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Russia edges closer to carbon market pilot

By Olga Dobrovidova

The Russian government and business have appear to have tacitly agreed that the country needs its own national carbon market in order to stay relevant in the greening world economy.

Now comes the tricky part – deciding who has to make the first move in this game. Delovaya Rossiya, one of the two largest business lobby groups, recently hosted its annual forum in Moscow.

For the first time, as part of its general topic of competitiveness, government officials and experts  gathered to discuss ‘the carbon question’, i.e. what the Russian climate policy should look like in the absence of Kyoto Protocol.

At long last, nobody needs to be convinced that the risks of lagging behind the global decarbonisation trend are very real – no one at the roundtable tried to dispute that.

Moscow pulled out of the Kyoto Protocol in 2012 – but appears keen to explore other forms of cutting emissions (Pic: Flickr/koraxdc)

But the chicken and egg question is, who should lead – responsible businesses having to compete internationally or the state in dire need of dramatic economic reforms to ensure sustained growth?

Russia’s climate change envoy, Alexander Bedritsky, has repeatedly stated that all necessary political action to incentivize the green transformation has been taken – despite the fact that the long-suffering draft decree on Russia’s 2020 emissions reduction goal of 25% is literally about to celebrate its first birthday.

Somewhat surprisingly, this time Bedritsky directed his attention to voluntary carbon markets, where Russian participation is virtually nonexistent.
“I don’t really see any companies that are actively using best industry practices and increasing their competitiveness via voluntary (carbon) mechanisms”, said the presidential advisor.

This, according to Bedritsky, proves that Russian industry lacks the necessary leadership and is unwilling to live up to its promises of corporate social responsibility.

But, as industry quickly replies, in the current regulatory environment you have to be crazy to add the extra burden that any carbon regulation might bring.

As Delovaya Rossiya’s Yuri Fedorov put it, Russian companies are still looking up to the government to make the necessary decisions first.

“If the decree is signed, business will be ready to actively participate (in establishing a regulatory framework)… But for now, the answer is pretty much ‘no one is forcing us to do this, it’s an extra burden for our business – and a big one – so we’d rather not do anything”, said Fedorov.

The Ministry of Economic Development clearly takes the side of business in this issue, noting that Russia is currently a global leader in the sheer quantity of pollutants that have to be measured and limited – the list is some 400 items long.

Without a comprehensive reform of environmental regulations in general, “any attempts to create a carbon market will be met with nothing but protest, both from businesses and, frankly, from our Ministry”, said MED’s Oleg Pluzhnikov.

And, clearly, no one needs either a forceful Soviet-style introduction of a price on carbon or a poorly-designed trading system that would have to be calibrated at the expense of its participants.

That is why the consensus seems to emerge around creating a ‘carbon sandbox’, i.e. a small pilot scheme for one region and/or one industry, mainly for testing purposes.

The conclusions of the roundtable are going to be presented to the government and personally to Prime Minister Dmitry Medvedev – meanwhile, expert-level discussions are continuing with the Deputy Minister for Economic Development Sergey Belyakov reportedly hosting a closed-door meeting with businesses, EBRD and Sberbank, which used to manage JI in Russia, today.

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