Russian President Vladimir Putin set the goal of carbon neutrality by 2060 during comments in his speech at the plenary session of Russia’s Energy Week on October 13.
"Russia in practice will strive for carbon neutrality of its economy," he told delegates. "And we set a benchmark for this – no later than 2060."
"The planet needs informed, responsible actions by all market participants – both producers and consumers – focused on the long term, in the interests of the sustainable development of all our countries," Putin said.
"Russia is ready for such constructive and close co-operation," he added, as cited by the Moscow Times.
Putin’s announcement brings to an end considerable confusion and contradictory statements coming out of the Kremlin in recent months on just how tough the Kremlin was going to be in the climate fight, as bne IntelliNews has been reporting.
Russia has introduced a new long-term energy strategy and is taking the problem of climate change increasingly seriously after the country was plagued by floods and massive forest fires this summer. The temperatures are rising two and half times faster in Russia, the president noted, and even faster in the Arctic. As bne IntelliNews reported, Russia’s permafrost is melting and could do a trillion dollars of damage to cities and energy infrastructure in those regions that cover a third of the country’s territory.
The new energy strategy takes account of the shift towards renewable energy and “the role of oil and coal will decrease,” Putin observed.
Criticised for being slow to grasp the nettle, Russia set itself easy targets after it adopted the Paris Accords in 2019, as bne IntelliNews reported in an overview of Russia’s emissions, and plans to reduce them.
With abundant oil and gas reserves Russia has been slow to invest into renewable energy. Moreover, with abundant nuclear and hydropower resources, neither of which emit CO2, there has been even less interest in investing into wind and solar.
But the government ratcheted up its game in June when Putin ordered it to come up with plans to emit less CO2 than the Europe by 2050, when the EU aims to become carbon-neutral under its Green Deal.
Putin’s call to become carbon neutral by 2060 is new, as the previous plans were for Russia’s emissions to increase modestly before dropping to net zero some 80 years from now, according to Katie Ross at the World Resources Institute, as cited by the Moscow Times.
And Russia’s upping its game is important for the global drive to contain emissions growth. Analysis by climate science website Carbon Brief named Russia as one of the countries most responsible for global warming. The research shows that Russia has contributed 6.9% of the world’s CO2 emissions since 1850. When pre-industrial emissions are factored in, that makes Russia the third-biggest producer of CO2 historically, behind the US and China.
Putin’s comments represent a significant hardening of Russia’s position on emissions, as only a week ago the Ministry of Economy was flip-flopping on neutrality and said it was not under consideration.
As part of the new plan the share of renewables is set to increase greatly. Part of the plan is also to reduce emissions through absorbing CO2 by doubling the area of forest density through planting. Russia is already home to the world’s biggest forests.
The Paris Accords suggest that countries cut CO2 emissions by 30% from the levels of 2005. In Russia's case it was emitting 1,734mn tonnes of CO2 emissions per year (mtCO2/yr) in 2005, however, the Kremlin has set 1990 as the base when it was emitting 2,397 mtCO2/yr – a much higher bar and way above what Russia is emitting today.
A 30% reduction from the 1990 level would allow Russia to produce 1,678 mtCO2/yr, which is only slightly less than the 1,765 mtCO2/yr it was producing in 2017. However, if 2005 were set as the benchmark year then Russia would have to reduce its CO2 emissions by a third from the current levels, or by a hefty 550 mtCO2/yr.
Russia’s forests offset its CO2 emissions and absorb approximately 635 mtCO2/yr. Russia accounts for 70% of the world’s boreal forests and 25% of the world's entire forest resources. The area of Russian forests has increased by 4.3mn hectares over the past 10 years – equivalent to the size of Denmark – after falling for years due to two decades of illegal and unregulated logging operations.
Deputy Minister of Energy Evgeny Grabchak said that the Ministry of Energy forecasts that under Russia’s increasingly serious green deal the updated energy strategy predicts that electricity demand will grow 24% by 2035 compared to 2020, and 43% by 2050.
In 2035 the electricity generation split is expected to be 19.8% hydropower, 23% nuclear power, 4.5% renewables and 40% gas (with a 9.5% contribution from coal), according to Grabchak. By 2050, this is to be 19% for HPP, 24% for NPP, 12.5% for renewables, 43% for gas and 4.5% for coal.
“The generation split expectations provided by MinEnergo are similar to those that the Ministry for Economic Development has in its target (intensive) scenario in the latest low-carbon strategy draft,” VTB Capital (VTBC) said in a note. “The outlook thus suggests a further reduction in renewables costs, coal decommissioning (to only 4-4.5% in electricity generation by 2050) and decarbonisation mode being activated. This supports our anticipated growth in renewables (to 12.5% by 2050 in both scenarios) in the energy balance, which is a natural process in our view.”
