Despite the difficult geopolitical situation in Russia, the problem of climate change has not disappeared, and the country’s leadership continues to move according to its plans to achieve carbon neutrality by 2060.

In this regard, the most important climate event in Russia within the first half of 2022 is undoubtedly the decision to conduct a regional experiment to limit greenhouse gas emissions. The first region to take part in the experiment will be the Sakhalin Region.

It should be added that discussions around experimenting to achieve carbon neutrality on Sakhalin have been going on for a long time, but the key point here is the adoption of the Federal Law on conducting a regional experiment to limit greenhouse gases No. 34-FZ of March 6, 2022. Although only one region appears in the law, it provides for other regions of Russia to join the experiment in the future, which is undoubtedly a movement from the “dead point” toward a carbon-free future.

So, starting from September 1, 2022, quotas for greenhouse gas emissions for certain organizations will be introduced in the Sakhalin Region as part of the experiment.^[1] The regulatory system assumes the following:

1. Selection of companies – classification of organizations into the category of regional regulated organizations (RRO).
2. Establishment of quotas – a limit of annual greenhouse gas emissions will be determined for each RRO.
3. Carbon Reporting – PPOs will be required to provide annual emission reports, which must be verified by accredited legal entities.;
4. Quota fulfillment – if the company’s emissions are less than the limit, then after submitting the report, the RRO receives quota fulfillment units to an account in the carbon units register.
5. Exceeding the quota – if an organization has exceeded the limit, then, according to the Draft Decree of the Government of the Russian Federation[2], it pays 1 thousand rubles for each ton of _CO2 emitted over the limit.
6. Carbon offsetting – in order not to pay a fine or reduce its size, a company can reduce its carbon footprint by offsetting carbon units or quota fulfillment units that it previously received independently or acquired.[3]

Regulatory acts have fixed the payment for non–fulfillment of quotas – this factor, in the case of setting strict limits for companies, can contribute to the growth of demand for carbon units issued under Russian legislation.

The objectives of the Sakhalin experiment are to achieve carbon neutrality by the end of 2025 on the territory of this subject of the Russian Federation and the phased introduction of carbon regulation in Russia, including by extending the experiment to other regions of the Russian Federation.[4] The volume of GHG emissions in the region in 2021 amounted to 12.3 million tons of CO2 equivalent, absorption — 11.1 million tons. It is planned that because of the experiment, this difference will be reduced to zero.

This Post was submitted by Climate Scorecard Russia Country Manager Michael Oshchepkov

[1] Federal Law No. 34-FZ dated Match 6, 2022 “On conducting an experiment to Limit greenhouse gas emissions in Certain Subjects of the Russian Federation” – comes into force on September 1, 2022.

[2] Draft Decree of the Government of the Russian Federation “On the rate of payment for exceeding the greenhouse gas emissions quota”.

[3] Draft Resolution of the Government of the Russian Federation “On approval of the Rules for calculating and Charging fees for Exceeding the greenhouse Gas Emissions quota”.

[4] EY – Law Messenger “A law has been signed on conducting an experiment to limit greenhouse gas emissions on Sakhalin.”