The RSPP has published a position on carbon regulation

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TKB 13 January 2022 15:10

The RSPP has published a new position on climate policy in the Russian Federation. Industrialists, in particular, do not rule out the possibility of introducing additional carbon regulation for certain industries, including for the purpose of offsetting EU cross-border carbon regulation payments. De facto, this is recognition that the "carbon price" in Russia may appear in some forms, while, experts note, the RSPP focuses on reducing the expected "carbon" burden on business.

The position of the RSPP "On the development of climate policy and carbon regulation" was compiled based on the results of the meeting of the Bureau of the RSPP Board on climate issues, held at the end of November 2021.

The purpose of the document is to demonstrate the expectations and acceptable directions of the climate policy of the Russian Federation for large businesses, including in the context of the growing importance of the topic in Russia and the world, as well as the introduction of cross-border carbon regulation in the EU (CBAM).

As Sergey Tverdokhleb, executive Secretary of the RSPP Committee on Climate Policy and Carbon Regulation, explained, the position is based on a "simple message" — "it is important for our country to achieve the trajectory provided for by the low—carbon development strategy in the most cost-effective way - so that decarbonization can be chosen by those solutions that allow for maximum reduction of net emissions with the greatest socio-economic effect or at the lowest cost to consumers."

The most important points of the new position are that the RSPP considers it possible to introduce additional carbon regulation for certain industries (to the "soft" regulatory model adopted in the Russian Federation in the middle of last year, introducing mandatory reporting for large issuers and the opportunity for businesses to do voluntary climate projects), including, possibly, in more ambitious forms for sectors potentially subject to CBAM. But any new carbon regulation measures, according to the RSPP, should be "technologically neutral" (that is, take into account the possibilities of using different technologies to reduce emissions, and nuclear energy, and capture emissions), also, according to Sergei Tverdokhleb, "without creating an excessive and destructive new burden on the economy and the population."

The RSPP also proposes to take into account individual current payments as a contribution of business to decarbonization (for example, payments from wholesale consumers to finance low-carbon generation under the mechanisms of the renewable energy, nuclear power plant, hydroelectric power plant, payment for negative environmental impact on methane emissions, excise taxes on gasoline and diesel, fines for excess combustion of associated gas). State subsidization of the extraction and consumption of fossil fuels, which many companies receive, is not mentioned in the document.

"In Russia, enterprises already pay about $10-20 per ton for carbon, which are simply sewn into surcharges on the electricity market, excise taxes," says Mr. Tverdokhleb.

The document also calls for changing the priorities of state support for industrial policy, focusing on state support for energy transfer by providing tax incentives and direct subsidies, following the example of the EU (where this is done through the European Investment Fund and the Fair Transition Fund), indicating that in 2022-2023 the budget will be in surplus. Among the conditions for providing state support, it is proposed to include parameters for reducing emissions or increasing the absorption of greenhouse gases.

De facto, this is recognition of the possibility of introducing a "carbon price", for example, in the form of emission quotas, experts say, noting that the main motive for the RSPP's position is to reduce the burden on business, which may cause the Russian Federation to lag further in decarbonization issues. The position of the RSPP appeared against the background of news about the publication of a draft version of the response of the Environmental Commission of the European Parliament to the CBAM rules, submitted by the European Commission last summer. According to it, the transition period, during which payments are not provided for, is expected to end in 2024, and not in 2026, free quotas are issued only until the end of 2028 (and not until the end of 2035), polymers, hydrogen and basic chemicals are added to the list of types of taxable products.