Russian Business Confirms Importance of Low-Carbon Agenda for Maintaining Competitiveness in Global Markets

As we approach the UN Climate Change Conference 2022 (COP27) and the G20 Environment and Climate Ministerial Meeting, the third meeting of the Expert Council for Sustainable Development at the Ministry of Economic Development and Trade of the Russian Federation was held.

Opening the meeting, Minister Maksim Reshetnikov noted that despite the current situation, the work within the framework of the sustainable development agenda and its climate track remains one of the key factors in the development of the global economy and remains relevant for the Russian economy. ‘This is a long-term trend that is already affecting the competitiveness of Russian companies. And business itself understands it. Many large companies have already approved sustainable development strategies and many of them have made significant progress in implementing their decarbonization plans’ he said.

Maksim Reshetnikov added that the government continues to adhere to the goals of the 2050 Strategy of Social and Economic Development with Low Greenhouse Gas Emission.

The Minister also noted that in addition to the national taxonomy of ‘green’ and adaptation projects which had been already in place since last year, Russia has already formed a regulatory framework for climate regulation and is completing the creation of conditions for the launch of the carbon market.

Thus, a register of greenhouse gas emissions is being formed. Large companies will enter information into it at the beginning of next year. The data transfer procedure was approved after a long public discussion at the beginning of this year. Now the system of feedback from the companies is being built.

In addition, preparations are underway to implement the first voluntary climate projects. It will be possible to register projects from September 1 in order to do it a register of carbon units will work. In the same way a verified information about the results of projects will be entered.

In the autumn of 2022, an experiment will be launched in Sakhalin to make the region carbon-neutral by the end of 2025. The corresponding law was adopted in March 2022 and implies emission quotas and measures to reduce emissions by the largest emitters (enterprises).

‘It is the first experience of using the carbon quota mechanism. Along with it, there should be additional demand for carbon units’ said Minister Reshetnikov. ‘By the end of 2024, Sakhalin companies will understand whether they are within the established quota. If they do not, they will be able to buy carbon units from those who implement voluntary climate projects. If they reduce emissions more than required, they will be able to sell these carbon units at the end of 2025.’

Thus, according to the Minister, there will be a demand for different types of carbon units: both from climate projects and from the implementation of the quota. In turn, representatives of major Russian companies and development organizations noted that the decarbonization of the economy and adaptation to the negative effects of climate change remain important for the national and international agenda.

‘Low-carbon projects are more resilient to the global energy transition, and will face fewer strategic risks in the future. Therefore, the conditions for issuers of such instruments should be more favorable: as a consequence, we see a request to synchronize the terms ‘greenness’ and ‘decarbonization’ with the ‘level of risk and expected return.’

‘The concept of ‘transition’ projects is designed to solve several problems: to set a clear link between ‘green’ and ‘adaptation’ projects, the level of relevance of each such case for the decarbonization of the economy and contribution to the implementation of the low-carbon development strategy of the country’ said First Deputy Chairman of the VEB.RFAlexey Miroshnichenko.

Olga Kalashnikova, head of Severstal’s Environment, stressed that ‘climate technologies should remain outside of sanctions, and this is where the normalization of international cooperation can begin. Our company already has significant technological potential to reduce emissions and adaptation, but we are also ready to actively work on the development and implementation of new types of products and ready engineering climate solutions’ she added.

In her speech, Yulia Shabala, Deputy General Director for Government Relations of Management Company Metalloinvest, told that ‘the current conditions have led to a revision of climate change guidelines, the transformation of certain decarbonisation projects and the need to reorient commodity and raw material flows towards Asian markets, and a review of the global fuel and energy balance. ‘Nevertheless, despite the challenging geopolitical environment, the constraints that we see and the fallout of foreign technology, our company will adapt its climate strategy based on the green transition to continue to develop in the new environment’ she added.

In addition, Yulia Shabala stressed that the development of a low-carbon economy in the new business environment requires strengthening the role of the state to support the ‘green transition’, noting the need for ‘more active cooperation and coordination on the climate agenda, including through the international negotiation process, with friendly countries: major emitters of greenhouse gases, primarily China and India’. Summarizing the discussion, Maksim Reshetnikov noted that the implementation of sustainable development principles and the integration of the climate agenda is not an option ‘at will,’ but an urgent need. In this regard, he stressed the importance of developing Russian verification bodies to improve their competitiveness at the international level.

The head of the Ministry also confirmed the readiness to work with business to unify the methodological framework for the implementation of climate projects. It is important that big business is involved in the formation of demand for carbon-neutral products, he added.

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