Page 95 - RusRPTJan22

emissions) and thus affect (limit) their ability to make dividend payments. This is especially true for the utilities, cement/chemicals and transport sectors in terms of the decarbonisation capex to EBITDA. We note, though, that most of the capex is due to increase from 2030, with the cheapest decarbonisation options to be tackled first. For details, see our ESG & Decarbonisation – Decarbonisation cost of Russian economy, of 29 November.
Russian ministries expect carbon neutrality earlier than 2060. The State Duma approved the legislation for the island of Sakhalin experiment on 21 December.
During the Duma meeting, the Head of the Ministry of Industry and Trade, Denis Manturov, noted that the ministry expected industries to be able to achieve carbon neutrality earlier than 2060 (possibly in 2050). According to Manturov, in the M&M and Chemicals space, a package of measures is to be implemented, leading to tangible results.
Along with the Sakhalin experiment, Rosneft offered to consider the following projects as ‘climate’ projects: forestry projects, the utilisation of associated petroleum gas, the implementation of technologies to produce low-carbon fuels, renewable energy, and carbon capture and storage. Also on 21 December, the Board of Directors of Rosneft approved the strategy to 2030, announcing carbon neutrality for Scope 2 on top of Scope 1.
Companies are stepping up their climate impact rhetoric, setting decarbonisation targets and working out what has to be done to achieve them (considering not only Scope 1, but Scope 2 emissions as well). And as legislation is rolled out, the requirements for them are becoming stricter, with the aim for Russia to reach carbon neutrality earlier than 2060.
As concerns Scope 2, the appetite for renewable energy is increasing (despite Scope 2 emissions not being part of the EU CBAM), in terms of both getting green certificates/green bilateral contracts and constructing own generation. We note that in the past two weeks, Norilsk Nickel and Lukoil have announced own plans to construct renewable generation.
In addition, we note that Rosneft currently accounts for 6% of industrial electricity consumption (the second largest in Russia, after UC Rusal with a 7.2% share), and there are insufficient renewable resources to meet that. RusHydro and Rosatom could cover the gap (and we have seen bilateral contracts with them as well). Along with these developments, Russia might face a premium for green electricity sooner than we anticipate, as corporate strategies are driving this process. We see RusHydro as of the clearest beneficiaries of such a development.
95 RUSSIA Country Report January 2022 www.intellinews.com