Introduction

1The Paris Agreement has marked a new stage in international climate policy. Whereas the old system was based on commitments of developed and developing countries, the new institution builds upon national contributions from each country and is therefore a joint endeavour to mitigate climate change. In April 2016 Russia among other countries signed the Paris Agreement. Russian Minister of Natural Resources and the Environment underlined that implementation of the Paris Agreement would give a positive impetus to modernization of the economy. Indeed, climate policy in Russia started to develop primarily through its participation in international institutions to mitigate climate change, in particular, due to the adoption of international multilateral agreements - United Nations Framework Convention on Climate Change (UNFCCC) and the Kyoto Protocol (KP). Thus, development of Russian climate policy could be subdivided into three main stages that are linked to the Kyoto Protocol (2004), Presidential Decree on greenhouse gas emissions reduction (2013), and Paris Agreement (2015).

Emergence of the climate policy in Russia

2The Kyoto Protocol was the first driver for the inclusion of climate issues into the Russian government’s political agenda. Russia signed the Kyoto Protocol in 1999, but ratified it only in 2004. Thereafter, the agreement entered into force in the following year. Such a lengthy ratification process was due to intense political debates about the advantages and disadvantages that the Kyoto Protocol would bring for the Russian economy.

3The US withdrawal from the Kyoto Protocol in 2001 called into question its future, as the Protocol had to be ratified by 55 countries representing, in the aggregate, 55% of the emissions of all the developed countries in 1990 in order to enter into force. Despite the fact that by 2004 already 120 countries had ratified the protocol, their combined share of emissions did not exceed 44%. Since Russia’s share at that time accounted for 17.4% of global greenhouse gas emissions, Russia suddenly gained a decisive role in the climate negotiations. [1] In the domestic debates, supporters for Russia’s ratification of the Kyoto Protocol stressed the political and economic benefits, such as: EU support for Russian accession to the WTO, additional income from the sale of surplus emission allowances through the clean development mechanism and joint implementation, and reduction of GDP energy intensity thanks to energy efficiency measures. [2]

4Indeed, under the Kyoto Protocol, each country had commitments to reduce or not exceed emissions of greenhouse gases in the 2008-2012 year (the first commitment period of the Kyoto Protocol) as compared to 1990 levels. For Russia, this did not pose any difficulty, since at the time of signing, emissions were significantly lower than in 1990 because of the economic crisis in 1998 that had significantly slowed industrial growth. Thus, Russia possessed the largest amount of emission units [3] with the right to sell them on the international market.

5However, the opponents of ratification pointed to the goal established by the Government to double GDP within the following decade. In this context, ratification of the Protocol could restrict industrial growth and lead to a situation where Russia itself may be forced to buy emission quotas. [4] Potential benefits outweighed possible risks and Russia ratified the Kyoto Protocol, thus making its contribution to the development of international climate policy.

6Russia’s participation in the first commitment period of the Kyoto Protocol (2008-2012) allowed for direct trading of emission quotas as well as financing of emission reduction projects in other countries. However, since the approval of the rules for project implementation took more than three years, Russian companies were able to benefit from joint projects for a year and a half. During this period, Russia was able to sell 238 million tons of CO2-eq. at an average price of USD 10 per ton. [5] Most of the joint implementation projects focused on energy modernization (38 projects) and the capture of associated gas (26 projects). The oil and gas sector received the largest volume of emissions units – in total 119 million units. [6] Since Russia did not make any other commitments in the second period of the Kyoto Protocol (2013 - 2020), further participation of Russian companies in such projects became impossible.

