Don't delay with the carbon

Until Russia introduces a carbon tax, domestic companies will have to pay taxes to other countries, Presidential Special Representative Anatoly Chubais warned at the Gaidar Forum. Representatives of public environmental organizations are confident that measures to reduce the carbon intensity of domestic products will have a positive effect on the Russian economy.

The delay with the introduction of carbon regulation, the former head of Rusnano called a big mistake for Russia. Earlier Anatoly Chubais suggested that Russian business should not be afraid of the carbon tax and solve the problem with renewable energy sources (RES):

“If you have bought electricity from a wind farm and have a certificate confirming this, then you have a sharp drop in the volume of CO2 emitted during the production of the product. And then you have grounds to say, ‘No, dear European Union, my emissions are lower’...”

Another option proposed by the Special Representative of the President is to have your plants produce energy from renewable sources.

A stir in the "carbon family" caused the “European Green Deal” announced last year. The goal of the EU Green Deal concept to make the European economy climate-neutral by the middle of this century. One of the main measures is considered to be the introduction of a carbon tax on products imported from abroad. “Exemption” from this fee is supposed to have a chance to get manufacturers from countries with their own carbon schemes.

Talks about carbon schemes and limiting emissions in Russia are going on not for the first year, the Law, which should regulate this area has been under discussion for several years. However, the influence of opponents of climate change is affecting the process. Calls are made to oppose “carbon protectionism and the collapse of the economy”. The fact is, as practice shows, it is unlikely to evade carbon regulation. The Russian business has already had a negative experience of opposing the carbon charges in the aviation sector under the EU ETS scheme.

Meanwhile, the Russian business has more and more reasons to worry. Carbon intensity in the Russian Federation amounts to some 0.58 kg CO₂ per capita. For comparison, in the UK this indicator is 0.3; in Germany - 0.4; in France - 0.2. At the same time, there has been a steady decline in carbon intensity in the world, while in Russia there has been an increase. According to calculations of the Ministry of Economic Development, by 2035, the level of emissions per unit of production maybe three times higher than the world average.

According to the Federal Customs Service of Russia, in 2019, 73.8% of all goods in value terms, were exported to Europe. Experts from Econs.Online is confident that European mechanisms to limit emissions will affect oil, gas, coal, and metals. This could result in a cumulative loss of about 50 billion euros to Russian exports by 2030.

According to the Organization for Economic Cooperation and Development, Russia is the second-largest importer after China in terms of carbon-intensive goods. But at the same time, China already has domestic carbon regulation schemes, which gives the country a competitive advantage over Russia. In addition, oil from Saudi Arabia, which has a lower carbon footprint, can also squeeze Russian raw materials.

According to  Maxim Kanischev, founder of Anselm, energy efficiency and emissions reduction research project, Russia’s carbon risks are also increased by the impending U.S. return to the Paris Agreement.

“If these plans are implemented, the methods of calculation and the structure of setting the carbon tax rate will also be negotiated with the U.S.”

Experts also talk about the global financial risk for the Russian economy. Last fall, Russian oil and gas, mining, and pulp and paper companies had 7 trillion rubles in debt on bank loans (about 20% of the total portfolio).

In experts’ opinion, the Russian economy needs systemic measures at the state level: the development of a regulatory framework and reporting standards, disclosure of information on carbon emissions, and support for industries that must adapt to the transition economy. In addition, the efforts of the enterprises themselves are also needed: the introduction of mechanisms for measuring the carbon footprint and modernization of production.

Representatives of the Russian Social and Ecological Union (RSEU) believe that the establishment of independent bodies at the national level to control greenhouse gas emissions, the introduction of mandatory reporting by companies and regions on emissions, and then the use of payments for greenhouse gas emissions will help advance the issue of carbon regulation in Russia. In this Position, we call for the adoption as soon as possible of the Federal Law “On State Regulation of Emissions”. We believe that measures to reduce the carbon intensity of domestic products will have a positive effect on the Russian economy.