Current Issues of Transboundary Carbon Regulation
Ruslan Batashev
and Amir Bisultanov
Kadyrov Chechen State University, Grozny, Russia
Keywords: Climate policy, cross-border carbon tax, greenhouse gas emissions, carbon leakage, European Union, Russian
Federation, consequences, adaptation possibilities.
Abstract: The transformational changes in the economic system that are currently taking place around the world are
accompanied by a paradigm of the speed of consumption associated with the desire for an increase in the
dynamics of consumption of carbon intensity bringing together in the distant climate ambitions of various
countries the scope and mechanisms for the development of transboundary carbon regulation. This approach
is currently being adopted by the countries of the European Union. In this regard, there is a persecution of
mechanisms for cross-border regulation of carbon impact in the adaptation countries included in the action
(countries importing energy-intensive products to the EU). The relevance of the study for the Russian
Federation is beyond doubt. Thus, the purpose of this article is to study the features of transboundary
regulation of carbon emissions and the prospects for the development of domestic climate policy, taking into
account the peculiarities of international cooperation in a standard issue.
1 INTRODUCTION
Climate regulation in one form or another is
becoming an integral element of the transformational
changes that are normal in the economies of many
countries. This is the International Institute for the
Control of Gas Emissions, which involves the
application of a mechanism for cross-border carbon
adjustment in relation to products that use
technologies with a high carbon footprint. One such
tool is the cross-border carbon tax. The carbon tax is
a project of cross-border carbon corrective regulation,
intended and expected to be implemented in the
territory of application in producing countries, which
include imports to countries. From the point of view
of economic theory, consideration of cross-border
fundraising in the understanding of countries,
investing large amounts of financial resources in
"green programs", intensifying competition between
producers of products that pay a carbon tax, and
producers that are not taken into account in their
countries by carbon regulation (Christians, 2022).
Therefore, a cross-border carbon tax reduces the
reduction in global carbon emissions. The mechanism
of customs carbon adjustment in countries with a low
carbon cap standard and untapped modern
technologies for capturing and cleaning polluting
emissions will be applied by 2023. Currently, the
mechanism and format of its application are not
applied and are not repeated and are used in the mode
of ongoing improvements (Cheng, 2021;
Dorsey-
Palmateer
, 2020).
Thus, the purpose of this article is to study the
features of transboundary carbon regulation and
determine promising directions for the development
of domestic climate policy, taking into account the
peculiarities of international cooperation in this
matter.
2 MATERIALS AND METHODS
The research methodology is found on the basis of the
analysis of statistical data reflecting the directions and
specifics of the possible impact of the transboundary
carbon measurement in the EU within the framework
of the expected change in the frequency of the
Russian Federation and transformational processes in
the assessment in the measurements of the climate
measurement. Information base of the study of the
data registry of Rosstat, the Federal Customs Service
of Russia, coverage of the commission, monitoring
reports and studies of the group on climate regulation
and energy efficiency of the economies of countries.
The scientific observations of domestic researchers
devoted to the analysis and assessment of the impact
Batashev, R. and Bisultanov, A.
Current Issues of Transboundary Carbon Regulation.
DOI: 10.5220/0011568100003524
In Proceedings of the 1st International Conference on Methods, Models, Technologies for Sustainable Development (MMTGE 2022) - Agroclimatic Projects and Carbon Neutrality, pages
177-182
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)
177
of the transboundary carbon tax formed the basis for
the formation of the author's idea of the existing
approaches to carbon transboundary regulation and
strategic directions for the development of domestic
climate policy and integration into international anti-
carbon mechanisms.
3 RESULTS
Issues of cross-border carbon tax regulation have
recently received close attention in the academic
literature. The increased interest of domestic
researchers is explained by the fact that this issue is
extremely important for Russian exporting
manufacturers, which account for a significant part of
European imports. Also, scientific concern is
manifested against the background of the prospects
for the introduction of carbon tax regulation within
the Russian Federation.
A significant layer of scientific research is related
to the study of the consequences of the introduction
of carbon regulation mechanisms on the development
of industry in Russia. So, in the study of M.M.
Balashov (Balashov, 2020) notes that the introduction
of a cross-border tax carries significant risks for the
manufacturing industry in Russia, predicting that
such areas as petrochemistry, metallurgy and
fertilizer production will suffer the most. At the same
time, it is noted that the European policy of carbon
adjustment will have much more serious
consequences for the Russian economy, affecting not
only carbon-intensive and electricity-intensive
industries, but will also affect all other sectors of the
country, leading to a rise in the cost of producing
carbon-intensive export products (Kuzminykh,
2022). The author rightly, in our opinion, notes that
the main economic "subtext" of the cross-border
carbon tax on imported into the EU is to ensure the
competitiveness of producers of European products
with a carbon footprint, which has lost its price
advantage. Particularly relevant is the problem of
protecting European producers against the backdrop
of aggravated international relations and trade wars,
which have now led to an increase in the cost of
products, the raw material base of which is resources
exported from the territory of the Russian Federation.
