Implementation of Carbon-neutral Projects as a Tool for Sustainable
Development
Tamilla Magomadova
1a
, Tamerlan Magomaev
1b
and Elman Akhyadov
2c
1
Grozny State Oil Technical University named after Academician M. D. Millionshchikov, Grozny, Russian Federation
2
Chechen State University, Grozny named after A.A. Kadyrova, Grozny, Russian Federation
Keywords: Global changes, modern globalized workplace, low-carbon development, carbon neutrality, greenhouse gas
emissions, construction, projects.
Abstract: The turn of the Russian economy towards low-carbon development will lead to the fact that in the near future
all major infrastructure programs and projects will be evaluated in terms of their contribution to achieving the
goal of carbon neutrality. Obviously, the closest attention will be paid to projects in the electric power
industry. And if now investors are mainly guided by the ESG factors of companies' activities, then in the
future this will become characteristic of regulators and support institutions. The problem of developing
uniform methods and approaches to calculating the carbon footprint of infrastructure projects is undoubtedly
relevant. In most cases, companies in Russia do not yet disclose non-financial reporting at all, and if they do,
they use foreign corporate methods (GRI, TCFD, and others). In the summer of 2021, the Bank of Russia
issued recommendations on the disclosure of non-financial reporting by issuers, which are built in compliance
with the most common global corporate standards (GRI). Orientation to established practices allows
companies to reduce the time and cost of reporting, if they already report publicly according to foreign
standards. The methods implemented in Russia for calculating the carbon footprint of infrastructure projects
should also be based on the most common corporate standards in the world and strive for international
unification. Another important problem that does not yet have a solution is the verification of calculations and
reporting. And here, to increase confidence in the indicators, digital technologies should come to the rescue.
The Industrial Internet of Things, distributed systems for monitoring the condition of equipment, video
monitoring, and analysis tools without human intervention make it possible not only to generate gigantic
arrays of data on the contribution of this or that equipment to total emissions, but also to obtain objective,
unbiased results of their processing.
1 INTRODUCTION
Large investment projects are designed for decades to
come, therefore, when planning them, a large number
of risks are analyzed - from demand or the level of
planned load to environmental impact assessment
(especially when it comes to infrastructure
development). Different participants in the
implementation of the project - operators, financial
institutions, regulators - may be interested in various
aspects of risks. In view of the ongoing dynamics in
setting carbon neutrality targets, both at the country
and company levels, it is becoming increasingly
a
https://orcid.org/0000-0002-0146-8989
b
https://orcid.org/0000-0001-5817-4191
c
https://orcid.org/0000-0002-0793-1727
important to assess the carbon footprint of a project.
In particular, Russia aims to achieve carbon neutrality
by 2060 (Evangelista, 2020). A lot will depend on
what kind of infrastructure to introduce. Disclosure of
data on the carbon footprint of a project, that is, the
total amount of greenhouse gas (hereinafter referred
to as GHG) emissions associated with its
implementation, is not widespread. It is less common
than company-wide or product-by-product GHG
emissions disclosures, but quite promising. It should
be kept in mind that the carbon footprint of the project
will directly affect the GHG emissions of the
company implementing it. Estimates related to taking
38
Magomadova, T., Magomaev, T. and Akhyadov, E.
Implementation of Carbon-neutral Projects as a Tool for Sustainable Development.
DOI: 10.5220/0011554200003524
In Proceedings of the 1st International Conference on Methods, Models, Technologies for Sustainable Development (MMTGE 2022) - Agroclimatic Projects and Carbon Neutrality, pages
38-43
ISBN: 978-989-758-608-8
Copyright
c
2023 by SCITEPRESS Science and Technology Publications, Lda. Under CC license (CC BY-NC-ND 4.0)
into account GHG emissions during project
implementation are mainly typical for climate
projects aimed at reducing emissions or increasing
absorptive capacity. Along this line, the first
approaches and standards for such reporting were
formed. The harmonization of the rules for the
sustainable development mechanism of the Paris
Agreement can give a new impetus to international
climate projects, and the adoption of by-laws to the
Federal Law on "Restriction of GHG Emissions" - for
Russian ones (Surowiecki, 2021; Souter, 2019).