7Following the ratification of the Kyoto Protocol, the problem of climate change received for the first time considerable attention in Russia with the publication of the report by the Russian Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet). Roshydromet is responsible for the assessment of greenhouse gas emissions and prepares the Russian report for the UNFCCC. In its report “Strategic outlook for climate change in the Russian Federation up to 2010-2015 and its impact on various sectors of the Russian economy” Roshydromet stressed that climate change would have more negative effects than positive, such as increasing number of natural hazards (floods, hurricanes), growth in accidents on the pipeline transport, deterioration of monuments and buildings, increased costs for air conditioning and cooling. [7] A positive result of research conducted by Roshydromet was an attempt to raise public awareness of the issues associated with climate change.

8In accordance with the basic provisions of the UNFCCC and the Kyoto Protocol for the period 2007-2009, the Russian government adopted a series of regulations aimed at further implementation of mitigation and adaptation measures to combat climate change. [8] In this respect, the main adopted document was the Climate Doctrine of the Russian Federation until 2020, approved in December 2009. [9] Approval of the Climate Doctrine as well as participation of the Russian President in the UN Climate Conference in Copenhagen in 2009 was a clear signal that the country’s leadership recognized climate change as a real problem. [10]

9The climate doctrine recognized the anthropogenic character of climate change and emphasized the readiness of Russia to limit and reduce greenhouse gas emissions. Among the most important measures, energy efficiency and the transition to low-carbon economy were mentioned. The document underlined that negative effects outweighed positive ones. Certainly, ice melting in the Arctic was positively perceived as it provided longer shipping opportunities, shortened cargo shipping time to Asia, and finally, facilitated the development of the Arctic shelf resources. [11]

10However, the content of the Climate Doctrine was subjected to serious criticism from the expert community. The document contained neither specific targets and indicators nor measures to achieve them. [12] It also did not mention any global parameters characterizing climate change, such as CO2 concentration in the global atmosphere or the growth of average atmospheric temperature. In addition, a complex plan on the implementation of the climate doctrine was adopted only in May 2011 - a year and a half after the Climate Doctrine was itself published. Both documents were very general and did not include input from the business community which plays a central role in reducing greenhouse gas emissions. Furthermore, a GHG emissions reduction target was completely missing from the Doctrine.

Climate Policy Activation

11Presidential Decree “On the reduction of greenhouse gas emissions” adopted in 2013 set national targets for the reduction of greenhouse gas emissions and thus contributed to the first real steps in this direction. The goal established by the decree aimed at decreasing emissions to the level of 75% by 2020, compared to 1990 levels. [13] This target was heavily criticized by the expert community, since Russia‘s emission levels in 2012 amounted to 68.2%. [14] Thus, in reality this established target left the possibility to increase emissions in the case of strong economic growth. [15]

12To achieve established goals, an implementation plan enumerating key measures on emissions reduction was adopted in April 2014. [16] It comprised three main elements: establishment of a GHG monitoring system, assessment of reduction potential and development of governmental measures to regulate emission levels. Following the implementation plan, two governmental decrees were adopted in 2015. The documents delineated further steps and the implementation process itself.

13The first decree [17] considerably improved the previous monitoring system, reporting and verification of GHG emissions in Russia. The existing system comprises aggregated estimates of GHG emissions by gas type and source categories. However, it does not include data on GHG emissions by specific organizations, which is crucial to determine emission reduction targets for each sector. Furthermore, assessments are based mainly on aggregated data and characterized by a two-year reporting lag (for example, the national report from 2016 shows the results for 2014).

14The system of monitoring will be implemented in several stages with gradual involvement of regions, different sectors of the economy, and organizations responsible for GHG emissions. In the second half of 2016 it is planned to create corresponding legal and methodological baselines and begin inventories in several pilot regions. During this time companies with emission levels exceeding 150.000 tons of CO2-eq/year will begin monitoring and reporting their emissions. Starting from 2017, inventories will become mandatory also for companies with emission levels exceeding 50,000 tons of CO2-eq/year including air-, rail-, marine- and river transport. In 2019-2020 the existing system’s efficiency should be evaluated and further improved. Based on the results obtained from the emission inventories for the past five to seven years, target indicators on emission reduction for 2020, 2030 and 2050 will be established for regions and different sectors of the economy. Data collection and registration will start from June 2016 on. [18] Up-to-date and reliable inventories are a first step towards reduction of GHG emissions. Based on collected data, carbon pricing could be introduced as a following step.

