Page 14 - RusRPTOct21

The expected timeline for the rollout according to VTB Capital is:
· 2022 – The start of emission reporting for companies with emissions above 150kt CO2e per year (per the Law on Emissions)
· 2024 – The start of emission reporting for companies with emissions above 50kt CO2e per year (per the Law on Emissions)
· 2024 – Targets set and approval of the law on a trading system
· 2025 – Pilot regime
· 2026 – Full-scale operation, synchronised with EU CBAM rollout
· Along the way, Russia will be implementing the CO2 trading experiment in Sakhalin (from 2022), with the region due to achieve carbon neutrality by 2025.
According to the government,both emission trading systems and outright carbon taxation – or a combination of both – are being considered as options.
Five out of the ten largest emitters in Russia are utilities; three are oil & gas companies and two are metals & mining companies. According to the Climate Action Tracker, Russia needs to reduce its emissions by 40% to get itself on a trajectory that would keep global warming within the ‘two degrees’ scenario.
The current reduction targets are expected to be milder than that, with a gradual increase toward 2030-35. Nevertheless, it is helpful to evaluate the value at risk within company profits if this is applied in the worst scenario – as an outright tax with limited possibility to pass through the additional costs onto consumers.
Although VTBC expects initial carbon prices toe lower than in the EU, it says that to achieve one of the goals of the announced policy – to minimise external payments to the EU under CBAM and instead channel those funds toward domestic green investments – the CO2 prices would have to match EU levels to offset the European payments fully.
Additionally, EU CBAM is likely to cover only Scope 1 emissions in its initial form. Thus, decarbonising electricity consumption would remain a secondary goal suborned to reducing the carbon footprint of electricity production facilities.
At a 40% reduction target, assuming a range of CO2 prices from Sakhalin max (RUB 2,000/t) to the EU ETS level (EUR 60.9/t) then several factors come into play.
The utility sector is the most exposed to the negative influence of a CO2 price, with 30-100% of EBITDA at risk.
14 RUSSIA Country Report October 2021 www.intellinews.com