bne IntelliNews – bneGREEN: Russia will become carbon neutral by 2060


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Russian President Vladimir Putin set the goal of carbon neutrality by 2060 during comments in his speech to the Russian Energy Week plenary on October 13.

“In practice, Russia will strive to achieve carbon neutrality in its economy,” he told delegates. “And we set a benchmark for this no later than 2060. “

“The planet needs informed and responsible actions on the part of all market players 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 cooperation,” he added, quoted by the Moscow Times.

Putin’s announcement ends considerable confusion and conflicting statements from the Kremlin in recent months about the Kremlin’s harshness in the fight against the climate, such as bne IntelliNews reported.

Russia has introduced a new long-term energy strategy and is taking the issue of climate change increasingly seriously after the country was plagued by massive floods and wildfires this summer. Temperatures are rising two and a half times faster in Russia, the president noted, and even faster in the Arctic. As bne IntelliNews Russia’s permafrost is reportedly melting and could cause billions of dollars in damage to cities and energy infrastructure in those regions that cover one-third of the country’s territory.

The new energy strategy takes into account the switch to renewable energies and “the role of oil and coal will diminish,” Putin observed.

Criticized for being slow to seize nettle, Russia has set itself some easy goals after adopting the Paris Accords in 2019, such 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 in renewables. In addition, with abundant nuclear and hydroelectric resources, none of which emit CO2, there has been even less interest in investing in wind and solar.

But the government stepped up its game in June when Putin ordered it to come up with plans to emit less CO2 than Europe by 2050, when the EU aims to become carbon neutral as part of its Green Deal.

Putin’s call to become carbon neutral by 2060 is new, as previous plans called for Russia’s emissions to rise slightly before dropping to net zero in 80 years, according to Katie Ross of the World Resources Institute, as quoted by the Moscow Times.

And Russia’s increased play is important to the global drive to contain emissions growth. Analysis by the climate science website Carbon Brief named Russia as one of the countries most responsible for global warming. Research shows that Russia has contributed 6.9% of global CO2 emissions since 1850. When pre-industrial emissions are factored in, this makes Russia the third largest producer of CO2 historically, behind the United States and China.

Putin’s comments represent a significant hardening of Russia’s stance on emissions, as just a week ago, the Economy Ministry flip-flopped on neutrality and said it was wrong. ‘study.

Under the new plan, the share of renewable energies is expected to increase considerably. Part of the plan is also to reduce emissions by absorbing CO2 by doubling the area of ​​dense forest through planting. Russia is already home to the world’s largest forests.

The Paris Agreements suggest that countries reduce their CO2 emissions by 30% from 2005 levels. In the case of Russia, it emitted 1,734 million tonnes of CO2 emissions per year (mtCO2 / year) in 2005, however, the Kremlin set 1990 as the base when it emitted 2,397 mtCO2 / year a much higher bar and well above what Russia is issuing today.

A 30% reduction from the 1990 level would allow Russia to produce 1,678 mtCO2 / year, which is only slightly lower than the 1,765 mtCO2 / year it produced in 2017. However, if 2005 was set as a base year, Russia is expected to reduce its CO2 emissions by a third compared to current levels, or 550 mtCO2 / year.

Russia’s forests offset its CO2 emissions and absorb around 635 mtCO2 / year. Russia accounts for 70% of the world’s boreal forests and 25% of all the world’s forest resources. The area of ​​Russian forests has increased by 4.3 million hectares in the past 10 years, equivalent to the size of Denmark, after declining for years due to two decades of illegal and non-illegal logging. regulated.

Deputy Energy Minister Evgeny Grabchak said the Energy Ministry anticipates that as part of Russia’s increasingly serious green deal, the updated energy strategy predicts that demand electricity will increase by 24% by 2035 compared to 2020 and by 43% by 2050.

In 2035, the distribution of electricity production should be 19.8% hydroelectricity, 23% nuclear energy, 4.5% renewable energy and 40% gas (with a contribution of 9.5 % of coal), according to Grabchak. By 2050, it should be 19% for the CAP, 24% for nuclear power plants, 12.5% ​​for renewables, 43% for gas and 4.5% for coal.

