The Ministry of Economy wants to simplify trade in small quantities of carbon units

The Ministry of Economy intends to expand the “customer base” of the register of carbon units at the expense of small buyers, for whom the need to register in it may be an additional burden. To do this, the Ministry proposes to record in the register the sale of carbon units to such buyers according to data from sales agreements with their issuers – this will allow buyers to “offset” the purchased units to reduce their carbon footprint and will provide a database with information about such transactions, while maintaining transparency of the movement of units on the market — which is necessary, among other things, for international trade in them through Qatar or the BRICS countries.

The Ministry of Economy published on regulation.gov.ru draft amendments to Government Resolution No. 790 of April 30, 2022, which establishes the rules for maintaining a register of carbon units in the Russian Federation. The document proposes to amend the mechanism for offsetting carbon units to reduce the carbon footprint in accordance with the requirements of No. 296-FZ “On limiting greenhouse gas emissions” dated July 2, 2021. Owners of existing carbon unit accounts in the registry may be allowed to offset them “in order to reduce the carbon footprint of another person, including without the mandatory registration of such a person in the registry,” and there are also plans to publish information about offset units on the registry operator’s website and enter it into registry “information about all transactions related to carbon offsets for the purpose of reducing the carbon footprint, including the person whose carbon footprint is reduced by such offset.”

In the explanatory note, the ministry directly calls the goal of the innovation “increasing the attractiveness of carbon units by creating conditions for simplified access for a wide range of people to the carbon market.” In the current version of the rules for maintaining the register, in order to offset purchased carbon units, their buyer must issue an order certified by UKEP to write them off from his account in the register for crediting to the withdrawal account – which in turn requires opening an account in the register. The Ministry of Economy proposes to abandon this in order to “reduce transaction costs” for those in whose favor the offset will be made, including SMEs and individual entrepreneurs interested in purchasing small volumes of carbon units.

The procedure for such transactions is proposed to be made voluntary – however, companies “for which it is important to maintain information about the offset of their carbon footprint in the register will be able to offset carbon units by first opening an account in the register.” It is also proposed to create a section on the registry website to post information about operations for offsetting carbon units, indicating information about persons whose carbon footprint is being reduced. The Ministry refers to the fact that this practice is international, citing as an example the operations of the American Shell and the Australian Pangolin in the interests of their counterparties in the Verified Carbon Standard registry.

Work on the convenience and transparency of the register (on how the Ministry of Economy fought against “double” sales of the same carbon units to different buyers, see “Kommersant” dated October 25, 2023) is obviously a foundation for the future. Let us remind you that for now the register operates only as part of the experiment on Sakhalin (see “Kommersant” on July 8, 2021), which involves emission quotas with the goal of achieving carbon neutrality on the island by 2025. “For sale” units are formed by exceeding quota requirements and implementing climate projects by local issuers and are recorded in the register. However, after the “testing” of market mechanisms, they will expand to other constituent entities of the Russian Federation. At the UN climate conference in December 2023, Deputy Head of the Ministry of Economy Ilya Torosov said that eight climate projects have already been registered in the Russian register, 87.5 thousand have been issued and 3.7 thousand carbon units have been sold on the market, another 52 million carbon units alone are planned to be put into circulation – at the same time, the government intends to exempt transactions with them from VAT; a bill on this has already been submitted to the State Duma. Moreover, as a result of COP-28, the Russian Federation has hopes of introducing its emission reduction units to the international market – through the national registry of Qatar or the BRICS countries, as RDIF proposed in early January.

Oleg Sapozhkov