Climate project Investments in Russia can be considered in terms of direct investments in the projects themselves and in the carbon units they produce. In this article, we will examine whether there are opportunities for private investments in this sector.
Current Situation
The Russian carbon unit market has been in its formative stage since September 2022. Since the launch of the carbon unit registry, 24 climate projects have been registered. As of the time of writing, about 200,000 carbon units are in circulation. It is planned that as a result of the implementation of these projects alone, about 80 million carbon units will be issued.
A total of 3,755 carbon units have been sold since the registry’s inception. The full list of climate projects and transactions with issued carbon units can be found here.
Transactions involving the sale of carbon units can currently be considered as test cases, mainly conducted by large Russian companies. Formally, carbon units can be purchased by both private individuals and foreign physical and legal entities. So far, no such deals have been concluded.
Demand can be increased by: 1) the introduction of a voluntary product certification system based on carbon footprint indicators, and 2) the restriction of greenhouse gas emissions throughout the Russian Federation. This can be discussed after the approval of the Action Plan for the implementation of the Strategy for the socio-economic development of the Russian Federation with low greenhouse gas emissions until 2050. More information about the draft Plan can be found here.
What can be done now?
Before the approval of the Action Plan for the implementation of the Strategy for the socio-economic development of the Russian Federation with low greenhouse gas emissions until 2050, non-market mechanisms for supporting climate projects can be explored, namely:
- The willingness of private individuals to participate in supporting climate projects. These can be services for offsetting the carbon footprint from travel and purchases.
- The willingness of companies to participate in supporting climate projects as part of corporate social responsibility. This could involve offsetting the carbon footprint of employees, events, products, and services.
What can be planned to attract climate project investments?
- Sale of carbon units to private investors. Depending on demand, mechanisms for acquiring carbon units could be offered to private investors. At the time of writing, the average price ranges from 700 to 1,000 rubles per unit. The minimum price set by the government for exceeding each ton of emission quotas is 1,000 rubles per ton. Supplying the planned carbon units at a discount could attract a certain group of investors.
- Issuance of bonds. Investors might also be interested in bonds, the proceeds of which would be directed toward the implementation of climate projects.
- Creation of companies specializing in the implementation of climate projects and issuing their shares.
Conclusion
At present, there is a procedural opportunity for private investors to acquire carbon units. However, the initiators of climate projects and, in most cases, the sole owners of the issued carbon units have not yet created opportunities for attracting private investments in climate projects.
