Maxim Reshetnikov: Nobody says CO2 must be fought against at any cost

The European Green Deal, which the European Commission is working on these days, will encompass many industries of the global economy. Russia will not be an exception: climate-related customs duties on the import of iron, steel, aluminum, cement, fertilizers and electricity to the European Union will be a great challenge that exporters will face. What can and must be done to balance national interests with the fight to save the environment, in addition to delving into the opportunites this new climate strategy can offer Russian companies, and detailing Russia's low carbon development strategy were among the issues Economic Development Minister Maxim Reshetnikov spoke about in an interview to TASS.
You took part in the G20 ministerial level meeting on climate in Naples. What do our foreign partners say about their new climate strategy and how does Russia feel about this rhetoric?
The European Commission in July came up with 13 drafts of regulatory acts, which are part of Europe's Green Deal. They concern industry, energy and transportation. For example, there is a proposal for actually curtailing the production and import of internal combustion engines by 2035. The rules for the chemicals industry, such as pesticides and fertilizers, are to undergo a fundamental change. By 2030, the consumption of coal is to going to be slashed by more than 70% compared to the 2015 level. In the meantime, the European market consumes 21% of the coal we produce, or 41% percent of this fuel that we export. For our coalmining regions, such as Kuzbass, the loss of the Western market will be an enormous challenge.
For the time being, all this is nothing but bills, plans and strategies that are still under discussion. That being said, the EUs Carbon Border Adjustment Mechanism (CBAM) is taking shape. In the CBAM's description there are still many gaps, but at present, a number of contradictions with the rules of the WTO and international climate change agreements are quite evident.
What sort of danger will Russian exporters be facing from all of what youve just said and in what way does Russia plan to support individual companies and entire industries?
[Our] EU partners have postponed the deadline for paying the carbon tax by three years. Mandatory accounting for companies will be effective starting from 2023, and mandatory payments, from 2026. The list of industries to which the CBAM applies has expanded. This will cover the production of iron and steel and products thereof, aluminum, mineral fertilizers, cement and the production of electricity. The volume of Russia's export to the EU that will fall under the Carbon Border Adjustment Mechanism is estimated at $7.6 billion a year. Let me explain why when evaluating the effects, we only take into account our export to the EU. The mechanism is designed in such a way that it pegs the carbon tax to the actual carbon intensity (CI) of the product in question. The greater the emission of carbon dioxide from the industrial plant that has manufactured a certain product, the more the importer will have to pay. Respectively, the tax will vary from company to company, and even from industrial facility to industrial facility, even if two companies supply equal amounts of goods to the EU.
In recent years, many companies have upgraded production and Russian companies' carbon footprint is competitive. It is crucial to ensure that it should be calculated impartially and manufacturers in the EU or other countries do not get unfounded advantages. The CBAM draft offers no answers to the questions of what projects the companies will be able to count and what means of interaction for third countries [our] European partners may offer, such as accounting, verification and so on and so forth.
If the CBAM's real purpose is not the creation of new barriers in trade, but rather fighting climate change, then the carbon reduction per one invested dollar should be the chief parameter. In this respect, it is important for Russia to have a mechanism that will enable enterprises to use the money to cut carbon emissions inside the country. This will be the most effective solution in the struggle against climate change and for the global agenda, too.
How does Russia see this? As protectionism or real efforts towards fighting climate change?
For the time being, it looks like an invitation to negotiate. On the one hand, by proposing this green deal our partners seek to speed up the work towards the creation of real economic mechanisms for implementing the Paris Agreement. That's the climate aspect. But, on the other hand, our partners have run out of their own hydrocarbon resources. They have poured a lot of money into renewable sources of energy. Now they are trying to use the climate agenda to take advantage of their economic competitive edges and expertise.
Many experts believe that strict enforcement will rather perpetuate the gap between industrialized and developing nations. That is, those that have already achieved peak energy consumption and possess energy-effective technologies, and the others, which have not achieved this level yet.