Business judgment on the prospective of clean energy and sustainable development

In the days of the UN Climate Change Conference in Marrakech (СОР22), a “Clean Energy” conference took place in St. Petersburg. It was dedicated to the issues of energy and sustainable development, balance of business interests and preservation of natural resources.

The European University in St. Petersburg was the organizer of the conference. The theme of clean energy and low-carbon development was discussed at the conference in the format of debates between economists, non-governmental organizations and entrepreneurs from Russia and Europe.

This dialogue has already been on for quite some time, and a number of practical steps have already been accomplished. Russia has joined the International Climate Agreement adopted in Paris at the СОР21 Conference in 2015; on November 7, the RF Government declared adoption of the Realization Plan for the Paris Agreement; mechanisms for greenhouse gas emission reduction were discussed as priority issues at a whole series of forums; in December 2016, the State Council session will be dedicated to the environmental protection issues; the upcoming year of 2017 was announced as the Year of Ecology in Russia.

Establishment of new international economic instruments replacing mechanisms of pure development and projects of joint implementation under the frames of the Kyoto Protocol (which is now replaced by the Paris Agreement) bears both risks and new possibilities for the development of the Russian economy. Adequate regulatory legal norms and conditions facilitating projects targeted at emission reduction both in Russia and other countries are necessary for realization of these opportunities; companies aspiring competitiveness at the international market support these measures.

Oleg B. Pluzhnikov told at the conference about the Russian Partnership for Climate Preservation established on the eve of the СОР21 in Paris. It united nineteen major Russian commercial companies interested in the low-carbon trend. They signed a memorandum on partnership in which they declared that they will facilitate establishment of market and fiscal mechanisms in support of the low-carbon economy. The first decision which the Partnership considers absolutely necessary is establishment of the carbon fee which should facilitate transfer of investments from extracting projects to energy efficiency projects (EE) and renewable energy development (RBSs).

Regretfully, so far there is no clear and univocal understanding of the goals, priorities, and objectives for the low-carbon development. For instance, the ambiguity of the goals and objectives for emission reduction by 2030: is it with or without consideration of the forest uptake of CO2? We can limit ourselves with decorative EE measures or just do nothing and “compensate” the lack of activities by a certain calculated amount of forest uptake. However, many experts in energy, business, and management believe that the goal to provide by 2030 emissions at the level of 70% of the year 1990 requires heavy-handed actions for real emission reduction.
There is lack of coordination and cooperation between the governmental structures and there is a strong counterwork of the industrial lobby (contaminators). One can see that the RF Plan for preparation for ratification of the Paris Agreement is quite a give-and-take approach and to a big extent it is so because of demands of contaminating industries, e.g., the coal industry.

Influence of the non-governmental organizations is rather weak, as is not adequate support from the part of business structures interested in the green economy.
At the same time, in the opinion of a number of prominent economic experts, A. Chubais being one of them, carbon is the same type of contaminators as any other and its impact on the planet is obvious. One should pay for emissions. In the opinion of Oleg Deripaska, establishment of a certain price on carbon should help leveling-off competitive conditions for businesses in Russia and beyond its borders.

However, there are other opinions as well. The Analytical Center affiliated with the RF Government believes that introduction of a carbon emission tax will provoke a sequence of negative outcomes for the fuel-power complex and energy-intensive industries.

Practical steps of the “anti-green” lobby are: resistance to ratification of the Paris Agreement; stress on the forests (and first of all not on the preservation but “good” calculations: if you “count it properly,” things will be fine without EE and RESs); demonstration of the issues with the downfall of incomes and jobs in case of implementation of the low-carbon scenario.

Unfortunately, there will be losses in case of “doing nothing” as well. According to the World Bank’s data, by 2017, Russia will not be considered as a country with any level of CO2 emission regulation. Russia’s trade partners, i.e., EC countries and China have already established the carbon fee. This might cause such a situation when Russia will have to “pay in addition” for its exported production with high emission component in case of exporting to countries with carbon fees already introduced.

Another aspect is that the impact of carbon industry on the global economy is thoroughly analyzed and measures for reduction of the quota of this industry are taken; ratings of companies and countries regarding the coal power production are composed and the image of RF is far from the desired. The VTB Bank, for example, belongs to the top thirty banks financing the coal industry, and this image will inevitably impact the investments.

Mikhail Yulkin, Director General of the Center of Ecological Investments, reminded that the Paris Agreement had set the goal for all countries to reach growth cessation in the nearest future and then start their absolute reduction. Mechanisms for realization indicate the necessity for each country to develop a strategy of low-carbon development till 2050.

The Paris Agreement has already been ratified by 103 countries, and the process keeps going on, while Russia intends to do this no earlier than in 2019.

The carbon footprint of a company became not only and indicator of risk factor but the key to new opportunities for business development on the base of new technologies. The carbon footprint and the possibility for a company to manage it are taken into consideration in companies ratings. Requirements for transparent reporting on emissions are contained in international documents, particularly in the GRI/Global Reporting Initiative and international programs such as CDP/ Carbon Disclosure Project. Seventy five companies with total purchasing capacity of $2 million request CDP’s data on emissions of enterprises and measures for reduction of greenhouse gas emissions on regular basis. This all affects the investment attractiveness of the companies. There already is in action a whole series of carbon neutrality marking. The following companies participate in CDP and have relatively high ratings: Arkhangelsk Paper Mill, Gazprom, Polimetall Company, EVRAZ, NOVATEC, Uralkalyi, Lucoil, and Leroy Merlen. There exist both international and national standards for emissions assessment, including GOST R ISO 14064 -1 2007 in Russia.

Introduction of carbon emission fees will lead to a result if these fees will be directed to the measures for greenhouse gas emission reduction. Environmental activists believe that along with reorientation from subsiding extracting industries to EE and RESs, this will help Russia not to fall behind the global trend and make the national economy sustainable and competitive.