Analyzing the main theses set out in (Balashov,
2020), there is no doubt that the mechanism of cross-
border tax regulation of the carbon consequences of
production activities is becoming an economic
instrument of political pressure on trade partners of
the EU countries by imposing on them a similar
model of carbon regulation. As a result, Russian
export-oriented producers with this approach will
lose their price advantages, which are available,
among other things, due to the resource base on which
production is based.
The European "carbon" policy is at odds with the
"Strategy for the development of the manufacturing
industry of the Russian Federation until 2024 and for
the period until 2035" adopted in Russia in 2020.
According to this strategy, the economic policy of the
Russian Federation will be aimed at creating high-
performance export-oriented sectors in the
manufacturing industry, developing on the basis of
modern technologies and provided with qualified
personnel. At the same time, the transformation of
export-oriented areas is the second stage in the
development of the manufacturing industry based on
the development of the domestic market and domestic
technologies. Thus, sharing the views of the author
(Balashov, 2020) regarding the threat to the economic
security of the country, we note that it is necessary to
take preventive measures, taking into account the
prospect of introducing hydrocarbon regulation in the
EU countries and reflect them in the Strategy, which
will allow us to adapt to changing economic and
geopolitical conditions and ensure the leadership of
the Russian Federation in energy intensive industries.
Some researchers agree that the GBAM
mechanism (transboundary carbon collection
mechanism) will become a catalyst for the
development of ESG regulation in the Russian
Federation (Anankina, 2021). The ratification of the
2019 Paris Agreement has intensified the
development of ESG principles for regulating the
production activities of carbon-intensive industries in
Russia. Thus, a draft low-carbon development
strategy has been prepared. The mechanism for
introducing carbon payments within the country is
under discussion, the Central Bank has given market
participants recommendations on carbon regulation,
on accounting for climate risks in the insurance
sector. This process is considered by the author as one
of the effective tools to stimulate investment in low-
carbon technologies. This will increase the efficiency
of production in the country and prepare domestic
enterprises for sustainable production processes.
In addition, a number of positive effects
(opportunities) are highlighted from the introduction
of a cross-border carbon tax for Russian companies
with flexible development strategies. First of all, we
are talking about the development of renewable
energy in Russia. In an environment where the cost of
carbon emissions will have a significant impact on the
cost of production, renewable energy sources will
acquire additional economic attractiveness for
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
178
industrial consumers. The carbon tax can become an
additional incentive for the development of
technologies for capturing, storing and utilizing
carbon dioxide in the Russian Federation. The timely
introduction of ESG regulation in Russia will allow
us to occupy niches in the markets of consumers
focused on hydrocarbon emissions in the supply
chains.
The lack of a flexible strategy for carbon
regulation can have an extremely negative impact on
the availability of financial resources and the
investment attractiveness of Russian industrial
enterprises. Similar risks are predicted in the works of
E.A. Motosova, I.M. Potravny (Motosova, 2014), E.
Anankina (Anankina, 2021). Despite the fact that the
ratified Kyoto Protocol (2004) did not bring the
Russian Federation the predicted political integration
into the mechanism of international environmental
regulation, a number of authors agree that the refusal
to accept obligations under subsequent international
climate agreements will lead to the fact that for
Russian carbon-intensive industrial enterprises will
face serious risks in a number of industries, primarily
due to limited access to promising sources of
financing for the reconstruction and modernization of
production facilities and advanced production
technologies that meet the principles of ESG
regulation (Main indicators of environmental
protection, https://rosstat.gov.ru/). The degree of
financial risk due to ESG factors is characterized by
the fact that currently domestic companies are less
subject to pressure within the concept of carbon
regulation than others. This is largely explained by
the fact that they have more differentiated sources of
cheap investment. We have to agree with the author
(Anankina, 2021) that it is not very likely that Russian
carbon-intensive industries can avoid investor
pressure to require companies to participate in carbon
regulation and reporting.
Currently, the development of international
relations with counterparties and investors interested
in ESG transformation has an impact on the
transformation of the development strategies of some
Russian banking structures. Thus, Sberbank
announced its readiness to finance the agro-industrial
complex through concessional lending to enterprises
that invest in low-carbon technologies. It should be
noted that today Sberbank is one of the largest
creditors of the domestic economy, which accounts
for up to 33.9% of loans issued to legal entities. At
the same time, the bank itself has developed an ESG
transformation strategy at Sberbank, within which
work has begun to develop practices for managing
climate risks and opportunities (Impact assessment
report, 2021).
