The Ministry of Economy unifies calculations, control and regulation of greenhouse emissions
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In preparation for the introduction of quantitative restrictions on greenhouse gas (GHG) emissions in the Russian Federation, the Ministry of Economy intends to change the procedure for determining the companies to which they will apply, eliminating contradictory norms that allowed enterprises to evade reporting and fines on formal grounds and required administrative liability from those who in reality do not exceed regulatory thresholds. The changes will affect 22 thousand companies, placing them under the control of Rosprirodnadzor—and, according to experts, will make climate regulation in the Russian Federation uniform.
The Ministry of Economy published on regulation.gov.ru a draft government resolution tightening the rules for assessing greenhouse gas emissions by companies. The very requirement to provide mandatory reporting for enterprises that emit more than 150 thousand tons of CO2 equivalent per year into the atmosphere was introduced at the beginning of 2023; the GHG emissions register received 1,023 reports last year. From 2025, the obligation to transfer data to the register will also arise for companies with emissions of more than 50 thousand tons of CO2 equivalent per year – according to the Ministry of Economy, taking into account the new rules, their number will increase to 21.8 thousand. Let us recall that in the summer of 2023, amendments to Code of Administrative Offenses on fines for failure to provide such reports. For officials they range from 10 thousand to 50 thousand rubles, for individual entrepreneurs – from 50 thousand to 150 thousand rubles, for legal entities – from 150 thousand to 500 thousand rubles.
The Ministry of Economy’s project maintains the thresholds at which companies must report on GHG emissions, but changes the approach to classifying such companies as regulated (those who must provide reporting). The explanatory note to the document explains this with the intention to eliminate conflicting standards, calculations according to which either created an obligation for a business to report emissions when the actual volume is below the threshold, or made it possible to evade such an obligation when emissions are above the threshold on legal grounds.
Let us explain, now the methodology for determining the calculation of the mass of GHG emissions, approved by Order of the Ministry of Natural Resources No. 371 of May 27, 2022 (including according to instrumental control data), and the criteria for classifying companies as regulated (obliged to report), introduced by Government Decree No. 355 of 14 March 2022 – with a calculation method for determining the mass of GHG emissions depending on production processes (such as the combustion of natural gas at a thermal power plant).
As the Ministry of Economy notes, the results of calculations for them may differ in the range from one fifth to two and a half times. The calculations were made based on the results of the 2023 reporting campaign, and, as the department states, they “do not allow us to determine the exact number of regulated organizations that have obligations to report on greenhouse gas emissions,” since they are carried out by “economic entities independently,” “checking the correctness and reliability calculations “are not provided”, and alternative data sources are either incomplete or non-existent.
The Ministry of Economy proposes to retain, for the purposes of classifying companies as regulated in terms of GHG emissions, only the methodology for calculating their volume from the order of the Ministry of Natural Resources and to take into account the data on emissions of such objects of I-III categories of NVOS. “As a result, progress in achieving sustainable development goals will be assessed more accurately and with better quality,” says First Deputy General Director of the Center for Social Development Boris Kopeikin. “If the resolution is adopted in the proposed version, the number of companies required to report will be insignificant, but will be reduced. Moreover, for those who meet all three conditions simultaneously (in terms of the volume of emissions, ownership of NVOS facilities and participation in the list of regulated activities.— “Kommersant”), you will have to do additional work: conduct an inventory of sources, count emissions and submit reports,” notes Nikolai Krivozertsev, head of the Business Russia expert center for ESG transformation, CEO of EcoStandard Group of Companies.
According to the expert of the International Center for Sustainable Energy Development under the auspices of UNESCO, General Director of CarbonLab LLC Mikhail Yulkin, “the resolution is not just intended to solve the problems of calculations – it actually establishes the accountability of emitters of greenhouse gas emissions to Rosprirodnazor (which controls emissions of NVOS facilities, which was not the case before )”. “Now a new conflict arises: should we count GHG emissions only from environmentally friendly wastewater treatment facilities or should we count emissions from all facilities and processes in accordance with the methodology of the Ministry of Natural Resources,” notes the expert.
Vladimir Lukin from Kept, in turn, says that the resolution “will make it necessary to introduce a system for accounting for greenhouse gas emissions at small-scale enterprises. Essentially, this is a signal for medium-sized businesses to actively engage in the climate agenda.” According to him, the innovation has three important aspects: methodologically, working with such enterprises is more complex than organizing GHG emissions accounting at large enterprises that have automated production control systems, while the overall potential for reducing emissions is higher, as is sensitivity to regulatory measures , including market ones, which is why the resolution will contribute to the emergence of new climate projects. Irina Demina from ENV-Consulting draws attention to the fact that the criteria for classification as regulated companies are planned to be synchronized with government decree No. 449 of March 24, 2022, which sets out the rules for assessing the achievement of GHG emission reduction targets, both in content and by date: Both the targets and the new criteria are proposed to come into effect from 1 September 2024.
“Carbon reporting makes it possible to assess how Russia is moving towards carbon neutrality by 2060, outlined by the president, and decarbonization of existing industries. The data that we will receive from reporting companies will help us build the most effective system for stimulating businesses to decarbonize and measures to adapt not only industries, but also the country as a whole to climate change,” concludes Deputy Head of the Ministry of Economy Ilya Torosov.
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