Russian utilities have been starting to change their profile, but only slowly. The most advanced is the Italian Enel Russia, which has gone emissions-free after it sold its coal-fired Reftinskaya thermal power plant (TPP) in October 2019 and has been investing heavily into renewables.
Other big polluters like metallurgical giants Norilsk Nickel and RusAl have also been cleaning up their act and closing down high-emissions facilities as part of a drive to improve their environmental, social and governance (ESG) profiles that have affected their stock prices.
Changing European energy market
In wide-ranging comments Putin went on to describe the changing energy environment in Europe. Specifically he lambasted Europe’s energy policies, saying that the EU had become over-reliant on wind power, which had underperformed this summer due to a “wind drought.”
He went on to stress that Russia was a reliable energy supply and had strictly been adhering to its gas new transit deal signed at the last minute with Ukraine in December 2019 that commits Russia to send 40bn cubic metres of gas via Ukraine’s Druzhba pipeline until 2024.
However, he reiterated the increasingly prominent Kremlin talking point that if Europe wants more gas it has to sign new long-term supply contracts with Gazprom. “We have to know how much gas our customers want,” Putin said. Even without these new contracts Gazprom is expected to ship a record amount of gas to Europe this year that is being sold on the spot markets on the St Petersburg commodity exchange.
The previous record exports of gas to Europe reached 200.7 bcm in 2018. In September Gazprom guided for 183 bcm of exports this year, but analysts say these exports will reach 190 bcm for this year and could easily be higher.
At the same time, Europe has seen a decrease in imports of gas from other source. Specifically he said that US LNG exports to Europe have fallen by some 14 bcm – approximately the amount that is anticipated to be Europe’s gas deficit this year – drawn off to Asia by even higher prices than in Europe.
Putin added that Russia plans to export 10% more than the contract level via Ukraine to Europe (approximately 44 bcm in total). Russia has already increased supplies to Europe by 15% in 9M21, Bloomberg reported.
Gazprom has been rushing to fill Russia’s own gas storage tanks as it faces the same shortages as the rest of Europe. However, BCS GM reported on October 13 that Gazprom had resumed offering gas on the St Petersburg exchange, suggesting that the Russian tanks are now almost full. Gas trading on the St Petersburg exchange rose to 8mn cubic metres per day. This is up from less than 1 mcm per day recently, with the extra gas coming from Gazprom.
“A sign that Russian storage fill may be approaching completion. Gazprom largely withdrew gas from SPIMEX in August due to the fire in its gas condensate processing plant at Urengoy, with demand for an unusually large refill of depleted Russian storage and an atypically early start to the Russian heating season occurring in early September,” BCS GM said in a note. “However, in recent days, the weather in the European part of Russia has been pleasant, while Gazprom’s management has signalled that domestic storage should reach planned fill levels in the coming days. If the weather remains reasonably warm – no cooler than typical seasonal levels – then Gazprom should be able to offer larger amounts for domestic or international deliveries relatively soon.”
The increase in gas prices in Europe has been driven by the electricity deficit, as renewables capacity was suppressed, while after the end of the previous heating season gas levels in storage were not properly restored, Putin argued. Russia is not using energy as a weapon against Europe and stands ready to help the region as its energy crisis continues.
Putin repeated that the gas crisis in Europe could be quickly ended if Nord Stream 2 gas pipeline were put into operation. Gazprom has already loaded the pipeline, that was completed in September, with technical gas and in theory it could be put into operation tomorrow.
“The Nord Stream 1 and Nord Stream 2 pipelines are set to ensure the sustainability of gas supplies to Europe and reduce GHG emissions,” Putin said. “Nord Stream 2 AG continues to resolve the issues related to the certification with the German regulators, but the administrative barriers to the launch of Nord Stream 2 are not being removed. The gas pipeline would reduce tensions and prices.”
VTBC comments that despite the easing of tensions in the gas market the elevated current gas price of $1,123 per 1,000 cubic metres is indicative of continuing shortages that could amount to a gas deficit of 10-15 bcm for the upcoming heating season on the continent.
“We believe that in such a case, Gazprom would be able to draw additional (so-called emergency) capacity into production, providing more gas to Europe if requested by its European counterparties,” Sova Capital said in a note. “We therefore think that such an elevated gas price level is not sustainable and is set to adjust downward.”