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Key Trends In Decarbonization
Edition №3
December 2021
December 2021
V. V. Putin,
President of the Russian Federation
President of the Russian Federation
«Having set the task of building a carbon neutral economy no later than 2060, Russia is also relying on the unique resource of our forest ecosystems, their significant potential for absorbing carbon dioxide and producing oxygen. After all, about 20% of all world forests are located in our country».
Joe Biden,
President of the United States
President of the United States
Our countries are losing trillions of dollars due to the climate change. <...> High energy prices confirm the need to diversify energy resources, double the rate of clean energy capacity and adapt promising new technologies <...> so that we do not continue to rely on one energy source.
K.V. Yudaeva,
First Deputy Chairman of the Central Bank of Russia
First Deputy Chairman of the Central Bank of Russia
Russia's plan to reduce its carbon footprint by 2050 would require an investment of 1 to 4 trillion rubles per year ($13.4 billion to $53.6 billion).
"Why has climate policy intensified this year? I think the stimulus in many ways was the UN conference (COP 26) <...>. And it was a trigger for all countries. Quite a number of countries made additional commitments to accelerate emission reductions in the wake of the climate conference, and they're thinking about different policies to achieve these goals
"Why has climate policy intensified this year? I think the stimulus in many ways was the UN conference (COP 26) <...>. And it was a trigger for all countries. Quite a number of countries made additional commitments to accelerate emission reductions in the wake of the climate conference, and they're thinking about different policies to achieve these goals
Calendar
Russian News
ТАSS: In November, the government approved a long-term strategy for low-carbon development of Russia. The target scenario assumes that by 2050 greenhouse gas emissions will be reduced by 60% of the level of 2019, such figures can be achieved simultaneously with economic growth and the achievement of the goal of carbon neutrality in 2060.
Government of the Russian Federation: In December, the State Duma of the Federal Assembly of the RF has received a draft Federal Law "On conducting an experiment on limiting greenhouse gas emissions in certain constituent entities of the Russian Federation" for its consideration. First of all, the possibility of conducting the experiment in the Sakhalin Oblastis being reviewed.
Vedomosti: Russia will pay a 5% tax on internationally recognized climate
projects. The contribution will be paid to the Adaptation Fund from carbon units that are authorized at the international level by a special body under the UN (supervisory body). A tax on the turnover of carbon units is necessary to help developing countries - these funds will subsequently be invested in projects to reduce emissions in developing countries.
projects. The contribution will be paid to the Adaptation Fund from carbon units that are authorized at the international level by a special body under the UN (supervisory body). A tax on the turnover of carbon units is necessary to help developing countries - these funds will subsequently be invested in projects to reduce emissions in developing countries.
Refinitiv: "The Central Bank of Russia plans to lower capital requirements for banks that lend to environmental projects and raise these requirements for those banks that issue loans to companies that do not disclose information about their environmental impact," said First Deputy Chairman Ksenia Yudaeva.
Refinitiv: Sberbank, Russia's largest lender, plans to increase its portfolio
of environmental, social and governance (ESG) loans by more than 40
percent to 200 billion rubles ($3 billion) this year. .Then multiply it by several times
of environmental, social and governance (ESG) loans by more than 40
percent to 200 billion rubles ($3 billion) this year. .Then multiply it by several times
International News
ТАSS: The first climate projects under the Paris Agreement on climate will start in 2023, their global volume could reach €20 billion per year. This correlates with Russia's actions to create its own system of climate projects. To date, a system of standards has been formed, and the process of accreditation and verification will begin in 2022.
Ministry of Economic Development of the Russian Federation: Russia has joined two multilateral WTO Ministerial Declarations on various aspects of the trade-environment nexus. The relationship between trade and the environment is crucially important as Russia and its major trading partners are rapidly increasing their efforts to combat climate change and achieve carbon neutrality.