15Since energy efficiency measures implemented within the past seven years have not brought any tangible results, the Russian Government has decided to change its approach in dealing with CO2 emissions. In contrast to energy efficiency initiatives involving financial incentives, measures to reduce GHG emissions in Russia will be mostly based on carbon pricing. Russia joined the carbon pricing initiative by the World Bank in 2014. [19] Carbon pricing could be implemented in the form of taxes or cap-and-trade schemes. [20] There are quite some positive examples (in particular the Chinese experience) that proved carbon pricing to be an efficient tool to cut GHG emissions. [21] Moreover, carbon pricing considerably affects companies’ investment decisions, stimulating the use of green technologies and fostering innovation. [22] Thus, up-to-date inventories should be followed by carbon pricing measures that, in turn, are expected to trigger new investment projects. Implementation of such projects might also favour development of energy service companies (ESCOs). Indeed, in many cases, organizations obliged to reduce GHG emissions would prefer to hire an external company possessing appropriate experience to help them reduce emissions and providing corresponding solutions. However, implementation of inventories and measures to cut GHG emissions will also face certain difficulties, particularly, a lack of qualified experts.

16Some Russian companies have already voiced their support for carbon pricing. Oleg Deripaska, head of the Russian aluminium giant RUSAL, declared at the Climate Conference in Paris that carbon pricing starting from USD 15 per ton of CO2 is the only efficient way to reduce emissions. [23] Any form of carbon pricing is favourable for RUSAL as its production is mostly based on hydro power.

17Apart from the above-mentioned legal documents, it is necessary to mention two others that show how the general perception and attitude towards climate issues have evolved in Russia. In 2014 the Russian Federal Service for Hydrometeorology and Environmental Monitoring (Roshydromet) published its second assessment report on climate change and its consequences for the Russian Federation. Based on contemporary modelling, the report concluded that, through the whole 21^st century, the velocity of atmospheric warming in Russia will exceed two-fold the average global. At the same time, a global tendency towards climate change slow down is not observed in Russia. As a consequence, the number of annual dangerous natural phenomena will double from 150-200 to 350-400 in the mid- and long-term. Furthermore, growing energy consumption from air conditioners during summer time will become a more acute problem. [24] Therefore, in his speech at the Economic Forum in Saint Petersburg, the Minister for Natural resources and the Environment estimated potential economic losses from climate change to amount to 1-2% of GDP. [25]

18The Importance of measures to mitigate climate change was also underlined in the new Energy Strategy of the Russian Federation up to 2035. Apart from enumerating measures and targets on GHG reduction, the energy strategy introduced the notion of sustainability and emphasized the importance of integrating sustainable indicators at the business level.

Russian climate policy in the context of the Paris agreement

19The new climate agreement was adopted at the UNFCCC conference in Paris on 12 December 2015. [26] The Kyoto Protocol was comprised of obligations to reduce GHG emissions for developed countries only. It was in line with the status of the global economy in the 1990s. However, presently developing countries are responsible for 60% of global emissions [27] and the goal of keeping global warming at the 2 degree level requires collective action.

20Speaking at the 70th session of the UN General Assembly on 28 September 2015, Russian President Vladimir Putin paid special attention to the problem of global climate change, saying that Russia is planning by 2030 to limit greenhouse gas emissions to 70-75% compared to 1990 levels, thus making its contribution to slowing global climate change. It was further underlined that qualitatively new approaches are necessary to succeed. [28]

