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Russian taxonomy: first experiment at Sakhalin

As a further step in the development of the Russian taxonomy, on 16 February 2022, the Russian State Duma (the lower chamber of the Russian Parliament) adopted a draft Federal Law “On the Experiment on Reduction of Greenhouse Gas Emissions in Certain Regions of the Russian Federation” (the “Draft Law”). 

The Draft Law, which is expected to come into force in the coming months, establishes a regulatory framework for conducting an experiment on reduction of greenhouse gas (“GHG”) emissions in the Sakhalin region and potentially other Russian regions (the “Experiment”). The objective of the Experiment is to ensure that the Sakhalin region reaches carbon neutrality by 31 December 2025, with deadlines for other Russian regions included in the Experiment to be set at a later time. 

The Draft Law envisages a number of measures aimed at achieving the objective of the Experiment, in particular:

  • emission quotas for companies and individual entrepreneurs included in the Experiment (the “regulated entities”);
  • enhanced carbon reporting requirements by regulated entities, including a requirement on audit of such reporting in accordance with international standards;
  • a framework for emissions trading by the regulated entities and functioning of an emission units repository; and
  • a right of Russian regions to implement a tax and other financial incentives for regulated entities.

In the explanatory note to the Draft Law, the Russian Government (the author of the Draft Law) has indicated that upon its enactment the payment for non-compliance with emission quotas should be established taking into account the world-wide GHG emission payments (USD 2 per 1 tonne of CO2 equivalent) and the European GHG trade system payments (Euro 25 per 1 tonne of CO2 equivalent).

The State corporation VEB.RF will coordinate the Sakhalin Experiment.

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