The Ministry of Economy intends to prevent the situation of double counting of carbon units

The Ministry of Economy intends to prevent the situation of double accounting of carbon units, for which it proposes to make a number of changes to the rules for maintaining their register. Among other things, it should contain information about existing encumbrances of emission reduction and quota fulfillment units, as well as data on their offset. The Ministry of Economy notes that the innovations are aimed at protecting market participants and are preventive in nature. Double accounting can significantly discredit the national carbon market system, experts say.

The Ministry of Economy published on regulation.gov.ru a draft government decree on amending the rules for creating and maintaining a register of carbon units, operations in it and the form of a standard agreement with the register operator. Let us remind you that the registry is a key part of the infrastructure of the emission reduction market; it has been operational in the Russian Federation since September 1, 2022, and the operator is JSC Kontur. Market participants can register climate projects in it, issue carbon units into circulation and conduct transactions with them (we are talking about the opportunity to sell the reductions achieved as a result of climate projects to companies that cannot fit into emission quotas). Also, the register should take into account units of quota fulfillment during the implementation of the Sakhalin experiment to limit greenhouse gas emissions (see “Kommersant” dated July 8, 2021)

To eliminate the possibility of double accounting and “double sales” of carbon units (which will inevitably lead to disputes between business entities), it is proposed to oblige issuers to provide to the register data on the encumbrances of issued units and quota fulfillment units, as well as information about their offset. The project also provides for information interaction between the operator and notaries and the ability to carry out transactions without an order from the account owner, if there is a judicial act, an executive document, an act of other bodies and officials or a certificate of inheritance, this should also eliminate obstacles to their circulation. Another norm is registration in the system of assurances from issuers that emission reductions during the implementation of a climate project will not be alienated or encumbered outside the register.

As Deputy Head of the Ministry of Economy Ilya Torosov explained to Kommersant, the novel is intended to harmonize legislation with international experience, including the Paris Agreement. “Its main goal is to eliminate double counting of carbon units,” he said, clarifying that we are talking about protecting the interests of participants in a growing market. Currently, seven climate projects are registered in the register, almost 84.5 thousand carbon units have been issued, about 2.47 million carbon units are subject to release. At the same time, the explanatory note to the project refers to the results of law enforcement practice, but the ministry insists on the “preventive” nature of the document and claims that they have not encountered any cases of “doubling”.

At the same time, applicants for climate projects can indeed use various options for monetizing their results, including applying to international registries or selling project results on the free market, says Vladimir Lukin, partner in the operational risk and sustainable development group at Kept (formerly part of KPMG). “Double accounting should be monitored by independent verifiers, but this does not eliminate the risk, and this can significantly discredit the national carbon market system,” the expert notes.

Let us note that until 2022, in matters of carbon regulation, the Russian Federation focused more on Western markets (see Kommersant, September 8, 2022), and in practice, decarbonization was accompanied by cases of deception. Thus, in 2015, researchers from the Stockholm Environment Institute criticized joint implementation projects under the Kyoto Protocol in Russia and Ukraine for the unreliable reporting of most of them. In particular, in a number of cases in the Russian Federation, greenhouse gas emissions were first specifically increased in order to sell large volumes of reductions on the international market.

Venera Petrova