21Thus, Russia intends to keep its GHG emissions on the level of 70-75% by 2030 compared to 1990. [29] Directly thereafter, the Russian goal was considerably criticized by foreign and Russian experts, as Russian GHG emissions in 2015 accounted for 71% compared to 1990. [30] Thus, it even leaves certain space for growth in emissions, while any significant exceeding of this target seems to be unrealistic. The expert community was further disappointed by the lack of a clearly identified emissions peak. [31] Indeed, Presidential decree on the reduction of GHG emissions [32] gives no insight into an emission peak value or when this peak will be achieved. However, Russia is not alone. All key CO2 emitters such as the US, EU, Japan and India have not identified national peaks for GHG emissions. [33]

22The Paris Agreement is based on a new “bottom-up” approach, which implies that countries themselves define the obligations and targets to reduce GHG emissions on the national level and develop an adaptation plan. Then, national targets should be submitted to the UNFCCC and will be considered as contributions to global actions to mitigate climate change. [34]

23The new approach of the Paris Agreement is grounded on the principle of supplementary socio-economic benefits. National GHG emission reduction targets are calculated in two steps. In the first stage, national goals for energy efficiency, renewable energy, and others will be recalculated in national indicators on CO2 reduction. In the second stage, additional benefits emerging from the implementation of specific measures are taken into account. [35] For example, an established goal to achieve 4% renewables by 2020 in Russia allows calculating how much CO2 could be saved. In addition, emerging supplementary benefits such as better air quality, jobs creation or lower energy prices will be taken into consideration. Based on such an analysis, countries then build several scenarios comprising a combination of different policies and measures to achieve INDCs within the Paris Agreement. In most all cases, national CO2 emission reduction goals are in line with national plans on modernization, energy efficiency and renewables. [36]

24This principle also underlies the new financing mechanism that allows countries to fund projects on GHG reduction in other countries. The new mechanism aims not at implementation of separate projects but rather wider support of new policies, programs and activities. [37] The new financing mechanism has substituted the mechanisms applied within the Kyoto Protocol such as clean development mechanism (CDM) and joint implementation (JI) and thus almost eliminated inter-state emission trading. Indeed, the purchase of CO2 quotas from another country has not contributed to technological, more innovative nor greener development. Moreover, the international supply of carbon credits is expected to exceed demand as it is presented just by a few countries, such as, Canada, Japan, South Korea, New Zealand, Switzerland and Norway. [38]

25Funding of policy-driven projects on GHG emissions reduction in other countries will definitely increase the role of private investors and the business community. Developed countries confirmed their commitment to mobilize 100 billion USD by 2020 to support mitigation policies in developing countries. [39] However, it was emphasized that such an amount could be achieved only and mostly with the help of private financing. Governments themselves will be able to provide a very limited amount. Russia has made a modest contribution of USD 5 million and decided to follow the Chinese example and establish its own fund in cooperation with the UNDP. The fund has received USD 10 million and aims at supporting GHG reduction projects in other countries. [40] The 100 billion USD scheme should not be confused with the Green Climate Fund which will receive only a designated amount from this scheme. For the Green Climate Fund, countries have raised USD 10.2 billion for the next four years. [41]

26The Paris Agreement supplemented GHG emissions reporting and target-setting requirements with requirements for climate change adaptation policy under the UNFCCC. Although, the National Adaptation Plan Process was established under the Cancun Adaptation Framework [42], the Paris Agreement directly calls upon countries to develop and adopt national adaptation plans and then report on implemented measures. [43]

27In Russia such a plan does not yet exist on the federal level but there is a positive example at the regional level – in Saint Petersburg. In September 2015 the draft of the first regional climate strategy up to 2030 was presented. [44] The core element of this climate strategy is adaptation to climate change. Development of such a strategy at the regional level is explained by statistically observed changes in climatic conditions of Saint Petersburg and negative impacts on the city’s economy and people’s health. The climate strategy of Saint Petersburg underlines a noticeable increase in the average annual air temperature in Saint Petersburg (faster than in neighbouring Helsinki and Tallinn), an increase in rainfall (by 35% over the last decade), decrease in the ice coverage season in the Gulf of Finland, as well as rising level of the Baltic Sea and the Gulf of Finland. [45]

