Page 96 - RusRPTFeb22

VTB Capital (VTBC) summarised the main points in a note.
· Russia has approved the law on emissions that envisages reporting
verified emissions (the mandatory payment for CO2 is not part of it, but while preparing the rules for the operator of carbon units for climate projects, the Ministry for Economic Development mentioned RUB2,000 per carbon unit as the base for calculating commissions; see our Morning Comment of 14 December);
· has come up with a low-carbon strategy that aims for carbon neutrality by 2060 (MinEconomy’s preliminary version mentioned a possible price for CO2 of RUB500-700/t after 2030 and the World Bank estimates that Russia needs a price of $44-130/t from 2025 to reach carbon neutrality, while the IMF puts it at $50/t; see our Morning Comment of 2 December);
· is carrying out the Sakhalin CO2 trading experiment (with a range from international $2/t to $27/t);
· is undertaking the Clean Air project as part of the Ecology national project that implies a reduction in emissions of least 20% in the 12 most polluted Russian cities (Bratsk, Krasnoyarsk, Lipetsk, Magnitogorsk, Mednogorsk, Nizhny Tagil, Novokuznetsk, Norilsk, Omsk, Chelyabinsk, Cherepovets, Chita) by 2024 and 50% by 2030. It is planned to reduce emissions from industrial enterprises, public utilities and transport. From June 2022, more regions are to be included.
“It seems the RUB1,000-10,000/t price could relate to the latter, as those are quota experiments, but more details are to follow. The island of Sakhalin experiment is to become the base for the national carbon price, especially in light of EU Carbon Border Adjustment Mechanism (CBAM), while the recommended levels seem to be getting close to international CO2 prices. We also estimate that a CO2 price of $30/t would make it possible to decarbonise 50% of GHG emissions in Russia,” VTBC said in a note.
The Russian Prime Minister notes that annual decarbonisation could cost 1-2% of GDP by 2050. On Thursday 13 January, Prime Minister Mikhail Mishustin noted that the annual costs for Russia of decarbonising could stand at 1-2% of GDP by 2050, according to the preliminary calculations. He said that Russia was planning to move in several directions, from the complete restoration of forests (after the deforestation which has taken place) to the development of alternative energy sources and the formation of a new industrial and transport infrastructure on their basis. Russia has to adapt to the global energy transition, and has adopted a low-carbon strategy through 2050 to achieve carbon neutrality by 2060 (or earlier). Mishustin noted that, as part of the environmental agenda, a special programme to support companies had been created (which implies subsidising interest rates), while the government is also going to support low-carbon projects through the Industry Development Fund and special investment contracts. The decarbonisation cost of 1-2% of
96 RUSSIA Country Report February 2022 www.intellinews.com