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The Agreement as a Matter for Controversies

Plans for the Paris Climate Agreement implementation remain the subject of controversies in the Russian business community. One part of entrepreneurs sees the low-carbon plans as a threat to the economy. Businessmen who don’t share this position, experts, and NGO representatives find such opinion quite archaic and put forward proposals for the Strategy of low-carbon development.

In 2017, the RF Government should come up with a Strategy of low-carbon development and coordinate several other strategies: social and economic, energy, and strategies for a number of branch industries. The Ministry of Nature has already outlined the mechanism of reporting on greenhouse gas emissions for major Russian enterprises. However, the process of low-carbon transformations does not look as a task-oriented one. The idea of a no-carbon zone to be established in Siberia announced right after Paris and plans on introduction of carbon regulations had been postponed for an indefinite period of time because of numerous objections to it.

The Climate Agreement practically provokes controversies. That said, these disputes keep going on not in the usual way, i.e., between industrialists and environmentalists; discussions inside the business community are by far much sharper. One part of the entrepreneurs sees risks in the Paris Agreement and introduction of carbon control. They refer to calculations of the Analytical Center affiliated with the RF Government and the Institute of Natural Monopolies Research (IPEM), according to which “introduction of a carbon tax in the amount of $15 per one ton of CO2 would necessitate payments of $42 bln annually which corresponds to 3.2–4.1% of 2015 VAT, or 19–24% of the 2016 federal budget income, or 35–45% of the Reserve Fund and the National Welfare Fund’s total amount.”

Even if we do not argue conclusions of IPEM specialists and do not ask them to specify the way how fees for CO2 emissions could impact the National Welfare Fund, it is important to point out that the carbon tax is not a requirement of the Paris Agreement. The document has no fixed obligatory mechanisms for whomsoever. Voluntarily, Russia offered to limit its emissions of carbon dioxide at the level of 70-75% of the 1990 volume. With consideration of the economic downfall in Russia in the 1990s, these obligations could be implemented without any special measures taken.

As long as the discussions on climatic plans never die down, a group of experts under the aegis of the Center of Environmental Innovations had come up with recommendations for the Russian Strategy of low-carbon development.

One of the authors of the paper, Director of the Center of Environmental and Natural Resource Economics at the Higher School of Economics, George Safonov believes that the most important role of the Strategy is to give a signal to business circles, innovations companies, inventors, developers of low-carbon technologies, and financial and innovation institutes. Experts recommend to establish tough and ambitious goals on increasing the absolute amount of electricity generation using no-carbon sources. In their opinion, it is important to estimate potential and develop a set of measures for realization of export-oriented projects in the sphere of no-carbon energy generation. High knowledge-intensive “products” could be considered as an alternative to the traditional export of energy resources and energy-intensive production.

“It is extremely dangerous to get caught in the ‘carbon trap,’” Strategy authors wrote, “when newly commissioned industrial capacities with utilization of fossil energy resources and processes would ‘preserve’ the present carbon-intensive production processes for future decades (e.g., pay-back for construction of a coal power station varies between 30 and 40 years).”

“In case of realization of the strategy, programs and plans for low-carbon development at all levels (federal, regional, municipal, enterprises, and particular projects), it is necessary to take into account economic, technological, environmental, and social outcomes. It is necessary to hold special researches on evaluation of the impact of low-carbon development on the level of employment, quality of the newly established lobs, and risks of losing jobs in particular industries and regions.”

The majority of specialists and experts came to the conclusion that Russia will not be able to stay aside of carbon control. Processes which might be launched by the Paris Agreement will outline the direction of the world economy development for the next decades. Disregard of these changes will cause serious risks to the national economy.

Correction of world investment trends in the energy sector has already caused noticeable changes in the national programs of many countries: both developed and developing countries have adopted decisions on abandonment of coal and transfer of the investment flows to RESs. There has even appeared a special term indicating this process: fossil fuel divestment (divestment of fossil fuel-related projects).

Press-secretary of the Ministry of Economic Development Yelena Lashkina has acknowledged: “Given the globalization trends, the Paris Agreement will keep impacting our economy in any case, whether Russia does or does no ratify it. Many international markets already block carbon-intensive production.”

Vice-President of the International Financial Corporation (IFC) Dimitris Tsisiragos believes that “if we fail to implement the Paris Agreement, no less than 100 mln people might fall below the low-income poverty threshold.” “In this case I am speaking about particular regions which are most vulnerable regarding the climate changes: e.g., the Black Sea Coast, Central Russia, and Mongolia where the utmost temperature increases have been registered,” the expert said in his interview to Gazet.ru.

“Russia has the opportunity to implement the most ambitious plans on execution of the Paris Agreement with the benefit for its economy and the social sphere,” Olga Senova, Climate Secretariat of the Russian Social and Ecological Union, believes. “To do this, the potential of low-carbon projects should be assessed in accordance with experts’ recommendations, the RESs’ energy efficiency in the first place, and compared with the perspectives of the traditional way of the development through investing in fossil energy sources. We should do the comparison and make the right choice.”