Page 148 - RusRPTMay21

relevant ministries a draft law on greenhouse gases (GHG) emissions in the Sakhalin region.
In January, the roadmap for the experiment in the region was approved. It envisaged CO2 trading and achieving carbon neutrality by 2025. All the regulation has to be worked out within six months, with the region also facing the need to move its coal-fired and fuel-oil boilers to gas, as agreed by the regional authorities with Gazprom. There is also a strategy for transport to move to more ecology-friendly fuel, with at least half of cars planned to be using gas or electricity in five years.
All regulated companies that have GHG emissions in excess of 50kt CO2 have to report their emissions and follow the preset emissions quota, while emissions have to be verified by accredited independent entities (as defined by the Ministry for Economic Development and VEB). According to the draft, if a regulated company exceeds the quota, there is to be a fine of RUB150-2,000/t for each ton in excess.
While the proposed price range per tonne of CO2 in Sakhalin of RUB150-2,000/t ($2-25/t) is well below the key benchmarks of international peers, this is nevertheless an important step towards the introduction of an all-Russia carbon price. As we wrote in our Utilities Quarterly – 1Q21; Climate-related reporting puts all of EBITDA at risk, of 5 April, CO2 pricing (either in the form of an IFRS-enforced, climate-adjusted, net profit calculation mechanism or through national legislation) poses a substantial risk to the future profits of the sector. We believe that the introduction of such a price is a key risk to any ongoing or newly-launched investment projects in the sector as well, potentially adversely affecting the IRRs of any ongoing investment programmes in fossil-fuel generation.
9.1.11 Metallurgy & mining sector news
Russia’s trust-busting regulator, the Federal Antimonopoly Service (FAS), opened an investigation on April 27 into the Russian flat steel producers Magnitogorsk Iron and Steel Works (MMK), Novolipetsk Mining Kombinat (NLMK) and Severstal after prices on the domestic market soared in the last six months.
The investigation was triggered by numerous complaints about the strong growth in flat steel prices on the domestic market. In its statement published on April 27 FAS pointed out that flat steel prices had risen 50% over the past six months while costs for raw materials had grown at a less significant rate.
148 RUSSIA Country Report May 2021 www.intellinews.com