On 2 July 2021, the President of the Russian Federation signed the Federal Law "On Limiting Greenhouse Gas Emissions" (the "Law") aimed at regulating the relevant legal relations in connection with Russia's fulfilment of its obligations under the Paris Agreement as well as mitigating negative consequences for Russian exporters resulting from the application of the so-called ecological compensation mechanism developed by the European Union.

The Law:

  • obliges organizations whose business or other activities that emit greenhouse gases with a mass exceeding a certain amount to report their greenhouse gas emissions
  • introduces the term "greenhouse gas emission reduction target", which, as well as the procedure for assessing the achievement of such a target, will be established by the Russian government
  • establishes the right of legal entities and individual entrepreneurs to participate in climate projects aimed at reducing greenhouse gas emissions or increasing their absorption, which, in turn, will require the development of criteria for classifying projects as climate projects, as well as procedures and forms for reporting on the implementation of such projects
  • introduces the term "carbon units", which is essentially a new category of property rights to be traded as part of the implementation of project activities, which is crucial to the Law
  • regulates the verification of the results (report) of the climate project as a verification and confirmation of the information on the reduction (prevention) of greenhouse gas emissions or on the increase of greenhouse gas absorption as a result of the climate project necessary for the release of carbon units into circulation. The form of such a report and the procedure for its submission will be established by the authorized federal executive body
  • eliminates the double regulation of greenhouse gases (methane and sulfur hexafluoride) by establishing that they shall be accounted for in accordance with the provisions of the Law in question. It is stated that for the purposes of implementing the Law there is a need to amend the Code of Administrative Offences of the Russian Federation to establish liability for failure to submit or late submission of reports on greenhouse gas emissions as well as for submission of inaccurate information in reports on greenhouse gas emissions. It will also require the development of a special tax regime that takes into account the particularities of carbon unit taxation.

The final provisions of the Law set out the following reporting procedures for organizations whose activities involve the emission of greenhouse gases:

  • by 1 July of the year following the reporting year, as from 1 January 2023, if the mass of emissions is equivalent to 150 thousand tons of carbon dioxide or more per year
  • by 1 July of the year following the reporting year, as from 1 January 2025, if the mass of emissions is equivalent to 50 thousand tons of carbon dioxide or more per year

The above-mentioned innovations are intended to contribute to the modernization of production facilities, the introduction of new environmental technologies and the improvement of the quality of natural greenhouse gas sinks in the Russian Federation.

The next stage in an ambitious project to reduce greenhouse gas emissions could be the international recognition of carbon units, the creation of a "carbon market", appropriate trading platforms and, by extension, the development of a "green economy".

The law comes into force 180 days after its official publication date.

In case of additional questions, our experienced lawyers will be glad to advise on all issues related to greenhouse gas emissions, as well as on any other issues related to environmental law and industrial safety. Our company has experience in advising on projects related to the use of the Kyoto Protocol mechanisms and the structuring of carbon trading on an international scale. Our integrated offices are represented in most of the countries party to the Paris Climate Agreement and track all the latest trends in carbon trading.

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