RBC: "Gazprom Neft, NLMK and UC Rusal sent their comments and proposals on the CBAM* to the European Commission. Russian business points to the potential incompatibility of the CBAM with World Trade Organization (WTO) norms, as well as to the lack of data from European regulators on actual emissions from the production of products exported from Russia
Refinitiv: In December, the European Commission presented bills
on energy efficiency in buildings, methane emissions and transport emissions, complementing the "Fit for 55" package released in July, which aims to reduce EU greenhouse gas emissions by 55% by 2030 compared to 1990. The vote on the bill is scheduled for the end of February 2022.
on energy efficiency in buildings, methane emissions and transport emissions, complementing the "Fit for 55" package released in July, which aims to reduce EU greenhouse gas emissions by 55% by 2030 compared to 1990. The vote on the bill is scheduled for the end of February 2022.
Refinitiv: In December, the European Commission proposed rules that would oblige oil and gas operators to report methane emissions, up to the source of the emissions, at their facilities in the European Union. However, foreign companies, which supply most of Europe's fossil fuels, would be largely unaffected.
* CBAM – Carbon Border Adjustment Mechanism
Emissions Trading Systems
The average price of CO₂ quotas in the European trading system will be 70 € / t CO₂ in 2022 (+33% compared to the average price in 2021)
Price forecast:
Tightening climate policy in the eu(european climate program fit for 55, commitments in the framework of cop 26)
Demand increase for coal for power generation due to natural gas shortages and limited lng supply (18% increase compared to 2020)
Аn increase in the position of investment funds by 24.7% (from 47 to 58.6 million tons of co₂)
Demand increase for coal for power generation due to natural gas shortages and limited lng supply (18% increase compared to 2020)
Аn increase in the position of investment funds by 24.7% (from 47 to 58.6 million tons of co₂)
The price change is due to:
Average price
for 2021
for 2021
€/t CO₂
53,1
since the beginning of 2021, the price of the quota has increased by 123%
European Carbon Market
Free allocation
of quotas
of quotas
43%
Volume of primary quota auctions in 2021
mln t CO₂
946
The average price of CO₂ quotas in the Chinese trading system will be 8 € / t CO₂ in 2022 (+30% compared to the average price in 2021)
Price forecast:
A limited number of participants. At this stage, the system includes only the electric power industry - 2,225 large energy companies in China, whose carbon dioxide emissions are more than 26 thousand tons per year.
Unbalanced level of liquidity (high trading volume in some months leads to a significant increase in prices, while in other months with low trading volume the price decreases due to lack of demand)
Unbalanced level of liquidity (high trading volume in some months leads to a significant increase in prices, while in other months with low trading volume the price decreases due to lack of demand)
The price change is due to:
Since the launch of china's quota trading system in mid-july, the price of quotas has increased by 2%
Chinese Carbon Market
Free allocation
of quotas
of quotas
100%
Volume of primary quota auctions in 2021
bln t CO₂
4,4
Average price
for 2021
for 2021
€/t CO₂
6,2
Outcomes Of The 26th United Nations Climate Change Conference (Cop 26)
* UNFCCC - United Nations Framework Convention on Climate Change (adopted in 1992)
SOURCE: BLOOMBERGNEF
SOURCE: BLOOMBERGNEF
89%
1,8⁰С
Share of global emissions regulated according to national and carbon neutral targets (up from 34% in January 2020)
The level at which global warming can be sustained while meeting the updated net zero targets. 0.3⁰C above Paris Agreement target of 1.5⁰C
Countries have agreed on the need to set more ambitious national emission reduction targets by 2030 to meet the Paris Agreement's 1.5⁰C goal.
mln t co₂
91%
The share of the world's forests with 141 countries committed to ending global deforestation by 2030
Countries signed a declaration
of commitment to stop global deforestation
by 2030
of commitment to stop global deforestation
by 2030
The agreement on commitments to stop deforestation by 2030 has
been criticized for not being binding.
been criticized for not being binding.
141
10%
Share of global coal generation capacity attributable to countries that have supported the coal-to-clean energy transition initiative
Countries supported the initiative
to switch from coal to "clean" energy
to switch from coal to "clean" energy
The coal phase down agreement has been criticized for being softened at the last minute from the original version, which called for coal phase-out.
