Carbon taxes go to emissions

Carbon taxes go to emissions

Russia intends to fight global warming on a voluntary basis

Photo: Anton Vaganov / Kommersant   |  buy photo
[Translated version published by TLB]
via Newspaper “Kommersant”

The draft law “On state regulation of greenhouse gas emissions” prepared in pursuance of the Paris Agreement on Climate Change has been submitted to the government. After consultations with the Ministry of Energy, the Ministry of Industry and Trade and the Russian Union of Industrialists and Entrepreneurs, the new version excludes provisions on target levels of greenhouse gas emissions and fees for exceeding them, as well as on the mechanism of circulation of “carbon units” – the entire infrastructure to combat global warming, except for monitoring, will be created on volunteer. For the Russian Federation, this is a way to join the Paris Agreements without actively participating in them.

As Kommersant learned, the Ministry of Economy is submitting to the government the final version of the draft law “On state regulation of greenhouse gas emissions” (Kommersant has it). On October 18, the project will be considered at a meeting with Deputy Prime Ministers Aleksey Gordeev and Dmitry Kozak. It is assumed that before the end of 2019 he will be represented by the government to the State Duma. Recall that in September, Prime Minister Dmitry Medvedev signed a government decree on the adoption of the Paris Agreement. The document has been ratified by 185 countries; in practice, it is being implemented to one degree or another in more than 100 of them.

In the original version, the bill of the Ministry of Economy envisaged the implementation in the Russian Federation of a typical European climate control scheme similar to the 1997 Kyoto Protocol (ended in 2012) – this is state monitoring of greenhouse gas emissions, a mechanism for quoting emissions for industrial enterprises, setting a fee for exceeding emission standards, creating a market for carbon units of carbon monoxide emissions to stimulate projects in this area.

The project raised objections from the Ministry of Energy, the Ministry of Industry and Trade and the Russian Union of Industrialists and Entrepreneurs (RSPP), after which the department of Maxim Oreshkin took the following position: it was premature to discuss all these mechanisms.

In the version presented by the Ministry of Economy, Article 12 (“Circulation of Carbon Units”), Article 13 (“Greenhouse Gas Emission Targets”), Article 14 (“Greenhouse Gas Emission Charges”) and Article 15 on the Establishment of the Implementation Support Fund are excluded from the project projects to reduce greenhouse gas emissions and (or) projects to increase their absorption, as well as all the relevant references to these substances in other articles, including the right of the Russian government to introduce additional measures. Article 2 (“Basic Concepts”) even deleted the definition of “carbon units”, their “owners” and the “target” of CO2 emissions.

In correspondence with the Government of the Ministry of Economy in the person of Deputy Head Mikhail Rasstrigin, it indicates that taking into account the opinions of departments and the Russian Union of Industrialists and Entrepreneurs, it is “advisable to return” to the issue of the carbon unit market after launching the infrastructure for reporting and monitoring emissions — the register of projects in this area, the reporting system for emissions and its verification for regulated entities, creating requirements for projects to reduce emissions or increase absorption.

In other words, the Ministry of Economy does not yet know the answer to the question of whether there are risks of not achieving the declared goals of the Russian Federation to reduce emissions, and suggests not introducing any regulatory measures in this area.

“The introduction of additional measures, if necessary to achieve national emission goals, will be considered and justified separately during the development and subsequent updating of the long-term Economic Development Strategy of the Russian Federation with low greenhouse gas emissions,” Kommersant explained to the Ministry of Economy.

The proposed sequence of actions – reporting, impact assessment, strategy adjustment, discussion of new measures – is clearly designed for at least a few years. The meaning of the bill for the economy is only the introduction of reporting (apparently, a modification of environmental statistics, which is being collected now) and framework support for initiative projects in this area. In this sense, the fate of the “fight against global warming” for the coming years may be even less eventful than the project to stimulate investments (partly green) through the mechanism of “best available technologies”, implemented only partly in the framework of the environmental national project. This is good news for the industrial business, and bad news for proponents of action in the fight against climate change. In fact, the low growth of the Russian economy makes the question neutral for everyone: the likelihood

Note that large initiative projects in this area, contrary to prejudice, are quite likely – for example, due to global trends taken into account in capitalization (for example, LUKOIL announced such projects yesterday). However, the supporters of the Paris Agreement, the position of the Russian Federation will clearly disappoint. According to the director general of the Center for Environmental Investments, Mikhail Yulkin, “the saddest forecast comes true: they are not going to do anything in essence, they did not plan and do not understand why.” However, in his opinion, this defense tactic, the key role in the organization of which he attributes to individual member companies of the RSPP, is not as reliable as it seems. New European Commission Guidelines for the Border Carbon Adjustment Initiative (BCA – Carbon Emission Adjustment), according to FT, discusses, apparently, the possibility of introducing additional fees for imports from countries that do not regulate greenhouse gas emissions. However, we note that the implementation of the BCA as part of the EU green program in the coming years will most likely sharply activate world trade wars in the US-China-EU triangle. And this will almost inevitably lead no longer to a decrease in global GDP growth rates, but to a global recession – and, apparently, to a global reduction in greenhouse gas emissions, regardless of whether this affects the global climate or not.

(Dmitry Butrin, Alexey Shapovalov)


“It was necessary to do not fiscal regulation, but neutral”

Director General of the Center for Environmental Investments Mikhail Yulkin commented on Kommersant’s refusal of carbon taxes.

Obviously, Russia needed to join the Paris Climate Agreement only to create a favorable image – in order to switch its attention from internal summer events in the country, having risen to protect humanity.

The Skolkovo Energy Center recently forecast a 17% decline in hydrocarbon exports in the foreseeable future. As soon as the share of electric transport in the world reaches 10%, irreversible changes will begin in the oil market, and inexpensive oil will quickly end. The model on which the Russian economy has survived the last 20 years is dying. And all you need to do is find a convenient mechanism to transfer money to other areas that provide low-carbon development. Moreover, by the command of Rosneft or Gazprom, this is not possible. Just look at the example of Rosatom in wind energy. So, you need to invest in the education of people who will understand what a green economy is.

It was necessary to do not fiscal regulation, but neutral. But the business saw nothing but fiscal in an attempt to create market-based carbon regulatory instruments – and “killed” it without offering anything else. After the introduction of the EU of additional duties on high-carbon imports, Russia risks losing a significant part of its processing exports to the EU – since it does not stand comparisons with European counterparts in terms of energy intensity. In 10-15 years, this may cost us a third of oil production.


(TLB) published this article from Newspaper “Kommersant” with  our appreciation for sharing this perspective. (Translated version)

Read about the authors Dmitry Butrin, Alexey Shapovalov

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