There is a growing interest in the world in assessing
the GHG emissions of projects when making
investment and financing decisions. Such
requirements for a number of projects are already
being made by most International Financial
Institutions (IFIs) and are very likely to be further
extended to the financial sector, both private and
public. First in Europe, and then in other regions. The
European Central Bank plans to set requirements for
EU banks to report on the carbon footprint of their
portfolio (which may include the need to obtain data
on the emissions of borrowers in certain sections - by
company or by project) (Souter, 2019). The carbon
footprint of infrastructure projects includes GHG
emissions at the stages of construction and
maintenance of facilities, which can be influenced by
the investor, and emissions at the stage of operation,
which the investor often cannot influence (with the
exception of the stage of making an investment
decision on technological solutions in the project).
The assessment of such projects includes a so-called
baseline comparison (eg potential reduction in GHG
emissions from combustion engines to electric
vehicles with the development of appropriate
infrastructure and renewal of the vehicle fleet).
2 RESEARCH METHODS
Rapid digitalization is affecting every aspect of life,
including how we interact, work, shop and receive
services, as well as how value is created and shared.
In this process, data and cross-border data flows
become increasingly important for development.
Reflecting the large disparities in willingness to use
data that exist between and within countries, the
traditional digital connectivity divide is exacerbated
by what might be called the data divide. Countries
with limited capacity to digitize data and business
opportunities and use them for economic and social
development are clearly at a disadvantage. This
Digital Economy Report 2021 highlights the
challenges of managing data and cross-border data
flows in a way that can benefit sustainable
development (Egorova, 2020). It also highlights that
the state of the international debate on how to regulate
cross-border data flows is deadlocked and positions
tend to be polarized. The current legal and regulatory
framework is heterogeneous and reflects the very
different approaches taken in different countries, with
the strong influence of major economic powers. An
international framework is urgently needed to resolve
this situation. While the report does not provide a
"solution", its comprehensive, fact-based analysis
aims to rethink and expand the international policy
debate. The growing problems of interconnection and
interdependence in the global data economy require a
shift from a piecemeal approach to a more holistic,
coordinated global approach. This may require new
and innovative ways of global governance, as old
ways may not be appropriate to respond to the new
context. It may also require the creation of a new
international body that focuses on data governance
with the full participation of developing countries and
all stakeholders. The report reflects UNCTAD's
commitment to informing member states on how to
use and get more value from data and the digital
economy (Meckling, 2020). It will also facilitate
much-needed global dialogue on how to set the rules
for a more inclusive digital outcome. It is my hope
that a holistic approach to managing global data will
ultimately lead to increased sustainable development
and economic benefits from the digital economy for
people and businesses in countries at all levels of
development.
Despite the importance of data in the emerging
digital economy, there is no generally accepted
understanding of the concept of data, which can lead
to confusion and complicate analysis and policy
debate. Data is a special resource with specific
characteristics that distinguish it from goods and
services. They are intangible and non-competitive,
meaning that many people can use the same data at
the same time or over time without draining it. At the
same time, access to data may be restricted by
technical or legal means, resulting in varying degrees
of exclusivity. For example, data collected by major
global platforms is not available for use by others,
giving platform owners a monopoly position to
benefit from the data. Moreover, the aggregated value
can often be greater than the sum of the individual
values, especially when combined with other
additional data. The collected raw data can also have
significant "optional" value, as it can become
valuable if new problems that were not there can be
solved based on this data. The more detailed and
detailed the data, the more purposes it can be used in
Implementation of Carbon-neutral Projects as a Tool for Sustainable Development
39
filtering, aggregating and combining in various ways
to obtain various information. In addition, the data is
multidimensional. From an economic point of view,
they can provide not only private value for those who
collect and control data, but also social value for the
entire economy. And the latter cannot be provided by
markets alone. In addition, the distribution of data
private income gains is highly skewed. As a result,
policy development needs to support the goals of
efficiency and equity. However, non-economic
aspects also need to be taken into account, since data
is closely related to privacy and other human rights,
as well as national security issues, all of which need
to be addressed (Hibbard, 2019).
To understand data and its flows, you need to look
at it from different angles. First, there has always been
data and information associated with commercial
transactions, such as payment details, bank details,
names and shipping addresses, which are mostly
provided voluntarily and rarely create political
problems, while new players in the digital economy
work on those the same rules as normal economics.
Second, raw data collected from individual actions,
products, events, and behaviors has no value in and of
itself, but can create value when aggregated,
processed, and monetized or used for social purposes.
