Analysts from the Research and Forecasting Department of the Bank of Russia for the first time examined the impact of climate policy on the Russian economy until 2040, taking into account the current quantitative restrictions on exports. Moderate carbon regulation (reduction of emissions from combustion by 36% from the 2016 level) for Russia's real GDP is recognized as “benign”. However, by 2040, the indicator will fall below the values of the “business as usual” scenario by 4.7%, of which 0.3% will be due to the introduction of a domestic emissions trading system, and 4.4% will be due to deterioration external conditions under the influence of climate policies of other countries and export restrictions. Stimulating the development of green industries in the country could mitigate the consequences of carbon regulation. For now, however, officials and businessmen are talking about reducing the costs of low-carbon development in the Russian Federation.
Natalya Turdyeva from the Department of Research and Forecasting (DIP) of the Central Bank studied the impact of quantitative trade restrictions on the Russian economy within the framework of climate regulation scenarios until 2040. “This is the first work in which the introduction of an emissions trading system in Russia is considered in the context of quantitative export restrictions,” writes the author of the study. In particular, it examines the scenarios (with and without the introduction of domestic carbon regulation) “Baseline (business as usual)”, “TUR (transboundary carbon regulation.— “Kommersant”) moderate" and "TUR hard". The base scenario assumes the implementation of climate obligations under the Paris Agreement. “TUR moderate” and “TUR hard” assume coordinated actions of countries that will help contain the increase in average temperature on the planet in 2100 within 1.6 ° C in the “Less than 2 ° C” scenario and to 1.4 ° C in the scenario “Carbon Neutrality 2050.” In both scenarios, cross-border carbon regulation develops in the EU, directly affecting Russian high-carbon exports.
The assessments made by the author demonstrate that as the foreign economic situation deteriorates and the prices of Russian exports decline, the impact of quantitative restrictions on them fades into the background. In the base scenario, with low export prices, export volumes will be slightly higher or even lower than quantitative restrictions. In the “Hard TUR” scenario, almost all quantitative restrictions restrain exports, energy resources in the domestic market become cheaper, and the energy intensity and carbon intensity of GDP grow.
In such a scenario, the rent from access to export markets, corresponding to the shadow price of export restrictions, could constitute a significant share of the price of exports (about 25% for oil in 2040).
In the hard scenario, where TUR and emission quotas are in effect, the deviation of the real GDP of the Russian Federation from the base scenario in 2040 will be minus 11.3%, of which 7% will be due to unfavorable external economic conditions, and 4.3% will be due to the contribution of domestic climate policy. “Without free access to global green technologies, an ambitious climate policy (reducing CO2-equivalent emissions from combustion by 70% from 2016 levels) within the framework of the presented model may turn out to be prohibitively expensive,” concludes the author of the study.
Moderate carbon regulation (reducing emissions from combustion by 36% from 2016 levels) for Russia’s real GDP is recognized as “more benign.” Under this scenario, in 2040, GDP will fall below the values of the “business as usual” scenario by 4.7%, of which 0.3% will be due to the introduction of a domestic emissions trading system, and 4.4% will be due to the deterioration of the external environment under the impact of other countries' climate policies and export restrictions.
In all the scenarios presented in the work, a reduction in the production of oil and petroleum products and growth in the sectors of consumer demand, mechanical engineering and petrochemicals, which are not limited in access to the world market, are visible. “Without active climate policy, the carbon intensity of GDP increases, increasing the transition and physical risks of combating the consequences of climate change. A necessary measure to reduce risk is the development of green industries, including export-oriented ones,” the DIP concludes.
Let us note that practice is not yet consistent with the conclusions of experts. Yesterday, at the Climate Conference as part of the RSPP Business Week, officials and businessmen agreed on the need to find cheaper methods to achieve carbon neutrality in the Russian Federation by 2060. The head of the Ministry of Economy, Maxim Reshetnikov, confirmed that all new decisions will eliminate additional burden on the economy, and the main policy instruments until 2030 are reducing the carbon intensity of the economy and increasing the absorption capacity of ecosystems. At the same time, the ministry does not rule out the imminent appearance of an internal carbon price. “Judging by the argument, they are going to introduce a fee for CO2 emissions out of fear that otherwise they will have to give discounts to the export price,” says Mikhail Yulkin, an expert at the International Center for Sustainable Energy Development under the auspices of UNESCO. According to him, there really is such a risk, “but it is better to reduce losses by reducing emissions and the carbon footprint, and not by withdrawing funds from the budget.”