42
42%
Share of global methane emissions attributable to countries that have supported the initiative to reduce methane emissions
Countries supported the initiative to reduce methane emissions
One of the most successful initiatives at COP26 is the global agreement to reduce methane emissions by 2030.
100
300
68
CDM CERs of the Kyoto Protocol are translated into ITMOs
Countries with pilot projects under Article 6. 28 countries plan to convert CERs to ITMOs
Countries have agreed on rules for international trade in voluntary carbon units in accordance with Article 6 of the Paris Agreement.
$100
bln per year
0,2%
Share of total GDP of countries providing climate finance
The goal for climate finance directed to developing countries from developed countries. At COP26, countries pledged to meet this target by 2025
Countries pledged to meet the $ 100 billion target of funding for developing countries from developed countries by 2025.
The Agreement To Set More Ambitious Nationally Determined Contributions (Ndcs)
Countries agreed to set more ambitious NDCs by 2030 to meet
the Paris Agreement target of 1,50С.
the Paris Agreement target of 1,50С.
1,8⁰С
The level at which global warming can be sustained while meeting the updated net zero targets. 0.30 C above Paris Agreement target of 1.50 C
The Status Of Carbon Neutrality Claims
SOURCE: “COP26 DELIVERS GOLD AMIDTHE BLAH BLAH BLAH” BLOOMBERGNEF,“COP25:IMPERFECTCOMPROMISE OR A BALANCED CLIMATE DEAL”
AND “AWIN FOR CARBON MARKETS” REFINITIV, “CARBONMARKETS’ COP26 BREAKTHROUGH” WOOD MACKENZIE, BP STATISTICALREVIEW 2021
AND “AWIN FOR CARBON MARKETS” REFINITIV, “CARBONMARKETS’ COP26 BREAKTHROUGH” WOOD MACKENZIE, BP STATISTICALREVIEW 2021
Global Ghg Emissions
*BAU-Business-as-usual scenario
*BAU-Business-as-usual scenario
Share of global emissions regulated according to national and carbon neutral targets (up from 34% in January 2020)
89%
The International Trade
Agreement On Carbon Credits
Agreement On Carbon Credits
At COP 26, Articles 6.2 and 6.4 of the Paris Agreement were finally approved. It's about the mechanism for trade in carbon credits (ITMOs*) between countries The new mechanism replaced the Clean Development Mechanism (CDM) under the Kyoto Protocol, whose carbon credits (CERs**) can be converted into ITMOs.
Criteria For Participation In Article 6 Of The Paris Agreement
- Provided the latest report on the national greenhouse gas emissions inventory
- Participation in the mechanism contributes to NDC
- Takes part in the Paris Agreement
- Set NDC
- Designated authorized national authorities
- Has national mechanisms for implementing relevant activities and accounting ITMOs
Avoiding double counting (ITMOs should only be counted for national purposes of one country)
5% of carbon credits should go to the UN Adaptation Fund
to finance projects in the most vulnerable countries
2% of credits must be cancelled to ensure emission reductions
5% of carbon credits should go to the UN Adaptation Fund
to finance projects in the most vulnerable countries
2% of credits must be cancelled to ensure emission reductions
Using for NDCs (Japan, New Zealand, South Korea, Switzerland have already confirmed)
To meet the requirements of the Carbon Offsetting and Reduction Scheme for International Aviation (over 100 countries worldwide)
To comply with investor requirements for ESG compliance (large multinational corporations)
To meet the requirements of the Carbon Offsetting and Reduction Scheme for International Aviation (over 100 countries worldwide)
To comply with investor requirements for ESG compliance (large multinational corporations)
Conditions For The Recognization
Of Carbon Credits As Itmos
Of Carbon Credits As Itmos
*ITMOs(Internationally Transferred Mitigation Outcomes) – carbon credits issued under the new mechanism of international trade in carbon credits (Article 6 of the Paris Agreement)
