Page 17 - RusRPTDec21

generation and using more efficient technologies in coal-fired power generation. It is planned to electrify traffic and improve the energy efficiency of residential buildings. More detailed plans to reduce emissions will be published later.
However, the new European Green Deal will impose additional costs on Russia.
In July, the European Commission published its proposals for measures to support the achievement of the more ambitious EU emissions targets adopted this year. One of the actions included in the proposal is the so-called the carbon limit mechanism, a levy on greenhouse gas emissions from goods imported from outside the EU.
The purpose of the carbon limit mechanism is to curb carbon leakage, ie the transfer of polluting production to other countries as the EU's emissions targets become tighter.
At present, carbon leakage is being curbed with free allowances, but they would be phased out with the introduction of the carbon cap mechanism.
According to the Commission proposal, the carbon limit mechanism would apply to certain cement products, fertilizers, steel and aluminium products and electricity. The cap mechanism fee would be based on the EU ETS ETS: n allowance prices. It would be calculated on the basis of company-specific or calculated benchmarks for emissions from imports directly from production. The border mechanism is due to enter into force at the beginning of 2026.
The recently published BOFIT Policy Brief estimates that the biggest costs of a carbon boundary mechanism would be incurred by Russia. There is considerable uncertainty in the cost calculations, but the cost to Russia of the cap mechanism could be in the order of around € 2 billion per year, with the price of allowances around € 60 per tonne (as in recent months on average). This would correspond to 1.5% of the value of total EU imports of goods from Russia in 2019. The cost estimate is practically for 2035, when free allowances from European producers would have been removed. In the initial phase of the scheme, the costs would be significantly lower, as the free allowances received by EU producers will be taken into account when setting the cap mechanism levy.d
Russia is warming up to a 40-year, RUB89tn capex spree, which is set to drive its net emissions down 60% by 2050 from 2019 levels. This report provides a detailed view of the abatement costs, capex and price pressure in the key individual sectors, and offers a top-down view of the cheapest ways to reduce emissions in the country, as an indicator of where most of these investments are likely to be channelled.
The price of decarbonisation is set to rise. We estimate that Russia can remove 25% of its emissions for a price tag of RUB43tn (the equivalent of 1.3% of GDP per annum), and 50% of them for RUB86.6tn (2.7% of GDP per annum). In comparison, cutting 100% of emissions would require an astronomical RUB479.8tn by 2060 (or 15% of GDP). The cheapest ways to achieve these targets include tackling waste disposal, reducing emissions,
17 RUSSIA Country Report December 2021 www.intellinews.com