A Step in the Right Direction, But Is It Enough?

New Carbon Emissions Bill

Bill number 1116606-7 was the first of its kind passing through Russia’s Federation Council, before it was eventually approved by the State Duma on June 1, 2021. In the bill, companies that surpass a threshold of 150,000 tons of C02 annually must begin to limit their total emissions by 2023. In addition, corporations that emit between 50,000 and 150,000 tons annually will have to report their emissions in order to maintain accountability and the new standard.

Yevgeny Sofiychuk / TASS

The bill even has a system for giving carbon credits, where corporations can receive “carbon units” for investing in reforestation, recycling, carbon capture or other initiatives with the goal of fighting climate change. State Duma Deputy Nikolai Nikolayev, one of the bill’s authors, postulated, “It’s not enough to plant the seeds, you have to grow the forest,” demonstrating his desire to take decisive action when combating climate change.

The progress of this bill follows the announcement of Deputy Prime Minister Viktoria Abramchenko at the 9th Nevsky International Ecological Congress in St. Petersburg that the existing legislation would be amended to ban a significant number of non-recyclable plastic materials within the Russian Federation. The government appears to be taking an aggressive approach on this front, hoping that by banning these items they will force Russian businesses to adapt their business models to follow new laws aimed at fighting climate change. The ban includes single-use dishware, cotton swabs, plastic straws, colored plastic and other similar items.

Why Is Now the Time for Change?

Anatoly Chubais, President Putin’s Special Representative for Sustainable Development, hinted that Russia’s renewed commitment to the cause and attempt to abandon hydrocarbons as energy carriers was impacted by a number of developments including U.S. President Biden’s election and immediate action in returning the United States to the Paris Agreement, the EU revising its carbon emissions target from 40% to 55% by 2030, and China’s goal of becoming carbon neutral by 2060. Additionally, the European Union—which happens to be Russia’s largest trade partner—enacted a similar ban on plastics in April of this year. In the words of Chubais, “The world has made a radical decision to change the entire economic policy,” and it seems as though Russia plans on following suit.

Additionally, Putin voiced his displeasure at the St. Petersburg International Economic Forum for what he considered was an unfair opinion by other countries that Russia is not “interested in addressing global environmental issues.” Putin referred to these concerns as a “myth.”

How Will These Decisions Impact Russian Business, Will They Pay Off?

The rhetoric and legislation that has emanated from government officials over the past couple of weeks appears to place combating climate change as a more important objective for the Russian government as compared to the past—at least when it comes to the production of non-recyclable plastics. Further, their actions demonstrate incredible faith in the Russian economy, as government officials believe—or at least hope—that businesses will adapt to the new legislation by shifting toward new products and approaches to manufacturing.

While the recent decisions by the Russian government will surely have a tangible impact if they are fully passed into law and companies are held accountable, there is probably also a more long-term goal in mind. By following in the EU’s footsteps, these decisions will make future trade deals with European countries more feasible.

However, it is unclear if the Carbon Emissions Bill has set targets aggressive enough for Russian companies. On its current trajectory, the Central Bank has estimated that the new EU’s proposed carbon border tax could affect more than 40% of all Russian exports because Russia may still not meet the threshold required by the EU. If Russia is unwilling to take the same steps as some of its important trade partners, then it could risk losing as much as 33.3 billion euro over the next decade if the EU introduces its planned taxes, according to KPMG.

Outlook for 2021

Russian officials seem set on following the goals of the Paris agreement, as Ruslan Edelgeriyev, Special Presidential Representative on Climate issues, outlined Russia’s plan to “develop low-carbon hydrogen and nuclear energy, reduce methane emissions, and implement climate projects to reduce the carbon footprint of production.” Ultimately, while Russia’s actions in the past couple of days reflect this notion and demonstrate its desire to fight climate change, the country appears focused on trying to make progress at its own speed.

If the Russian bill does eventually pass into law, it will be hard to see it as anything but a solid first step. However, unless Russia finds a way to circumnavigate the proposed EU import taxes related to carbon emissions (or should the proposed taxes take a different form or never materialize), then the Russian government may have to act quickly to ramp up their efforts even further to avoid the potentially significant economic impacts. Edelgeriyev publicly stated that Russian officials believe other world powers are turning the fight against climate change into a race, leveraging other countries into an “unreasonable race for numbers.” Going forward, other countries may continue to try to heap pressure onto countries like Russia to follow in their footsteps.

The question then becomes, how will countries such as Russia react to being economically pressured, and how much are they willing to commit to fighting climate change.