption of the Federal Law “On State Regulation of Greenhouse Gas Emissions and Removals” – write activists from the Russian Social and Ecological Union in their.

Special Representative of the President of the Russian Federation for Climate Issues Ruslan Edelgeriev also considers the issue quite relevant. According to him, “without the formation of a system of emissions trading in Russia, which creates conditions for their reduction by modernizing production facilities, increasing their energy efficiency and implementing projects for absorbing greenhouse gases, the bill seems to be rather detrimental to the state.”

Director of the Center for Environmental Investments Mikhail Yulkin commented on the disadvantages of the current version of the bill:

“This bill ... deliberately puts Russia in the position of a country that does not take any measures to mitigate climate change in spite of the requirements contained in the Paris Agreement.” The expert notes: “Is it not clear that the situation of the global energy transition is fundamentally different from the equilibrium situation of a stable and steadily growing energy market? ... So, the main goal should be not to maintain at any cost Russia’s position in the world energy sector within the framework of the resources, raw materials, and technological structure the end of the 20th century for the next 15 years, but the soonest decarbonization of the Russian energy sector with access to new, green markets to ensure Russia’s leadership in the new low-carbon world order.”

Several international environmental organizations oppose the carbon market. For example, Friends of the Earth are against carbon markets and capitalist solutions to the climate crisis as a whole; they see them as a “wrong” solution to climate change, both ethically and climatically, problematic, and based on a whole set of false financial assumptions. Because of this, as Friends of the Earth say, there are still no good examples of well-functioning carbon markets.

The harshest criticism of the new bill comes from the traditional opponents of all climate- friendly initiatives: the Russian Union of Industrialists and Entrepreneurs (RSPP). However, business reproaches are connected not with the absence of real mechanisms, but with the very fact of carbon restrictions.

The business association has sent proposals to the Ministry of Economy “on the ways to reduce the risks from the possible introduction of EU carbon regulation.” It is proposed to promote the position on the need to abolish customs duties for low-carbon goods in negotiations with Europe. The Russian Union of Industrialists and Entrepreneurs so dislikes the prospect of paying a carbon tax that, as a radical measure, the organization “does not rule out the holding of litigations with the EU at various sites, including the World Trade Organization (WTO), as well as retaliatory measures to protect Russian producers.”

It is interesting that some representatives of Russian business, without waiting for the adoption of the law, are already preparing to enter the market of climate assets and liabilities. The system of “carbon units” has already been developed for OAO Russian Railways.

ACRA experts believe that in order to maintain its niche among suppliers to the European (and not only) market, Russian business needs “external synchronization”. “There is a need to ensure transparency in the measurement and reporting standards for greenhouse gas emissions, mechanisms and targets for reducing emissions under the Paris Agreement. It is important to create an internal mechanism for regulating the carbon market,” analysts say. “It is necessary to create prerequisites for diversifying the trade turnover of large exports and expanding sales markets. Only through a balanced approach to the implementation of emission control instruments will Russian exporters be able to avoid losses in the supply of their products. The implementation of energy efficiency programs and tax incentives, in its turn, will allow businesses to compensate for the additional fiscal burden.”

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