“The generation split expectations provided by MinEnergo are similar to those the Economic Development Department has in its (intensive) target scenario in the latest draft low carbon strategy,” VTB Capital (VTBC) said in a note. “The outlook therefore suggests a further reduction in the costs of renewable energies, the dismantling of coal (to only 4 to 4.5% of electricity production by 2050) and the decarbonisation mode being activated. This supports our projected renewable energy growth (to 12.5% ​​by 2050 in both scenarios) in the energy balance, which is a natural process in our view. “

Russian public services have started to change profile, but slowly. The most advanced is the Italian Enel Russia, which has become emission-free after selling its Reftinskaya Coal-fired Power Plant (TPP) in October 2019 and has invested heavily in renewables.

Other big polluters like metallurgical giants Norilsk Nickel and RusAl have also cleaned up their law and closed high emission facilities as part of a campaign to improve their environmental, social and governance (ESG) profiles that have affected the their stock prices.

A rapidly 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, claiming that the EU has become too dependent 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 adhered to its new gas transit agreement signed at the last minute with Ukraine in December 2019, which commits Russia to send 40 billion cubic meters of gas via the Ukrainian Druzhba pipeline until 2024.

However, he reiterated the growing Kremlin talking point that if Europe wants more gas, it must sign new long-term supply contracts with Gazprom. “We need 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, which will be sold on the spot markets of the St. Petersburg commodities exchange.

The previous record of gas exports to Europe reached 200.7 billion m3 in 2018. In September, Gazprom targeted 183 billion m3 of exports this year, but analysts say these exports will reach 190 billion m3. m3 for this year and could easily be higher.

At the same time, Europe has seen a decrease in gas imports from other sources. Specifically, he said LNG exports from the United States to Europe had fallen by about 14 billion cubic meters – roughly the amount that is expected to be Europe’s gas deficit this year – driven to the Asia by prices even higher than in Europe.

Putin added that Russia plans to export 10% more than the contractual level via Ukraine to Europe (around 44 billion m3 in total). Russia has already increased its supplies to Europe by 15% in 9M21, Bloomberg reported.

Gazprom rushed 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 Stock Exchange, suggesting that Russian tanks are now nearly full. Gas trading on the St. Petersburg Stock Exchange reached 8 million cubic meters per day. This is an increase from less than 1 million cubic meters per day recently, with the additional gas coming from Gazprom.

“A sign that the filling of Russian storage may be almost complete. Gazprom largely withdrew gas from SPIMEX in August due to the fire at its gas condensate processing plant in Urengoy, with demand for an unusually large recharge of depleted Russian storage and an unusually early start to the heating season Russian 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 management has reported that national storage is expected to reach expected 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 quantities for national or international deliveries fairly quickly. “

The increase in gas prices in Europe was caused by the electricity deficit, as the capacity for renewables was removed, while after the end of the previous heating season, gas levels in storage n ‘have not been 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 reiterated that the gas crisis in Europe could be quickly resolved if the Nord Stream 2 pipeline is brought into service. Gazprom has already loaded the pipeline, completed in September, with technical gas and could theoretically be commissioned tomorrow.

“The Nord Stream 1 and Nord Stream 2 pipelines are designed to ensure the sustainability of gas supplies to Europe and reduce GHG emissions,” Putin said. “Nord Stream 2 AG continues to resolve certification issues with German regulators, but the administrative barriers to launching Nord Stream 2 have not been lifted. The pipeline would reduce tensions and prices.

VTBC comments that despite easing tensions in the gas market, the current high gas price of $ 1,123 per 1,000 cubic meters is indicative of persistent shortages that could amount to a gas shortfall of 10 to 15 billion m3 for the next heating season on the continent.

“We believe that in such a case, Gazprom would be able to attract additional (so-called emergency) capacity into production, supplying more gas to Europe if its European counterparts request it,” Sova Capital said in a note. “We therefore believe that such a high level of gas prices is not sustainable and should adjust downwards.”

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