Customs declaration on carbon

Long-awaited news for Russian exporters: the European Commission has released a package of proposals on the “Border Carbon Adjustment Mechanism.” NGO activists and experts believe that Russia needs to take systemic measures at the state level and help industries adapt to the transition economy.

The Carbon border adjustment mechanism (CBAM) is part of the Green Deal. In April, Europe made its emission reduction goals more ambitious and must reduce emissions to 55% below 1990 levels by 2030.

The package of thirteen proposals presented by the European Commission includes tightening the EU Emissions Trading Scheme (EU ETS) and adding CBAM to tax imported products with a large carbon footprint

 

Simply put, the EU wants to level the playing field: while it turns out that European manufacturers operate at a competitive disadvantage compared to foreign producers, Europe applies stricter emissions standards than most importing countries.

 

Manufacturers supplying their products to the EU will now have to register their products and purchase CBAM carbon certificates at the carbon price that would have been paid if the goods had been produced in the EU. There is another option - a non-EU producer can show that he has already paid the price for the carbon used in the production of imported goods in a third country, and the corresponding cost will be deducted from the cost of the CBAM certificate.

 

It is planned that the calculation will take into account all emissions throughout the chain of production and transportation of goods. And the reliability of the data will be carefully checked.

 

To provide “legal certainty and stability,” the mechanism will be introduced gradually. The first transition phase will begin in 2023. Electricity, pig iron, steel, cement, aluminum, and some fertilizers will be subject to CBAM in the first place. Then, in 2026, it will be extended to other goods, which will eventually include more complex supply chains.

 

At the end of 2019, the Ministry of Economy predicted that by 2035, the carbon intensity of the electric power industry in Russia will be 2.5 to 3.5 times higher than the global average. Metallurgical and electric power companies will be the first to feel the impact of the ETCA, but large-scale changes will inevitably affect the entire Russian economy.

 

According to the Center for European Reforms, Russia, which exported more than 8 billion euros worth of relevant goods in 2019, will be the hardest hit. The potential damage from this mechanism for Russian companies, according to KPMG analysts’ estimates, could range from €6 billion to €50 billion by 2030, depending on the scenario.

 

“There will be those who will benefit from the proposed measures and those who will lose,” says Mikhail Yulkin, expert of the International Sustainable Energy Development Center and general director of OOO CarbonLab. “And how this will affect Russia as a whole is still a question. Everything will depend on Russian companies which have three years to adapt to the new European rules and learn to benefit from them. And on the Russian government that also has time to think and propose its system of greenhouse gas emissions regulation to ensure low-carbon transformation of the economy and increase its competitiveness in the context of increasingly stringent climatic constraints.”

 

In their Statement, representatives of the Russian Socio-Ecological Union (RSEU) noted that the establishment of independent bodies at the national level to control greenhouse gas emissions, the introduction of mandatory reporting of companies and regions on emissions, and then the use of payments for greenhouse gas emissions will help to advance the issue of carbon regulation in Russia.

 

The report “Green Course for Russia”, co-authored by RSEU experts, states that Russia must take responsibility for reducing greenhouse gas emissions by transforming its economic system and actively developing non-resource (primarily green) sectors of the economy. According to representatives of civil society, urgent changes are needed in the energy sector, consisting of an accelerated transition to renewable energy sources and increased energy efficiency.