Page 13 - AsiaElec Week 14 2021

AsiaElec CARBON PRICING AsiaElec

Russia reveals proposed carbon

pricing levels for Sakhalin

RUSSIA THE Russian Economic Development Ministry The most notable rule is that all regulated
and the authorities in Sakhalin region have pro- companies that emit GHGs in excess of 50,000
posed fines of RUB150-2,000 ($2-25) per tonne tonnes per year (tpy) have to report their emis-
for companies that exceed proposed new green- sions and follow a system of emissions quotas,
house gas (GHG) emissions quotas. Emissions will have to be verified by accred-
The proposed rules form part of a draft law on ited independent entities, which will be defined
GHG emissions in the Far Eastern region now by the Ministry for Economic Development and
up for approval by the government in Moscow. VEB.
The proposals represent some of Russia’s ini- VTB Capital (VTBC) analyst Ilya Piterskiy
tial attempts to set a carbon price for the coun- said that while the proposed price range per
try’s CO2 emitters, and show how seriously the tonne of CO2 in Sakhalin of RUB150-2,000 ($2-
government is taking green and ESG issues. 25) per tonne is well below the key benchmarks
However, such prices are a major financial and of international peers, this is nevertheless an
ESG risk for major emitters. important step towards the introduction of an
In January, a roadmap for the experiment in all-Russia carbon price.
the Sakhalin region was approved. It calls for a CO2 pricing, either in the form of an
new CO2 trading system and achieving carbon IFRS-enforced, climate-adjusted, net profit cal-
neutrality by 2025. culation mechanism or through national legisla-
All new regulations are to be worked out by tion, poses a substantial risk to the future profits
June 2021. A key component is converting coal- of the sector.
fired and fuel-oil boilers to gas, which has already “We believe that the introduction of such
been agreed in principle by the regional author- a price is a key risk to any ongoing or newly
ities and Gazprom. launched investment projects in the sector as
Other changes include introducing more well, potentially adversely affecting the IRRs of
ecologically friendly fuel in the transport sector, any ongoing investment programmes in fos-
with at least 50% of cars using gas or electricity sil-fuel generation,” said Piterskiy.™
by 2025.

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