Page 127 - RusRPTDec21

9.1.10 Utilities & Renewables sector news
Despite the lack of high-calibre agreements, COP26 brought several key deals to the agenda, which, in our view, will affect Russian corporates. These include:
· Commitments to the 2022 renewal of the NDCs and subsequent five-year review periods. As Russian NDCs get stricter, we would expect the Russian government to seek ways to enforce national carbon limitations and carbon pricing, one of the most widespread and potent tools to achieve this. The five-year review frequency after the 2022 update suggests that Russia might need the tool set up as early as 2027. This matches our expectations for the emergence of a national carbon price by 2026 (see our ESG & Decarbonisation – Russia starts national consultation on carbon taxation system of 24 September). Secondly, we expect the capital markets to step up efforts to enforce the corporate adoption of CO2 science-based targets, which might translate into a significant intensification of corporate carbon ambitions (and thus capex).
· International carbon markets. With the launch of the inter-government (Article 6.2) and corporate (Article 6.4) markets for climate projects, we expect a significant build up in the pipeline of climate projects in Russia, with the aim of monetising emission reductions through the international markets. Taking into account low cost of carbon projects in the first quartile of the abatement curve (forestry, methane, renewable energy), this might offer a significant
127 RUSSIA Country Report December 2021 www.intellinews.com