Russian Parliament approves law to curb greenhouse gas emissions as Putin bets big on coal

The move comes as President Vladimir Putin sees coal exports as a valuable source of revenue and is ramping production.
The move comes as President Vladimir Putin sees coal exports as a valuable source of revenue and is ramping production.PHOTO: AFP

MOSCOW (REUTERS, BLOOMBERG) - Russia's Lower House of Parliament approved a law on Tuesday (June 1) that would limit greenhouse gas emissions in an initiative described as a first step towards carbon regulation in the country.

The move comes as President Vladimir Putin sees coal exports as a valuable source of revenue and is ramping production.

Russia has previously signalled its acceptance of the Paris Agreement, which commits countries to setting targets every five years to curb greenhouse gas emissions. But Moscow has faced criticism from environmentalists for shunning compulsory emissions targets for companies.

The law - which still needs to be approved by the Upper House of Parliament and signed by President Putin - would oblige companies producing large quantities of greenhouse gases to report their emissions.

Mr Vladimir Burmatov, chairman of the parliamentary committee on ecology and environmental protection, said the Bill was a first step towards carbon regulation in the country.

Russia joined the Paris climate change pact in 2019. New targets were due to be announced last year, but that has been put off until later this year because of the Covid-19 pandemic.

Russia's self-imposed target, reiterated last year by Mr Putin, is for its emissions in 2030 to be 30 per cent lower than in 1990. It is on course to exceed that goal easily due to the massive deindustrialisation that followed the fall of the Soviet Union.

Russia's climate envoy told Reuters recently that a global trend towards ambitious new targets amounted to an "unreasonable race", and Moscow would focus on the commitments it has made so far.

Reflecting the race to net-zero emissions, European governments are drawing up plans to phase out coal, US coal-fired power plants are being shuttered as prices of clean energy plummet, and new Asian projects are being scrapped as lenders back away from the dirtiest fossil fuel.

Yet, Mr Putin's government is spending more than US$10 billion (S$13.3 billion) on railroad upgrades that will help boost exports of the commodity.

The authorities will use prisoners to help speed up the work, reviving a reviled Soviet-era tradition. The project to modernise and expand railroads that run to Russia's Far Eastern ports is part of a broader push to make the nation among the last standing ones in fossil fuel exports as other countries switch to greener alternatives.

The government is betting that coal consumption will continue to rise in big Asian markets like China even as it dries up elsewhere.

"It's realistic to expect Asian demand for imported coal to increase if conditions are right," said UMMC Holding deputy chief executive Evgeniy Bragin. The firm owns a coal company in western Siberia's Kuzbass region.

"We need to keep developing and expanding the rail infrastructure so that we have the opportunity to export coal.''

The latest 720 billion rouble (S$13 billion) project to expand Russia's two longest railroads - the czarist-era Trans-Siberian and Soviet Baikal-Amur Mainline that link western Russia with the Pacific Ocean- will aim to boost cargo capacity for coal and other goods to 182 million tonnes a year by 2024.

Capacity already more than doubled to 144 million tonnes under a 520 billion rouble modernisation plan that began in 2013.

Mr Putin urged faster progress on the next leg at a meeting with coal miners in March.

"Russia is trying to monetise its coal reserves fast enough that coal will contribute to GDP rather than being stuck in the ground," said analyst Madina Khrustaleva, who specialises in the region for TS Lombard in London.

Mr Putin is betting that his country's land border with China and good relations with President Xi Jinping make it a natural candidate to dominate exports to the nation that consumes more than half of the world's coal.

His case is helped by the fact that Australia, currently the No. 1 coal exporter, is facing trade restrictions from China amid a diplomatic dispute over the origins of the coronavirus.

But the plan is fraught with risk, both for Russia's economy and the planet. The UN's Intergovernmental Panel on Climate Change recommends the immediate phasing out of coal to avoid catastrophic global warming, and the effects of climate change are expected to cost Russia billions in coming decades.

Last month, the International Energy Agency (IEA) went one step further and said no new fossil-fuel infrastructure should be built if the world wants to keep global warming will below 1.5 deg C.

With all but one of the top 10 economies committed to reaching net-zero emissions within decades, the IEA's Net Zero by 2050 Roadmap calls for phasing out all coal power plants without carbon capture as soon as 2040.

It is also not a given that Asian coal demand will keep growing. Coal consumption in China is poised to reach a record this year and the country continues to build coal-fired power plants, but it also plans to start reducing consumption starting in 2026. At the same time, it is increasing output from domestic mines, leaving less room for foreign supplies.

For Mr Putin there is more at stake than just money. At a video conference in March, he reminded government officials that the coal industry drives the local economies of several Russian regions that are home to about 11 million people.

Unrest among coal miners helped put pressure on the government before the Soviet Union collapsed in 1991, though the sector is now a much smaller and less influential part of the economy.