Third, the processing of raw data into digital
information—in the form of statistics, databases,
ideas, information, and so on—results in “data
products” that can be thought of as services in trade
statistics for international sales. There are also
various taxonomies that classify data types according
to various criteria. Important differences relate to
whether the data is collected for commercial or
government purposes; used by companies or the
public sector; are instantaneous or historical;
sensitive or insensitive; or are personal or non-
personal (Vladimirov, 2019; Molchanova, 2019). The
categorization of data is important as it can have
implications for the kind of access each type needs to
be granted, both nationally and internationally, and
how data and its cross-border flows are handled from
a political perspective.
3 RESULTS AND DISCUSSIONS
The carbon footprint is usually defined as the total
amount of GHG emissions associated with the
activities of an individual or organization, or
accumulated as a result of the production of goods
and services, as well as the implementation of
projects. It takes into account both direct and indirect
GHG emissions. According to the GHG Protocol
widely used in the world, there are three scopes of
GHG emissions (Braverman, 2019).
The main interest in disclosing the carbon
footprint of projects at the current stage is shown by
international financial organizations. Leading
organizations, including the World Bank, the
European Investment Bank, the European Bank for
Reconstruction and Development, the Asian
Development Bank, the African Development Bank,
the Inter-American Development Bank, and since
2012 have been collaborating in the format of the
Technical Working Group on Carbon Reporting to
improve and harmonize approaches to accounting for
GHG emissions when evaluating projects
(Korchagina, 2019). In 2015, when the Paris Climate
Agreement was reached, the UNFCCC Secretariat
joined the group and agreed approaches were
presented for projects for renewable energy, energy
efficiency and transport. The European Investment
Bank positions itself as a leader in accounting for
GHG emissions and sees accounting as a key step in
understanding the climate impacts of an
organization's project portfolio. At the same time,
IFIs have not set targets for reducing GHG emissions
for their portfolio of projects. The European
Investment Bank provides a list of industries for
which projects are generally required and not required
to disclose their GHG emissions (in order to receive
funding from this institution). Regulators at the
national and regional levels are only looking at the
possibilities of assessing the carbon footprint of
projects. For example, when conducting
environmental impact assessments or when making
decisions on the financing of large infrastructure
projects (as in the EU). It can be recalled that the
refusal to support coal generation projects also began
to be broadcast by IFIs, and then other financial
institutions and regulators began to join it.
Recommendations of international associations on
conducting a voluntary assessment of the carbon
footprint of infrastructure are being formed. An
example of a regional association is the Climate
Leadership Cities (C40), which, as part of the
Transforming Cities initiative, has published
guidelines for low-carbon and sustainable projects.
An example of an industry association is the
International Union of Railways, which offers
reviews, recommendations and best practices for
estimating GHG emissions at all stages of the
provision of railway services, including construction.
Finally, there are individual climate-responsible
investors and companies that also voluntarily disclose
the GHG emissions associated with their projects
(Braverman, 2019).
MMTGE 2022 - I International Conference "Methods, models, technologies for sustainable development: agroclimatic projects and carbon
neutrality", Kadyrov Chechen State University Chechen Republic, Grozny, st. Sher
40
The carbon footprint of the project, along with the
carbon footprint of the company, as well as the goods
and services it produces, is an integral part of
corporate carbon reporting, which is usually used to
assess and manage climate risks (regulatory,
reputational, etc.) of the company. At the company
level, the carbon footprint of projects is usually
measured by their operators. Estimating a project's
carbon footprint is a relatively new development in
corporate carbon reporting, reflecting the gradual
shift in business from reactive to proactive climate
risk management (Gakaev, 2020). A distinctive
feature of the carbon footprint of projects is its
predominant use for assessing future climate risks.
The motivation for the calculation may be the need to
provide such reporting in order to attract concessional
or cheap financing in international or domestic capital
markets, the need to demonstrate the benefits or the
level of the project's environmental impact to
potential clients or other persons influencing
decisions on the project. Also, such a calculation can
become a demonstration of the company's
responsibility in the field of sustainable development
- as an indicator that GHG emissions are taken into
account at all key levels of business operation. The
main target audience of such reporting are investors,
financial institutions, counterparties of companies
and regulators (Vladimirov, 2019). The company's
management is also interested in the formation of
carbon reporting, since the availability of accurate
data on GHG emissions allows improving the quality
of strategic planning in this area and monitoring its
performance, including in comparison with
competitors (Molchanova, 2019).