28Apart from national goals and adaptation plans, the Paris Agreement requires countries to produce national, long-term development strategies by 2050 with low levels of CO2 emissions. In other words, countries have to develop national decarbonization plans. If the importance of climate change and CO2 emissions have been already recognized by the government, a long-term vision of what the country should look like in 2030 and 2050 remains to be developed – mostly due to opposing visions between the ministries and business community. After the Paris climate conference (COP-21), the Russian Ministry of Natural Resources and Environment suggested to the President to implement a pilot project in Eastern Siberia with the goal of achieving zero CO2 net emissions in the region by 2050. According to the main ideas of the project, this could be achieved through the combination of expanded renewable energy, introduction of a carbon tax, and implementation of best available technologies. [46] However, the Ministry for Energy spoke out against this proposal, emphasizing that it would be costly for certain sectors of the economy. This collision of views towards decarbonization illustrates different approaches existing among Russian majors. Above all, coal-producing companies do not support the policy objective of full decarbonization. [47]

29In addition, the problem of decision-making on climate issues can be explained by the absence of one federal authority responsible for climate policy. Presently, the Ministry for Foreign Affairs, Ministry of Natural Resources and Environment, Ministry for Economic Development and Roshydromet participate in the development and implementation of climate policy in Russia. Designation of one federal authority could help to coordinate national actions, make decision-making more transparent and show the main vector for climate policy based on priorities of a specific ministry. For example, choosing the Ministry of Natural Resources and Environment, the Russian climate policy could develop in a greener direction. [48]

30A number of Russian and international experts emphasized potential economic benefits and positive side-effects of deep decarbonization, in particular improved energy efficiency and greater deployment of renewable energy. Thus, potential benefits of deep decarbonization, measured in GDP growth, are estimated to range between $13,000 up to $41,000 per person, accompanied by a decrease of CO2 emissions by 87% by 2050. [49] Certainly, this would require enormous investments and the redistribution of profits from the oil and gas sector. Taking into consideration low oil prices and hence increased pressure on Russia’s fiscal balance, it looks more likely that the government will focus its mitigation efforts on other sectors in the short- to mid-term, rather than seriously pursuing decarbonization of the economy as a whole. Energy efficiency measures which have been high on the agenda for the past several years have not brought any tangible results. As a consequence, the Department for Energy Efficiency and Energy Saving within the Russian Federal Ministry for Energy has been recently dismissed. [50] Nevertheless, limited support for renewables and electric vehicles along with the goal to shift 50 per cent of public transport to gas still remain on the agenda of the Russian government. [51]

EU-Russia Relations in the context of Paris Agreement

31The Paris Agreement and forming of the new climate agenda might have a range of substantial impacts on the EU-Russia sectoral cooperation. One of the most discussed issues at the sidelines of the COP 21 meeting in Paris was an emergence of global carbon markets. The head of the World Bank expressed his support, underlining that the signing of the Paris agreement provides an opportunistic moment to put a price on carbon. Although, most of the details and mechanisms still need to be clarified, a wide support among governments and business communities sends a clear signal to investors that the emergence of regional inter-connected carbon markets is very likely after 2020. [52] Emergence of carbon markets in some countries can have considerable impacts on countries that have not established any carbon regulation. Many internal economic regulations can act as non-tariff barriers therefore directly or indirectly restricting exports from other countries. Among them could be mentioned subsidization, carbon labelling, regulations on hazardous substances contained in products, and finally, regulations on production methods. Such measures considerably affect global markets incentivizing trade with green and low-carbon goods. [53] Joint agreements between countries, recognizing carbon pricing measures, could help to avoid export restrictions. Thus, in the future, major consumers such as the EU and the US could import goods mostly from countries which have established carbon markets and have mutual agreements with the EU and the US. [54] In this respect, Russian efforts to introduce carbon pricing are seemingly in line with the international climate agenda. Russian exports are predominantly comprised of energy carriers, such as oil, gas and coal. Comparison of the CO2 emissions by sector shows that the energy sector is responsible for the largest share of CO2 emissions and that it considerably exceeds emissions levels in other EU countries. [55] Thus, in the mid-term Russia should intensify its efforts to decarbonize its energy sector. Although, there are quite some positive examples in this direction, such as taxation of methane emissions, the overall reduction potential is still huge. [56]

