The largest enterprises in Russia from 2022 were obliged to conduct carbon reporting

The largest enterprises in RUSSIA with emissions of more than 150 thousand tons of carbon dioxide equivalent per year, starting from 2022, will be required to provide carbon reporting, the first results of which will appear in 2023. The relevant law "On limiting greenhouse gas emissions" came into force on the last day of December this year.

About who the norms of the law will affect in the first place and whether the regulatory framework for the provision of such reporting is ready, said experts interviewed by TASS.

The draft federal law was developed by the Ministry of Economic Development as part of Russia's international obligations under the Paris Agreement, and was considered by the government in February 2021. Its main goal is to limit greenhouse gas emissions by 2030, as well as increase the absorption capacity of forests.

"The targets for reducing greenhouse gas emissions in Russia are based on commitments under the Paris Agreement and are based on the Low-Carbon Development Strategy of the Russian Federation until 2050 (SNSD) adopted this year. Russia, following the largest economies of the world, has set itself the goal of achieving carbon neutrality by 2060, when the level of greenhouse gas emissions will be below the level of their absorption," Ernesto, chairman of the Green Initiative project coordinating committee, chairman of the Energy Committee of the Association of European Businesses, commented to TASS Ferlengi,

the law involves a phased implementation.The first phase came into force at the end of December 2021 and will last until 2024. it involves the introduction of mandatory carbon reporting by the largest emitters of greenhouse gas emissions (over 150 thousand tons of carbon dioxide equivalent), the rest of the enterprises can provide carbon reporting on a voluntary basis.

"Naturally, at the first stage, the introduction of the reporting requirement will cause some costs, including those associated with the installation of additional equipment and the involvement of new specialists," Ferlengi believes.

At the same time, according to him, the whole world is moving towards carbon neutrality, and monitoring and reporting on greenhouse gas emissions is a necessary first step. "Today, those companies that have taken the path of modernizing and reducing the carbon intensity of their products earlier than others will receive undeniable advantages when the carbon footprint accounting system becomes mandatory and exceeding allowable quotas will entail new fines and payments," the agency's source added.

After 2024, carbon reporting will become mandatory for businesses emitting more than 50,000 tons of carbon dioxide. It is assumed that a special authority will be authorized by the government to systematize carbon reporting.

"In world practice, it is customary to consider energy (73%), agriculture and afforestation (18%), the chemical and cement industry (5%), and waste processing (3%) as the main sectors - emitters of greenhouse gases. In this regard, I am sure that Russian companies in these particular sectors will be the first to report," said Ernesto Ferlenghi.

At the same time, he added that construction and transport should also be added to this list.

“If we talk specifically about companies, then these are, first of all, representatives of the fuel and energy complex, the chemical and metallurgical industries, producers of fertilizers and ores - all those whose main sales market are Western countries, which already provide for carbon taxes, emissions trading systems, and these measures in the near future may also be applicable to importers to these countries," the source said.

Artem Kazantsev, a partner at Sinum ADV, holds a similar position. In his opinion, the requirements for the provision of carbon reporting will primarily affect companies operating in the oil and gas, metallurgy, energy and chemical industries. At the same time, carbon regulation will be relevant for large transport companies, manufacturers of building materials, owners of forest land and agricultural land subject to fires.

Despite the need to maintain carbon reporting, at the moment a unified methodology for its provision has not yet been approved.

"There is no methodology [for reporting], but it will most likely appear a year after the start of the provisions of the law," Oleg Kassin, managing partner of the International Law Firm Kassin and Partners, believes.

According to him, currently a draft federal law has been prepared, which provides for administrative liability for failure to submit reports on greenhouse gas emissions or their submission in full. We are talking about a fine in the amount of 100 thousand to 150 thousand rubles. for officials and from 200 thousand to 1 million rubles. - for legal.

"Penalties for non-reporting are still very low. This may become an initial relaxing factor in the serious approach of large companies to reporting on emissions," commented Grigory Pakhomov, strategic development consultant at KPK Capital Regions.

In this regard, according to lawyer Konstantin Erokhin, "many additional issues may arise with reporting, which it is desirable to resolve before the start of operation of the entire greenhouse gas emission accounting system."

“We believe it would be right if Russian companies can calculate their carbon footprint and take steps towards sustainable development even before the methodology and mechanisms for issuing and circulating carbon credits work,” said Artem Bazhenov, Docrobot.ru Development DIRECTOR.

Despite the lack of a methodology, the experts interviewed by TASS agree that the collection of carbon reporting, most likely, can be done by the Russian Ministry of Natural Resources or its subordinate organizations, as well as structures of the Russian Ministry of Economic Development.

"One of the federal executive bodies authorized by the government [to collect carbon reporting], and there may be several of them, we believe, will be the Ministry of Natural Resources, which for several years has approved methodological guidelines and guidelines for quantifying greenhouse gas emissions by organizations engaged in economic and other activities in the Russian Federation," says Pavel Korneev, a leading lawyer at the European Legal Service.

"The best option for data aggregation should be a scientific or public organization, for example, the Russian Academy of Sciences or one of its institutes. In reality, either the Ministry of Economic Development or the Ministry of Natural Resources will be responsible," said Vice President of the Independent Fuel Union, Deputy Chairman of the Supervisory Board of the Reliable Partner Association Dmitry Gusev.

In turn, the Ministry of Economic Development of Russia TASS commented that the government has a whole year to appoint an authorized body to collect reports.

"According to the law on limiting greenhouse gas emissions, their large issuers will begin to provide carbon reporting only from 2023. Therefore, the government still has time to appoint an authorized body," the press service said.

The law also provides for the creation of a legal framework for the circulation of carbon units, the release and circulation of which, according to the HEAD of the Russian Ministry of Economic Development Maxim Reshetnikov, is expected by the end of the first half of 2022.

"In order to launch trading in carbon units, it is necessary to create a register of carbon units and approve the criteria for climate projects," the press service of the Russian Ministry of Economic Development commented to TASS.

The ministry added that draft resolutions and government orders on the registry operator and the procedure for its creation and maintenance have already been sent to the relevant authorities. Criteria for climate projects are also being agreed upon.

“There is a feeling that by the summer of 2022 this system, due to its complexity and complexity, will not work. It seems to me that several more years are needed to create and develop all the necessary state systems, test them in test mode, and work on the bugs, which, is likely to be required in this area," lawyer Konstantin Erokhin believes. In his opinion, to start work, it is necessary to establish the operation of the entire system in a test mode, and this may take several more years.

Experts also note that in order to launch this mechanism, enterprises will have to invest in the modernization and purchase of new equipment, which at first may affect the financial performance of companies.

“We can say with confidence that at the time of the launch of the mechanism, companies will increase their costs for paying for units and modernization, which will be included in their revenue. Or the prices for the final product will increase, which will fall on the consumer,” believes the strategic development consultant of KPK Capital Regions" Grigory Pakhomov.

At the same time, as Ernesto Ferlenghi notes, a carbon unit is a new asset, which in the future, with mutual recognition between different countries, can be exchanged, sold or bought to offset the reduction of the company's carbon footprint.

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"According to the President of the Russian Federation and some experts, the market for carbon credits in Russia could be $50 billion. This means that climate projects in Russia, subject to their global recognition, can generate the creation of carbon credits worth comparable to the cost of exporting Russian oil abroad in the first 9 months of 2020," the source added.