Assessing the prospects and consequences of the
introduction of a cross-border tax for the Russian
Federation, the author (Grishchenko, 2021) cites a
hypothesis according to which the introduction of a
mechanism for a cross-border carbon tax will become
a serious factor that in the future will have an impact
on the economic stability of the Russian Federation.
The author's key arguments in favor of this hypothesis
are that the European Union is one of Russia's key
partners. According to Eurostat in 2021. in the
structure of foreign trade of the Russian Federation,
the EU accounted for 36% of external trade. The
share of Russian exports to EU countries was 38.3%
(Eurostat, https://ec.europa.eu). According to
Grishchenko Yu.Yu. The Russian Federation, in the
context of the transformation of international trade
under the influence of ESG principles, needs to act
preventively on an integrated basis. In particular, it is
necessary to provide for the mandatory inclusion in
the reporting of organizations of information on
greenhouse gas emissions produced on the basis of
approved emission measurement standards.
Sustainable economic development should be
ensured through the diversification of export
products. Fuel and energy products traditionally
remain predominant in the structure of Russian
exports (54.3% in 2021). Metallurgical and chemical
products also occupy a significant share in Russian
exports (18.1% in 2021). Considering that a
significant part falls on European markets, there is a
threat of losing key markets.
A number of authors (Medvedev, 2021) in their
studies, when assessing the consequences for the
Russian Federation of the introduction of the EU
carbon tax regulation, focus on the analysis of the
future competitiveness of the sectors of the economy
that will be the object of carbon regulation. In
particular, the authors predict that industries such as
the glass industry, fertilizer production, pulp and
paper, metallurgy, and the chemical industry will
suffer the most. The technological backwardness of
domestic steel companies, which leads to an increase
in the carbon intensity of this industry, reduces the
competitiveness in front of producing countries
whose steel industry is much more efficient in terms
of carbon emissions concentration (India, Turkey, EU
countries). The countries of the European Union will
clearly benefit from carbon tax regulation, as they
have already reduced the concentration of carbon
emissions by investing more resources in
environmentally efficient production. “Thus, the EU
border tax could transform the market for high
Current Issues of Transboundary Carbon Regulation
179
footprint producers in favor of European or low
footprint companies.”
According to the authors, the regulation of the
negative consequences of the introduction of the
carbon tax is possible through the development of
measures of the main nature, including: low-carbon
development of the Russian economy through
environmentally friendly and energy-efficient
technologies; development and legislative
consolidation of methodological approaches to
measuring the absorption capacity of Russian
ecosystems and forests in order to offset when paying
the EU transboundary carbon tax; domestic carbon
market and development of mechanisms for its
regulation. The importance of developing a
methodological framework for determining the
volume of greenhouse gas absorption by domestic
ecosystems is also noted in the study by the authors
Bobylev P., Semeykin A. (Bobylev, 2020), who
consider the introduction of a transboundary carbon
tax as an exclusively instrument of EU protectionism.
The authors rightly note that cross-border regulation
is aimed not only at reducing greenhouse gas
emissions, but also at reducing the EU's import
dependence on energy resources from other countries.
For example, the stability of the European auto
industry and the construction sector depends on the
supply of Russian steel, iron and non-ferrous metals.
At present, Russian steel exports to the EU account
for 10-15%.
Analyzing the status, risks and possible options
for Russia's response to the introduction of a border
corrective carbon mechanism, representatives of the
Institute of Europe of the Russian Academy of
Sciences (Bazhan, 2020) describe the subject of
discussion of this article as a dubious initiative from
a legal point of view, which carries clear risks for
domestic exporters. At the same time, the authors of
the study point out the specific features of the EU
approach in matters of methodology for the
implementation of cross-border tax regulation. In
particular, the closed nature of the adoption of key
decisions on the mechanism of cross-border
regulation, the low level of development of the
initiative, the short time for obtaining the opinion of
interested parties, etc.
A decade ago, Russia ranked fifth in the world in
terms of emissions (Energy efficient Russia, 2009).
Research conducted in 2021 by the Carbon Brief
organization in the field of global climate regulation
suggests that the Russian Federation has moved to
third place after the United States and China in the
ranking of the world's main environmental polluters.
Volumes of greenhouse gas emissions of the
Russian Federation for the time interval 2010-2019
changed significantly (-22.8%), and the annual
dynamics is characterized by an oscillatory
increase/decrease in greenhouse gas emissions. If we
compare the current state of carbon intensity in
Russia, compared with 1990, the volume of
greenhouse gas emissions into the atmosphere has
decreased by one and a half times.
