Carbon reporting in the law

After four years of discussions and numerous amendments, the Federal Law “On the State Regulation of Emissions and Absorption of Greenhouse Gases” was passed. According to public environmental activists, the adoption of the document should be followed by concrete actions to reduce emissions.

The law developed by the Ministry of Economic Development of the Russian Federation was adopted in early June in the third reading by the State Duma of the Russian Federation, and recently approved by the Federation Council. The document may start the era of carbon regulation in Russia.

The law introduces into legal circulation the terms “greenhouse gas emissions”, “climate project”, “carbon unit”, “verification of the results of climate projects” and other wording adopted in the international climate process.

Under the law, businesses that are responsible for significant amounts of greenhouse gas emissions will now be required to report. In the first stage, companies with emissions of more than 150 thousand tons of CO2 equivalent will be subject to carbon reporting. They must report by March 1, 2023. At the second stage - from 2024, the companies with emissions above 50 thousand tons of CO2 will have to report.

As follows from the explanatory note to the law, it establishes principles for limiting greenhouse gas emissions, measures for their limitation and state accounting, the rights, and obligations of legal entities and individual entrepreneurs to limit emissions, including - the right to implement climate projects. In addition, the established system of state accounting will allow to record the dynamics of reduction of greenhouse gas emissions at the level of organizations.

If the initiators of the regulation are to be believed, "the most important element of carbon regulation is a new mechanism for project activities, under which carbon units resulting from climate projects can be put into circulation.  The initiators of the law believe that the new law will help climate-friendly businesses. According to the Deputy Minister of Economic Development of Russia Ilya Torosov, the document creates “a fundamentally new economic regulation for our country, which is based on the level of greenhouse gas emissions.”

Vladimir Burmatov, the head of the State Duma Committee on Ecology and Environmental Protection, also considers the introduction of “greenhouse gas emission reduction targets” and “carbon units” into the terminology to be an important component of the new law. According to the deputy, “they will be charged to domestic producers when exporting products and will also be counted by foreign partners.”

Not everyone welcomed the new law relating to the problems of climate change. There is an opinion that “the law speaks only in the name of reduction of greenhouse gas emissions, but it does not lead to any real reduction of emissions.” Chairman of the Chamber of Commerce and Industry Committee on Environmental Management and Ecology Sergey Alexeev  believes, that “the bill does not come one step closer to solving the president's task to ensure strict control of greenhouse gas emissions.”

Experts have noticed that the law lacks detailed measures to limit emissions, clear procedures for the control of reporting. In addition, it is not clear how and how much emitters must pay for exceeding the limits on greenhouse gas emissions. Economic incentives for companies that invest in climate projects are also lacking.

Meanwhile, international climate processes are gaining momentum: the Group of Seven (G7) countries have recently supported measures aimed at introducing carbon reporting not only for businesses but also for banks. We are talking about regulations that will encourage companies and banks to disclose their performance on greenhouse gas emissions and the “carbon component” of all financed projects.

Representatives of the Russian Social and Ecological Union (RSEU) called for the adoption of the Federal Law “On the State Regulation of Emissions and Absorption of Greenhouse Gases” in their Position two years ago. Environmental activists support active actions to reduce greenhouse gas emissions, including the soonest introduction of mandatory reporting by companies and regions on emissions, and then the application of payments for greenhouse gas emissions. The RSEU also believes that the law must be followed by real action. One of the important things for Russia is to revise the goal of reducing greenhouse gas emissions by 2030: it is advisable to adopt a goal of reducing emissions to 50% of 1990 levels without taking into account the absorption of forests.