Vnesheconombank assessed the prospects of carbon neutrality in Russia

The path to achieving carbon neutrality in the context of sanctions is becoming more difficult and more expensive for Russia. Vnesheconombank Institute of Research and Expertise prepared a report “Achieving Carbon Neutrality in Russia No Later than 2060”.

According to the Strategy of socio-economic development of Russia with low greenhouse gas emissions, approved in late 2021, greenhouse gas emissions in Russia must reduce to 630 million tons by 2050, taking into account the absorption capacity of forests, and by 2060 the task to reach full carbon neutrality is set.

Assessing the prevailing external and internal factors by the end of 2022 in their new report, analysts of the Institute of Research and Expertise of Vnesheconombank (VEB Institute) come to the conclusion that not all sectors of the Russian economy will be able to significantly reduce greenhouse gas emissions. 

At the end of 2022, industrial production in Russia decreased, but in the energy sector, which is associated with about three-quarters of greenhouse gas emissions, no decline was recorded. Although, according to the authors of the VEB report, the effects of sanctions will still reduce the volume of greenhouse gas emissions by slowing down economic growth, but this achievement will be temporary.

While the fuel and energy sector and metallurgy have the prerequisites to reduce emissions with a simultaneous increase in economic indicators, the situation in the chemical industry and the transport sector will result in an increase in greenhouse gas emissions from these industries by one and a half times.

According to experts, the emission reduction targets laid down in the national development strategy can be achieved only with the use of special decarbonization measures: increasing energy efficiency, reducing carbon intensity, developing renewable energy sources and distributed generation, and increasing the use of alternative fuels.

In the absence of special decarbonization measures, the volume of net CO2 emissions by 2050, according to calculations of the VEB Institute, will be 1,255 million tons of CO2 (almost twice as high as the low-carbon targets).

Experts assess the changes that the “new reality” brings to low-carbon development plans. Sanctions and difficulties with the import of equipment complicate the objectives. Particularly negative, according to experts, supply chain disruptions will affect the implementation of decarbonization measures in terms of energy efficiency and the development of renewable energy sources. Moreover, under sanctions, decarbonization will be much more expensive.

For Russia, the sanctions result in lower growth rates of the national economy and a “pivot to the East” in foreign trade relations, experts say. Carbon neutrality with the reorientation to East Asian markets, according to the VEB Institute estimates, will cost nearly 480 trillion rubles by 2060, while two years ago its cost was estimated at 102 trillion rubles.

At the same time, according to analysts, the “pivot to the East” will not reduce the importance of the climate agenda because of China’s plans to introduce cross-border carbon regulation in the coming years.

Experts point out that in the current situation, one cannot abandon technologies that allow increasing energy efficiency and reducing energy consumption, otherwise Russia may become uncompetitive in those sectors in which it has won a certain share of the international market. 

First of all, we are talking about such major sources of greenhouse gas emissions as the fuel and energy complex and metallurgy, the production of which is accompanied by high emissions. These sectors account for a large share of Russian exports and the carbon intensity criterion continues to be “one of the key ones on the world market,” VEB experts add.

According to VEB Institute’s calculations, the reduction of greenhouse gas emissions planned in Russia’s national policy will require about 1% of GDP annually. Experts emphasize the importance of investments in decarbonization. “In terms of the budget of investment programs, it is likely that the costs will be higher than the projections laid out in 2021. To what extent these expenditures will be higher than planned is still difficult to say because it will depend on many macroeconomic factors, as well as the choice of foreign producers.”

The VEB estimates, like all national documents, state that low-carbon figures are calculated taking into account the absorption capacity of forests. However, experts admit that the volume of absorption of the forest sector is already insufficient: “Currently, the absorptive capacity of Russian forests is estimated at only 0.6 billion tons of CO2 equivalent per year,” and “to achieve maximum values of carbon emissions absorption it is necessary to carry out measures aimed at planting forests to replace those lost, fighting forest fires and illegal logging”.

According to experts of the Climate Secretariat of the Russian Socio-Ecological Union, hopes for the key role of emissions absorption by forests are insufficiently justified and short-sighted. There is no verified international methodology to confirm such hopes, and there are arguments by a number of Russian experts that industrial carbon dioxide emissions from fuel combustion and mineral products exceed the absorption capacity of managed forests in Russia, while absorption by other kinds of ecosystems and the cost of supporting these processes have not been studied enough. Therefore, the optimistic (target) scenario must not be abandoned -- however weak it may be. Refusal to take active action to reduce emissions in the long term will cost more than any investments in mitigation now.   The priority measures leading to real reductions in greenhouse gas emissions should be the use of renewable energy and energy efficiency (RSEU position on solving the problem of the climate crisis).