The statistics of greenhouse gas emissions by
sectors of the Russian economy has the following
structure (Figure 2).
Figure 1: Volumes and dynamics of greenhouse gas emissions in Russia.
3159
2502
2602
2565
2701
2643
2649
2094
2098
2155
2134
2119
79
104
99
105
98
100
79
100
103
99
99
0
20
40
60
80
100
120
0
500
1000
1500
2000
2500
3000
3500
1990 2005 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
million tons of CO2 equivalent per year Growth/decline rate
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
180
Figure 2: Structure of greenhouse gas emissions by sectors of the economy.
4 DISCUSSION
The policy of climate regulation in the Russian
Federation has a rich chronology, connected both
with the solution of this issue within the country and
in the process of integration into the international
climate agenda. One of the latest key decisions in the
field of carbon regulation in Russia is the issuance of
Decree of the Presidents of the Russian Federation of
2020 “On reducing greenhouse gas emissions” No.
666. The Decree contains a target for reducing
greenhouse gas emissions by 2030 to 70%.
Thus, the development of Russia's domestic
climate policy in this area goes hand in hand with the
strengthening of international cooperation in the
implementation of climate conservation policy,
which necessitates the development of a
multidirectional strategy to reduce the carbon
intensity of domestic products.
In our opinion, when integrating the Russian
Federation into international programs and
mechanisms of transboundary carbon regulation, it is
necessary to pay attention to the following key points:
the possibility of creating and developing
domestic carbon markets in order to ensure the
receipt of carbon fees in the country's budget
system, which will make it possible to
subsequently compensate domestic producers
for payments made through various
government programs (subsidizing the
industry, concessional lending, tax preferences
(the most preferable, in our opinion, option,
etc.);
assessment of the correctness of the proposed
mechanism of transboundary regulation in
terms of compliance with a “clean” climate
policy. In the context of the aggravation of
international economic relations, such
mechanisms of transboundary carbon
regulation should be approached critically,
evaluating them, first of all, as possible
instruments of trade restrictions and unfair
cross-country competition. The recognition of
the presence of an element of economic and
trade barriers in the idea of a transboundary
carbon tax, in our opinion, is quite justified, at
least for one fact: many European countries do
not have a raw material base for the production
of metallurgy, chemical industry, mineral
fertilizers (strategically important in
agriculture) . The European approach should be
carefully assessed when justifying the need for
a cross-border tax as a tool to combat the
phenomenon of "carbon leakage". According
to the European initiators, the "leakage of
carbon" occurs against the backdrop of a
tightening of the European program to combat
harmful emissions, which, however, is refuted
in authoritative studies by domestic scientists.
Thus, representatives of the Russian Academy
of Sciences (Bazhan, 2020) believe that the
"carbon leak" is not confirmed by sufficient
facts, justifying their position, for example, as
50%
55%
60%
65%
70%
75%
80%
85%
90%
95%
100%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Energy industrial production Agriculture Waste
Current Issues of Transboundary Carbon Regulation
181
follows: the relocation of energy-intensive
industries ended 10-20 years ago; the
movement of industrial enterprises in energy-
intensive industries is caused, first of all, by the
availability of cheap labor in some countries;
The restructuring of the EU economy is already
largely complete, and the carbon-intensive
products consumed in the EU are mostly
imported.
the possibility of taking into account the
absorbing potential of Russian ecosystems
when paying a transboundary carbon tax. The
state of the carbon balance is characterized by
the fact that in Russia the emission of harmful
substances significantly exceeds their
absorption by ecosystems. The level of
absorption of harmful substances in the
Russian Federation at present (the latest up-to-
date data from Rosstat) is estimated at 534.8
million tons of CO2 equivalent per year. Thus,
Russian forest ecosystems provide
compensation for up to a quarter (25.2% in
2019) of anthropogenic emissions. "However,
the absence in Russia - unlike the leading
countries of the world - of a reliable, time-
tested forest inventory system is a significant
factor hindering the development of sustainable
use of forest resources and ensuring a full
accounting of greenhouse gas absorption by
forests" (Bazhan, 2020).
5 CONCLUSION
In conclusion, we note that the need to ensure
sustainable economic development of the Russian
Federation, the main one of which is currently the raw
material base, against the background of Russia's
significant contribution to greenhouse gas emissions,
requires a balanced approach when making decisions
in the field of international climate cooperation.
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neutrality", Kadyrov Chechen State University Chechen Republic, Grozny, st. Sher
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