On June 9, 2022, GCI 4 BOARDS, General Partner – Sberbank, in collaboration with “Business Solutions and Technologies” and the Financial University under the Government of the Russian Federation, held a discussion “Climate projects: risks and opportunities for business” where the study based on a survey amongst largest Russian companies was presented.
Climate projects can become one of the key tools for decarbonization in Russia, as they have a strong potential to reduce emissions and increase absorption of greenhouse gases, and present monetization opportunities for businesses. However, there are a number of significant obstacles Russian companies need to overcome in order to implement the climate strategy and build the market of carbon credits in Russia. First of all, Russia needs to create incentives for investments and to solve the problems of taxonomy, methodology and regulation of climate projects.
This conclusion follows from the joint study “Climate projects: risks and opportunities for business”, conducted by GCI 4 Boards and Business Solutions and Technologies.
The results of the study were presented to board members and experts during a discussion at the Financial University under the Government of the Russian Federation, the Academic Partner of GCI 4 Boards. The participants discussed the challenges of achieving decarbonization goals in the changed geopolitical paradigm; the future of forest climate projects in Russia; prospects for carbon capture and storage (CCS) projects for oil and gas companies; prospects for international cooperation and the necessary conditions for the recognition of Russian carbon units as offsets for the export carbon footprint by foreign buyers, in particular from the Asia-Pacific region; support measures to stimulate investment in climate projects.
The speakers of the discussion were Irina Gayda, Expert of the Center for Energy Transition and ESG, Skoltech, Member of the Board of Directors, NOVATEK; Nikolay Ivanov, Vice President, Segezha Group; Ivan Kukhnin, Partner, Sustainability Services Group, Business Solutions and Technologies; Evgeny Shvarts, Independent Director, RUSAL, Nornickel.
Irina Gayda, NOVATEK, Skoltech, noted that the study findings resonate well with Skoltech’s climate research programs: “Russian companies continue to implement their climate agenda, and even complex projects such as carbon capture and storage are still in the field of interest of oil and gas companies. The main change concerns investment programs for the implementation of this agenda in connection with the current processes in the world. The issue of carbon units pricing is also acute, which makes or does not make climate projects profitable. Thus, the price of 10-15 dollars per ton is not enough for such complex technological projects that carry risks for people’s lives, such as CO2 storage.”
Ivan Kukhnin, Business Solutions and Technologies, named the main factors for the development of voluntary climate projects in Russia: “First of all, it is necessary to bring carbon regulation to the creation of CO2 emissions trading system at the federal level and introduce a carbon price. On the other hand, I would like to stress the importance of the market for supporting services of climate projects, since companies often face insufficient expertise here, both in technological solutions and in corporate governance. The introduction of a carbon price is one of the tools to reallocate resources in favor of industries that are accompanied by the least amount of greenhouse gas emissions, and thus contribute to the development of low-carbon technologies in various industries.”
Yulia Menshikova, Director, Sustainability Services Group, Business Solutions and Technologies, noted the potential of climate cooperation with the CIS countries in the implementation of climate projects and pointed out the need to create a roadmap for climate projects: “Development of a roadmap for the implementation of climate projects and the issuance of carbon credits could become part of the climate policy of companies. As a tool to motivate and further develop the carbon market in the Russian Federation, it seems extremely useful to create independent platforms for the exchange of experience with the participation of business and the expert community.”
Nikolay Ivanov, Segezha Group, spoke about climate-smart forest management and production, mentioning the great potential of biofuel and wood construction from CLT panels to reduce CO2 emissions: “CLT panels production is based on principles of circular economy where raw material is a forest absorbing CO2, the waste products and the end product after the end of their life cycle are used to produce biofuels, which today account for less than 1% of the country’s fuel balance. For the development of the domestic carbon market in Russia, more climate projects are needed, based on the real needs of companies and consumers, and not carried out for the sake of achieving corporate reporting indicators. At present, the main problem is the lack of opportunities to monetize such projects, which must be addressed in the first place.”
Evgeny Shvarts, Independent Director of RUSAL, Nornickel, presented the findings of a study by the Center for Responsible Environmental Management, the Institute of Geography of the Russian Academy of Sciences, evaluating the potential of forest climate projects. He announced the principles of the state strategy for low-carbon development in Russia and the main problems of reforestation and the implementation of voluntary forest climate projects: “According to McKinsey’s report in 2021 , the global need for decarbonization through natural and climatic solutions by 2050 will amount to 5 billion tons. Russia, having 20% of all the world’s forests, could supply up to 1 billion CO2 to external and domestic markets, but it is necessary to create opportunities for companies to monetize their climate projects and provide a clear mechanism for their registration, which will ensure the ownership of project investors over their results – carbon units, after project certification and validation.”
The full text of the study “Climate Projects: Risks and Opportunities for Business” will be published in June 2022.