**CERs (Certified Emission Reductions) – carbon credits issued under Clean Development Mechanism projects in accordance with the rules of the Kyoto Protocol
SOURCE:“COP26 DELIVERS GOLD AMID THE BLAH BLAH BLAH” BLOOMBERGNEF, “COP25:IMPERFECTCOMPROMISE OR A BALANCED CLIMATE DEAL” AND “A WIN FOR CARBON MARKETS” REFINITIV, “CARBON MARKETS’ COP 26 BREAKTHROUGH” WOOD MACKENZIE
**CERs (Certified Emission Reductions) – carbon credits issued under Clean Development Mechanism projects in accordance with the rules of the Kyoto Protocol
SOURCE:“COP26 DELIVERS GOLD AMID THE BLAH BLAH BLAH” BLOOMBERGNEF, “COP25:IMPERFECTCOMPROMISE OR A BALANCED CLIMATE DEAL” AND “A WIN FOR CARBON MARKETS” REFINITIV, “CARBON MARKETS’ COP 26 BREAKTHROUGH” WOOD MACKENZIE
Itmos
Applicability
Applicability
Countries Implementing Projects Within The Framework Of
*** TSVCM- Taskforce on Scaling Voluntary Carbon Markets
Russia has joined the ITMOs carbon trading mechanism and plans to implement the first climate projects within the framework of this mechanism. The main focus for Russia will be the implementation of forest-based climate projects, which were added to Article 6 of the Paris Agreement at COP 26.
However, due to the fact Russia did not participate in the CDM under the Kyoto Protocol, Russia has lost its competitive advantage over countries such as China and India, that will be able to use CERs as ITMOs.
However, due to the fact Russia did not participate in the CDM under the Kyoto Protocol, Russia has lost its competitive advantage over countries such as China and India, that will be able to use CERs as ITMOs.
The Internationally Transferred Mitigation Outcomes (Itmos)
The price of CERs
CDM in 2020
CDM in 2020
CDM CERs of the Kyoto Protocol, which are transferred into ITMOs
TONNES CO₂
M TONNES CO₂
€0,5/
300
The Agreement On Climate Financing For Developing Countries
The goal of climate financing for developing countries, set back in 2009 at the UN Climate Summit in Copenhagen, has yet to be met. At the COP 26 countries pledged to meet this target by 2025.
Climate Financing Provided Depending On Funding Sources
SOURCE:“CLIMATE FINANCE PROVIDED AND MOBILISED BY DEVELOPED COUNTRIES AND “ FORWARD-LOOKING SCENARIOS OF CLIMATE FINANCE PROVIDED AND MOBILISED BE DEVELOPED COUNTRIES IN 2021-2025 “ OECD
(2016-2019) And Oecd Forecast To 2025
bln/year
0,2 %
$100
Share of GDP of countries providing climate finance
A goal for climate finance directed to developing countries from developed countries.
Russia does not participate in climate finance, as it is included in the category of emerging economies of Annex I of the Paris Agreement. Developed countries and developing countries participate in the climate financing scheme.
The Declaration On Forests And Land Use
The adopted forest declaration is primarily aimed at preventing deforestation, especially in tropical forests. Russia is affected by the parts of the declaration that deal with forest conservation and sustainable forest management.
Signatory Countries On Forest
*CBAM – Carbon Boarder Adjustment Mechanism
And Land Use Agreement
At COP 26, the Russian delegation raised the issue of emissions offsetting in CBAM* primarily as part of the Russia-EU dialogue.
At this point an agreement has not been reached, but Russia will continue its efforts
in this direction.
At this point an agreement has not been reached, but Russia will continue its efforts
in this direction.
91%
141
Signatory countries' share of the world's forests
Countries signed a declaration of commitment to stop global deforestation by 2030
Net Change In Forests By Region
NCA* - Northern and Central America
SOURCE :“COP 26 DELIVERS GOLD AMID THE BLAH BLAH BLAH” BLOOMBERGNEF, FOOD AND AGRICULTURAL ORGANIZATION OF THE UN
SOURCE :“COP 26 DELIVERS GOLD AMID THE BLAH BLAH BLAH” BLOOMBERGNEF, FOOD AND AGRICULTURAL ORGANIZATION OF THE UN
(1990-2020), Million Ha/Year
The Agreement To Phase Down The Use Of Coal
Participants at the Glasgow climate summit agreed to phase down the use of coal in order to reduce greenhouse gas emissions into the atmosphere.