In this case, the criteria for the need to report are
financial performance and the number of employees
(that is, the size of the company) or participation in
regulated markets. If the new legislation and
standards are adopted by the end of 2022, then
European companies will apply the new reporting
standards for the first time in 2024, following the
results of 2023. After leaving the EU, the UK also
stated that it intends to make ESG disclosure
mandatory in a phased manner by 2025. At the same
time, there are no unified ESG reporting standards at
the international level, and aggregators of this
information (for example, CDP or Trucost) use
different methods to evaluate and compare issuers, so
it is difficult for regulators, as well as investors, to
assess the real impact of companies on climate
change. In Russia, mandatory ESG reporting, despite
a discussion that has been going on for about 10 years,
has not yet been introduced. Nevertheless, as part of
the implementation of the Federal Law "On the
Limitation of GHG Emissions", new regulations are
being prepared directly on carbon reporting. In
particular, criteria have been prepared for classifying
legal entities and individual entrepreneurs as
regulated organizations, that is, those that must
submit reports on GHG emissions on a mandatory
basis. From the infrastructure sector, only enterprises
with the type of activity "Transportation of oil
through main pipelines", "Transportation of natural
gas" and "Treatment, incineration and disposal of
solid waste" (if this industry is broadly referred to as
infrastructure), emitting more than 150 thousand tons
of oil, should report. tCO2-eq per year until 2024 and
more than 50 thousand tCO2-eq per year from 2024
(Egorova, 2020).
A certain element of indirect regulation of the
carbon footprint of a project, product or service is
stimulating its reduction through "green" or low-
carbon public procurement (Green Public
Procurement). In the EU, for a number of goods
and services, criteria for their classification as "green"
have been established - for the inclusion of
environmental requirements in open tender
documents. However, these are not mandatory
requirements, but recommendations for national
government authorities. There are also such criteria
for infrastructure projects - for the design,
construction and maintenance of roads, as well as
water disposal systems (sewerage and treatment
facilities). At the same time, in the criteria for roads
there is an explicit indicator of the carbon footprint,
and for wastewater systems, the goal of reducing
GHG emissions is regulated through energy
efficiency indicators. Such an integrated (project)
approach as in the EU is rare - more often
requirements are set for individual goods or services,
and it is the carbon footprint that has not yet become
the main element of "green" public procurement. The
United States also defines “green” criteria for
procurement by public authorities, however, in terms
of the implementation of infrastructure projects (road
construction), requirements are set only for individual
materials (products) used, and not for the project as a
whole, while there are no requirements for GHG
emissions, and the main features are associated with
the use of bio-based materials in materials. If an
infrastructure project qualifies for debt or grant
funding, low or reduced GHG requirements often
become a mandatory selection criterion. However, in
most cases, such requirements are set not by
government agencies, but directly by financing
structures - funds, banks and other development
institutions and investors (Meckling, 2020).
Implementation of Carbon-neutral Projects as a Tool for Sustainable Development
41
For example, in the EU, the climate impact of
projects is taken into account when selecting the so-
called Projects of Common Interest (PCI) - these are
key cross-border infrastructure projects linking the
energy systems of the Union countries. By definition,
such projects should contribute to the EU's climate
and energy goals. All projects have certain
(depending on sectoral affiliation) sustainability
requirements, including for some the level of
sustainability must be measured by directly assessing
the reduction of GHG emissions. A project included
in the approved list receives a number of support
measures, including: accelerated approvals and
issuance of permits, improved regulatory conditions,
lower administrative costs due to streamlined
environmental assessment processes. An even more
important benefit of PCI status is the right to apply
for grant funding from the Connecting Europe
Facility (excluding oil projects and commercially
viable projects). In addition to Connecting Europe
Facility funding, PCIs can also apply for support
under other EU programs such as the European
Strategic Investment Fund and the European
Structural and Investment Funds, in particular the
European Regional Development Fund. It is also
possible to obtain concessional financing in the EU
through the main financial and credit institution - the
European Investment Bank.
4 CONCLUSIONS
Approaches to calculating the carbon footprint of an
investment project have not yet been established and
are not fully standardized. They may differ and cover
different stages of the project life cycle depending on
the motivation of the company and the type of project
(climatic or not, which industry it belongs to). In
addition to the purpose of calculating the carbon
footprint of a project, the choice of methodology may
also depend on the type of investment project
(Egorova, 2020; Meckling, 2020):
1. As a result of the project implementation, GHG
emissions will be reduced compared to the
baseline. In this case, the methodology should
answer not only the question of the possible
carbon footprint of the project, but, more
importantly, the contribution of the project to
the reduction of GHG emissions compared to
the baseline. Such calculations, for example,
can be found in projects for the development of
the use of railways (compared to road and air
transport), the transfer of the fleet to electric
vehicles (compared to internal combustion
engines on liquid hydrocarbons), the
construction and operation of nuclear power
plants (especially, compared with thermal). At
the same time, calculations of avoidable GHG
emissions should be accompanied by monetary
metrics to compare different options. For
example, in some methodologies, it is proposed
to provide a calculation of the specific effect
(reduction in kg of CO2-eq. per year for every
dollar invested) (Molchanova, 2019).
