Page 58 - bne_May 2021_20210501

58 I Eastern Europe bne May 2021
A string of environmental disasters in 2020 and the increasing realisation that Russia's permafrost is melting has put emissions, the climate and ESG scores on the Kremlin's agenda.
Russia gets ready for green power and problems from costing carbon
as well as profitable, investments
and bans on holding the equity of “dirty” companies that have poor environmental, social and governance (ESG) scores have forced some of Russia’s household names to launch in-house sustainability strategies and invest billions of dollars on clean-ups that add nothing to their bottom line.
And the risks of doing nothing are rising. This week investment bank VTB Capital (VTBC) argued in a note that Russia
has already passed “peak oil” in 2019 as ESG concerns will prevent a ramp-up to previous levels of production once the coronacrisis fades completely. Russia produced an all-time high of 11.4mn barrels per day (bpd) in December
2018, but since the oil prices slumped
in 2014 it has joined the OPEC+ deal to limit production and hold up prices. Oil production fell to a low of 9.2mn bpd in June last year and has since recovered to 10.2mn bpd, but some analysts say it will not rise much further. The OPEC+ deal
is due to expire again soon as post-crisis demand returns, but VTBC analysts argue that even when the fetters are thrown
off Russia’s production will continue to slide as the world increasingly turns to alternative sources of energy.
But the sword that may skewer Russia’s energy business is the EU’s new Green Deal that promises to make the trade club carbon neutral by 2050. Part of this programme is to introduce a carbon tax on “dirty” goods producers – companies’ with high CO2 emissions or just poor ESG scores.
Now the government is starting to take some action. Last year the state
Ben Aris in Berlin
Russia’s Economic Development Ministry and the local authorities on the Far East island of Sakhalin have proposed imposing fines of RUB150- 2,000 ($2-25) per tonne on companies that exceed proposed new greenhouse gas (GHG) emissions quotas.
The hydrocarbon-rich island is home to major gas deposits and also the country’s first LNG plant. The fines are part of a push by the Kremlin to start dealing with the climate crisis and meeting its commitments under the Paris Accord that was ratified in 2019.
Russia has been criticised for going slow on tackling its GHG emissions, but that has started to change rapidly, first of all driven by the leading corporates, but now the government is getting into the game.
The proposed rules form part of a draft law on GHG emissions in the Far Eastern region now up for approval by the government in Moscow and represent
a first pass at the thorny problem of setting a price for carbon emissions.
www.bne.eu
A string of massive environmental disasters in 2020 and the increasing awareness that Russia’s permafrost
is melting have put the climate crisis
on Russia’s policy agenda and the Kremlin is responding. In recent months, the public discussion on stricter environmental disclosure requirements risks has picked up pace and the state is getting ready to legislate.
At the same time, the growing call by the general public for sustainable,
Russia oil production kbpd
Source: CTEK