Global Coal Generation Capacity,%
The original wording, as spelled out in the draft COP 26. Initially, the countries declared the abandonment of the use of coal
Accepted wording.
China and India reported disagreement with the draft and insisted on a rewording. This is due to the large number of coal-fired power plants in these countries and the dependence on coal imports
China and India reported disagreement with the draft and insisted on a rewording. This is due to the large number of coal-fired power plants in these countries and the dependence on coal imports
42
10%
Countries supported the initiative to switch from coal to "clean" energy
Share of global coal generation capacity attributable to countries that have supported the coal-to-clean energy transition initiative
Import Of Coal, %
Russia did not support the initiative, since about 16% of the power plants in Russia are coal-fired. In addition, the export of coal (for instance, to India) is an important source of income for Russia.
Introduction Of New
Coal Stations In 2000-2020 (Gw)
Currently there are 482 GW of coal-fired power plants to be introduced in the world, with more than half of them in China (260 GW).
2 GW of new coal-fired power plants will be built in Russia. In 2021 more than 13 GW of expected capacity was cancelled in Russia. The rest of the projects are struggling to get financing.
2 GW of new coal-fired power plants will be built in Russia. In 2021 more than 13 GW of expected capacity was cancelled in Russia. The rest of the projects are struggling to get financing.
The Agreement To Reduce Methane Emissions
Participants at Glasgow climate summit agreed to reduce methane emissions by 30% by 2030. However, major methane emitters, including Russia, did not support the initiative.
Signatories To The Methane
Reduction Agreement
Total methane emissions of the signatories account for 1.3 billion tons. In order to reduce global emissions by 30% they will have to reduce their emissions by 0.95 billion tons or at least 70% of their total methane emissions by 2030.
SOURCE:GLOBALMETHANE INITIATIVE, “COP 26 DELIVERS GOLD AMID THE BLAH BLAH BLAH” BLOOMBERGNEF
30%
100
Under this initiative methane emissions are to be reduced by 2030
Countries supported the methane reduction initiative.
Methane Emitting Countries,%
Russia did not sign the agreement, as this would mean the beginning of a prompt decarbonization of the oil and gas industry (the main source of methane emissions in Russia).
*CBAM – Carbon Border Adjustment Mechanism
млрд/год
$13
42%
Required investments for methane abatement in the oil and gas sector
Share of global methane emissions of countries that have supported the initiative
The Analysis
Of Russia’s Ndc
Of Russia’s Ndc
Russia’s NDC of 30% reduction in greenhouse gas emissions by 2030 compared to 1990 levels will be achieved through the absorption capacity of the forests. Without absorption capacity of the forests emissions will grow at 19% by 2030 compared to 2010 levels.
Current Ndc
ИСТОЧНИК: “COP 26 DELIVERS GOLD AMID THE BLAH BLAH BLAH” BLOOMBERGNEF
Changes In Greenhouse Gases Emissions Of Countries Included In
Appedix I Of The Paris Agreement By 2030 Compared To 2010 Levels
In Accordence With Their Ndc
A New, More Ambitious Ndc To Limit Emissions
At COP 26, Russia committed to a new and more ambitious NDC to limit emissions by the end of 2022.
In October 2021, the government approved Russia's Low-Carbon Development Strategy until 2050, which aims to cut greenhouse gas emissions by 60% from 2019 levels, equivalent to a 24% reduction by 2030 compared to 2010.
In October 2021, the government approved Russia's Low-Carbon Development Strategy until 2050, which aims to cut greenhouse gas emissions by 60% from 2019 levels, equivalent to a 24% reduction by 2030 compared to 2010.
*BAU-Business-as-usual scenario
Key Trends In
Decarbonization
Decarbonization
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