32Emergence of carbon markets could have direct implications on the coal industry. Numerous banks and international organizations have already voiced their support for a coal exit and ban of new coal-fired power plants. For example, in 2014-2015 the World Bank [57], the European Investment Bank [58], the European Bank for Reconstruction and Development, the US Export-Import Bank and many others announced limits on investments into coal projects. China, the biggest consumer of coal, has declared its firm intention to decrease the share of coal in its energy-mix. [59] Furthermore, according to the International Energy Agency (IEA), coal demand is slowing down globally and as a consequence, the coal industry will be under serious pressure in the upcoming years. [60] Russia is the main coal supplier of the EU with its share lying far beyond the others: in 2014 Russian share accounted for 29.9%, the US – 20.8%, Columbia – 20.2%. [61] In this context, Russian exports to Europe and Asia will most likely decrease in the mid-term.

33Finally, the Paris Agreement explicitly shows that international investments are gradually redistributed in the direction of green technologies and projects. Firstly, the emergence of carbon markets will favour the exportation/importation of goods with low carbon-intensity. Secondly, implementation of joint projects on GHG reduction in developing countries in the framework of the Paris Agreement will most likely focus on energy efficiency measures and renewable energy projects. These trends are also reconfirmed by signals coming from BRICS countries. In 2014 BRICS countries decided to establish a New Development Bank (NDB) that could become an alternative to the World Bank. The NDB with its main office in Shanghai aims to fund infrastructural projects in founder-countries. First decisions to fund projects with the total amount of USD 811 million were announced on 16 April 2016. All the BRICS countries received funding for some of their projects except for Russia - because the preference was given to green projects, in particular, in the field of renewable energy. [62] Thus, if Russia does not want to be left out of international investment trends, it will have to actively engage itself with the new economy and international climate agenda.

Conclusions

34The Russian climate agenda has been shaped by international climate agreements, which triggered domestic debates and development of corresponding legislation. Although Russian climate policy is emerging at a slower pace than in EU countries, important progress has been achieved in the past sixteen years. Furthermore, there is a growing understanding of potential threats and risks coming from climate change.

35The Presidential Decree of 2013 and the following Paris Agreement have revitalized Russian climate policy, making it more dynamic and detailed with regard to practical steps. In particular, the decision to implement carbon pricing has been taken. In this respect a reliable and up-to-date inventory can be considered a starting point for the reduction of GHG emissions. CO₂ emissions monitoring will gradually become mandatory for large, medium and small companies from June 2016 on. However, the efficiency of these measures remains to be seen.

36The issues of climate change and sustainability have also been included in the draft of the new Energy Strategy of Russia up to 2035. Although it can be considered as a positive step forward, further integration of climate issues into electricity legislation is indispensable. Furthermore, common ground between energy companies and climatologists has to be found for any further tangible progress and long-term vision of the country in 2050.

37Growing world-wide support for the emergence of carbon markets beyond 2020 will most likely lead to the emergence of international and regional regulations that favour less carbon-intensive products. To avoid being forced out of the exports markets, Russian companies will need to considerably decrease CO₂ emissions. Therefore, joint projects to mitigate CO₂ and methane emissions could be high on the agenda in the upcoming years.

38Finally, international investment flows are gradually moving in the direction of green energy and technologies. Therefore, it is important for Russia to engage with these global trends and to consider green policies as an integral part of its energy policy.