Carbon Pricing Will Level External Risks

8 july 2019 | Oil and Capital

Irina Pominova, an expert of the Analytical Center, believes that Russia should be able to introduce appropriate national regulation to minimize the risks of discrimination against Russian goods and services. The expert shared her opinion with Neft i Kapital journal.

Irina Pominova
Irina Pominova
Department for Fuel and Energy Sector

Ms. Pominova points out that the possibility of introducing carbon pricing in Russia should be considered as a strategic area for leveling foreign economic risks.

Prospects for the introduction of a carbon tax in Russia were a topic of an in-depth discussion due to the regulation of greenhouse gas emissions provided by the action plans on achieving the national climate goal for 2020 and, especially, on preparing for ratification of the Paris Climate Agreement.

"Carbon tax is one of two key carbon pricing methods, which is aimed at directly promoting the reduction of greenhouse gas emissions by business entities," states Ms. Pominova. "The discussion of the second method—the greenhouse gas trading system—is paid much less attention in Russia."

There is a growing concern about the threats of climate change worldwide, and a trend towards the spread of carbon pricing is forming (it is especially noticeable in Europe).

However, according to the expert, countries are largely guided by economic interests when introducing carbon pricing.

"Thus, for Europe, this will stimulate the development of alternative energy sources and reduce dependence on imports of traditional energy resources. Economic interests should be taken into account when considering the possibilities of introducing carbon pricing in Russia, along with other mechanisms for reducing greenhouse gas emissions," believes the expert.

Carbon pricing is a rather sensitive issue for a business community as it is associated with an increase in financial burden (primarily in the industries with relatively high greenhouse gas emissions, which this regulation is usually aimed at) and a decrease in competitiveness in foreign markets. In this regard, it is common practice to release certain industries from carbon pricing (for example, agricultural sector). Moreover, the countries, where such regulation is in force, are thinking about introducing barriers to products from the countries without such regulation to support the competitiveness of national producers.

"The further spread of carbon pricing in the world may put these plans into practice," says Ms. Pominova. "Russia should be able to introduce appropriate national regulation to minimize the risks of discrimination against Russian goods and services."

The possibility of introducing carbon pricing in Russia at the current stage, according to the expert, implies creating a reporting system for economic entities on greenhouse gas emissions that meets international practices and standards (work in this area is underway), and approving a long-term national benchmark for reducing greenhouse gas emissions.

Disclosure of carbon reporting becomes increasingly important for foreign investors. Thus, companies that have been listed on the London Stock Exchange are required to disclose carbon reports. A number of Russian companies, including the largest Russian fuel and energy companies, have already disclosed data on greenhouse gas emissions, particularly, as part of the Carbon Disclosure Project (CDP), an international investment partnership.

Source: Oil and Capital