Russia to Begin Carbon-Trading Trial in Far East Next Year

Russia will start its first trial of a marketplace to trade carbon credits on the remote Far East region of Sakhalin starting next year, as the world’s largest energy exporter faces criticism for being slow to reduce greenhouse-gas emissions.

The goal is to have the region become carbon neutral by 2025, Deputy Economy Minister Ilya Torosov said in an interview, adding that details of how that would be attained haven’t yet been decided.

“We will have quotas and regulation there, and if you exceed the quota then you need to buy extra,” Torosov said. Emissions, forest absorption and other criteria will be measured to ensure international standards are met, he said. The experiment will be expanded to other regions if successful, he added.

As other major economies accelerate efforts to fight climate change, Russia has implemented few policies to reduce its carbon footprint. A new draft law on the issue was to have included provisions for emissions limits and trading, but those were watered down amid opposition from industry, Ruslan Edelgeriev, the Kremlin’s senior adviser on climate change, said in an interview to the Kommersant newspaper in February.

Draft Law

Torosov said the current draft of that law represents a step forward and expressed hope it will be passed this year.

While Russia can’t participate in global carbon trading as a country under the Paris Agreement, individual companies can sell carbon units if they’re internationally recognized as offsetting emissions. That will be a challenge until Russia passes the draft law, which also governs domestic counting and monitoring.

Russia to Begin Carbon-Trading Trial in Far East Next Year

Sakhalin’s relative isolation and small economy -- $13 billion a year -- make it attractive as a test area. About three-quarters of its territory is forests, which absorb carbon dioxide, and it has relatively little industry beyond several major oil-and-gas projects. Their impact on the island’s greenhouse-gas balance is limited, since the effects of burning the fuel they produce aren’t counted in direct emissions.

Russia has no plans to reduce emissions or reach carbon neutrality, focusing instead on creating what the government calls a “low-carbon economy.” In contrast, Canada aims to reach neutrality by mid-century, and China is targeting 2060.

“We are for the market approach and for creating a system that benefits companies,” he said. “It’s important to create a system of motivation, we need to use carrots, not sticks.”

The Economy Ministry and state development bank VEB plan to adopt a green-finance methodology by the end of the summer that’s very close to international standards, Torosov said.

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