Page 8 - FSUOGM Week 35 2021

FSUOGM COMMENTARY FSUOGM

Russian CO2 plan "wishful thinking

The strategy hinges on whether hydropower and nuclear power are classed as green

RUSSIA RUSSIA'S Minister of Economic Development (1.6bn tonnes if accounted for estimated absorp-
Maksim Reshetnikov gave an interview to Tass, tion by forests). In the base case, electricity con-
in which he outlined the main directions of the sumption in Russia reaches 1.48 trillion kWh by
GHG reduction strategy. 2050, which is 38% higher than in 2019.
Russian state energy policy is focusing Lower emissions are planned in extraction,
increasingly on ESG, as Russia belatedly pre- generation and utilities, but the GHGs are seen
pares to tackle the EU carbon tax introduction increasing at a slower pace in all sectors, with the
and other "green" challenges. As followed by bne forest absorption being the main factor contrib-
IntelliNews, earlier this year President Vladimir uting to the decline.
Putin called for cutting Russia's greenhouse gas The base scenario is reportedly seen costing
(GHG) emissions to below those of the Euro- 1.5% of GDP, while the intense scenario would
pean Union as the Kremlin starts to wake up to cost 4% of GDP and would necessitate foreign
the dangers of global warming. investment. Forbes reported this week that
But the analysis of partial unofficial reports of investment in renewable energy is estimated at
EconMin's GHG reduction strategy shows that RUB3.7 trillion ($50bn) for 2021-2050, or about
it is based on two assumptions that are yet to be RUB74bn annually ($1.7bn).
recognised by the international community: the "From the details provided, it seems as
recognition of hydro and nuclear generation as though the plans to reduce Russian emissions
green, and the disputed strong potential of natu- remain relatively unambitious, with no carbon
ral forest absorption. neutrality, and no major reduction in emissions
Reshetnikov estimated the annual value of from industries with the focus on absorption
exports exposed to the EU carbon tax at $7.6bn capacity," Sova Capital notes, reminding that
and reiterated several points that have already natural absorption is currently not recognised by
been reported, such as the introduction of the international community as a tool for cutting
GHG reporting as of 2023 and actual payments emissions.
as of 2026, classifying large hydro and nuclear
generation as green and accounting for CO2 Putting price on CO2
absorption and carbon capture through natu- The CO2 payments only appear in one of the
ral forests. scenarios. The latter, though, is still a major dif-
Large hydro and nuclear energy has yet to be ference from the previous draft of the strategy,
considered green by other countries, allowing which did not have any CO2 pricing at all, Sova
for the decarbonisation goals of industrial con- Capital analysts note.
sumers to be met, VTB Capital (VTBC) wrote In a separate report Interfax reported that
on August 25. the Ministry of Energy expected the legislation
The minister also noted that a strategy of on low carbon certificates to be approved in the
low-carbon, long-term development in Russia autumn. According to the Deputy Minister of
was being discussed, with four scenarios under Energy, Pavel Snikkars, the supply of low-car-
assessment (inertial, base, intensive, aggressive), bon energy is 452bn kWh, while the demand
and the possibility of achieving carbon neutrality from exporters is half of this volume, and retail
was being analysed. demand is still shaping up (which could add
Neutrality not base case, high hopes for nat- about 10%).
ural absorption "The Ministry for Economic Development’s
Notably, reaching carbon neutrality is only statement that the low-carbon, long-term devel-
planned in the intensive and aggressive scenar- opment in Russia has to have an indicative CO2
ios (by 2050 and by 2060 respectively), while the price is a step towards getting a grasp on carbon
inertial and base case scenarios do not aim for trading in Russia," VTB Capital (VTBC) com-
neutrality at all. mented on August 25.
In the meantime, Kommersant daily and The analysts remind that the Sakhalin experi-
RBC business portal have reported the details ment currently implies RUB150-2,000 per tonne
of the EconMin's CO2 strategy draft, which sees price, while just recently the ministries stated
the emissions of GHG declining by 25% to 2050 that the EEU needed to align carbon pricing in
mostly due to natural absorption by forests and the bloc’s countries.
swamps, which was previously seen as too opti- "In terms of the low-carbon certificates, the
mistic by domestic and international analysts. approval of the legislation has been delayed,
The base scenario sees the volume of GHG with industrial consumers being active in sign-
down to 1.19bn tonnes by 2050 as compared ing bilateral contracts and international I-REC
with 2.12bn tonnes of CO2 emitted in 2019 certificates," VTBC reminds. ™

P8 www. NEWSBASE .com Week 35 01•September•2021