ENERGO: Low-carbon energy at 90% by 2035, Russia tells the world

During his speech at the UN General Assembly, Russian Deputy Prime Minister Alexander Novak pledged that by 2035, the share of low-carbon energy sources in Russia would increase to 90% of the total, while the share of carbon-free energy sources (hydro, renewables and nuclear) in the energy balance would increase to 45%, VTB Capital (VTBC) wrote on September 27.

The address of ex-Energy Minister Novak highlights how much of Russia's state ESG policy and green challenges will depend on negotiations with the international community.

As analysed by bne IntelliNews, Russia's greenhouse gas (GHG) reduction strategy is based on two assumptions that are yet to be recognised by the international community: the recognition of hydro and nuclear generation as green, and the disputed strong potential of natural forest absorption.

Novak too continued to argue that Russia's energy balance is already one of the most progressive among the world's largest economies, with about 87% of the electricity generated in Russia coming from carbon-free or low-carbon sources: 46% is natural gas (the ‘cleanest’ of all fossil fuels) and 41% is carbon-free generation.

The estimates provided by Novak suggest that coal-decommissioning in Russia is set to accelerate, VTBC argues. 

"Thus, as we have noted previously, those companies with the largest coal exposure (such as Unipro and OGK2) would be hurt the most by potential CO2 payments and ESG ratings downgrades," the analysts warn. 

Such companies also risk being left cut off from the international capital markets and face a significant amount of stranded assets on their balance sheets.

In a separate report Interfax wrote that that the first carbon platform in Russia is to be created in the Arctic, in the Yamal-Nenetsky autonomous region. 

According to the press release, this will be “the first carbon platform in Russia that can serve to verify the calculation methods for accounting of carbon emissions and the efficiency of initiatives to reduce emissions", as cited by VTBC.

"Carbon platforms (or polygons, as they are called in Russian) are territories with a unique ecosystem, created to implement measures to control climatically active gases with the participation of universities and scientific organisations. Recently, the list of potential carbon polygons was increased to 14 regions, including Sakhalin, Kaliningrad, Bashkortostan, Sverdlovsk, Novosibirsk, Tyumen, Chechnya and Krasnodar," the analysts remind.

VTBC believes that given the recent comments by the government officials, the work on such platform will only accelerate.