2. As a result of the project implementation, GHG
emissions will increase. For such projects, they
usually proceed from the principle of the best
available technologies (how to achieve the best
socio-economic effects from the
implementation of the project with its optimal
cost, if it cannot be implemented using other
technological solutions, but in general to
achieve the smallest contribution to GHG
emissions) (Molchanova, 2019; Egorova,
2020).
Driver of sustainable development, introducing
environmental impact indicators, including targets for
reducing greenhouse gas emissions, into the risk
assessment and project selection system. For the
purposes of developing investment activities and
attracting extrabudgetary funds to sustainable
development projects and mainly projects to reduce
greenhouse gas emissions, the Government of the
Russian Federation in 2021 approved the criteria for
sustainable (including green) development projects in
Russia, as well as the requirements for their
verification system. But a significant part of
infrastructure projects (including transport ones)
remains outside the parameters of the taxonomy. In
doing so, they can make a significant contribution to
achieving the goal of carbon neutrality (Egorova,
2020). The carbon footprint calculation tool could
become one of the elements of the methodology for
evaluating such projects, including as part of
attracting government funding. Climate change is one
of the major challenges facing the world community
today. To counter this challenge, developed countries
have taken a course towards decarbonizing their
economies. The European Union's measures to
introduce cross-border carbon regulation and the
refusal to implement large, including infrastructure,
projects in the field of traditional energy are
controversial. There are risks that decarbonization
instruments will be used to protect domestic markets,
promote own technologies by non-market methods.
At the same time, it is obvious that without
calculating the carbon footprint, it will not be possible
to reduce the anthropogenic impact on the climate in
MMTGE 2022 - I International Conference "Methods, models, technologies for sustainable development: agroclimatic projects and carbon
neutrality", Kadyrov Chechen State University Chechen Republic, Grozny, st. Sher
42
the future. The Russian Federation fully supports and
shares the need to implement measures to combat
climate change. To achieve the goals of
decarbonization and maintain the country's
competitiveness in foreign markets, it is necessary to
develop our own systems for calculating and
capturing greenhouse gas emissions, as well as their
recognition at the international level, including in
Europe, which will avoid negative consequences for
Russian exports and double taxation. At the same
time, of course, the priority should be the principle of
economic expediency in the implementation of the
energy transition. World practice shows that the
financial sector is a driver of sustainable
development, introducing environmental impact
indicators, including targets for reducing greenhouse
gas emissions, into the risk assessment and project
selection system. For the purposes of developing
investment activities and attracting extrabudgetary
funds to sustainable development projects and mainly
projects to reduce greenhouse gas emissions, the
Government of the Russian Federation in 2021
approved the criteria for sustainable (including green)
development projects in Russia, as well as the
requirements for their verification system. But a
significant part of infrastructure projects (including
transport ones) remains outside the parameters of the
taxonomy (Meckling, 2020). In doing so, they can
make a significant contribution to achieving the goal
of carbon neutrality. The toolkit for calculating the
carbon footprint could become one of the elements of
the methodology for evaluating such projects,
including as part of attracting public funding. Climate
change is one of the major challenges facing the
world community today. To counter this challenge,
developed countries have taken a course towards
decarbonizing their economies. The European
Union's measures to introduce cross-border carbon
regulation and the refusal to implement large,
including infrastructure, projects in the field of
traditional energy are controversial. There are risks
that decarbonization instruments will be used to
protect domestic markets, promote own technologies
by non-market methods. At the same time, it is
obvious that without calculating the carbon footprint,
it will not be possible to reduce the anthropogenic
impact on the climate in the future. The Russian
Federation fully supports and shares the need to
implement measures to combat climate change
(Meckling, 2020; Hibbard, 2019; Mauritzen, 2016;
Monasterolo, 2018). To achieve the goals of
decarbonization and maintain the country's
competitiveness in foreign markets, it is necessary to
develop our own systems for calculating and
capturing greenhouse gas emissions, as well as their
recognition at the international level, including in
Europe, which will avoid negative consequences for
Russian exports and double taxation. At the same
time, of course, the priority should be the principle of
economic expediency in the implementation of the
energy transition.
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