Russia and the EU:
A perspective on climate policy collaboration

Moscow, Russian Federation

IMAGE: Russian Carbon Fund

By Dr. Anton Galenovich, Chairman of the Council of the “Russian Carbon” Fund, and Chairman of the Association of European Business in Russia Climate Policy Working Group, ECOCOM Ltd.

A ‌‌key obstacle to the development of any Russia – EU climate policy collaboration seems to be a difference in critical approaches to the question of whether or not the perceived global climate change problem is serious enough to warrant intervention at such a significant level. In Russia, climate policy issues are not exactly at the top of the Government’s list of priorities, and at the moment the routine level of interference is low and a comprehensive approach is very much required. From an economic point of view, this is more evidence that Government interventions are often more expensive and harmful than the absence of any. For the Russian mainstream establishment, the issue is not climate change per se, but the negative economic implications of the development of low-carbon initiatives and technologies. On the other hand, positions and approaches toward climate goals, strategies, and policies in Russia are far from what could be called typical, and perhaps even provide more variety and flexibility than those of the EU. The choice of EU climate diplomacy to work exclusively with the mainstream might not necessarily be the best or even the only choice. The objective interests of business entities operating in Russia are in accordance with the existing global system of climate goals, trends, and agreements. Despite the status quo, the Russian business community very much views climate commitments and rights as a positive business opportunity rather than a business risk, and are well aware of the benefits offered by a low-carbon business model.


There are obvious and striking contradictions between the climate strategy declared by the Russian president Vladimir Putin and the plans and practical activities of the Government itself.


Speaking in Istanbul on October 10, 2016, Vladimir Putin defined the objective of Russia’s climate policy as one which would: “…provide for a rapid and economically efficient reduction of GHG emissions in compliance with the Paris Agreement”.


Neither planned, nor current actions of the Government imply any significant mitigation of carbon emissions, let alone any kind of rapid reduction. Equally absent has been the development of the necessary mechanisms which will evaluate and incite the economic efficiency of GHG emission reductions. The current plans of the Government of Russia are not envisaging the creation of an appropriate low carbon “toolkit” along with the mechanisms and tools instrumental for climate-responsible companies in Russia wishing to perform efficiently in the low carbon sector and build a more sustainable future. Furthermore, the decision to ratify the Paris Agreement by the Russian  Federation has not only been delayed for an uncertain period but is actually currently under an “investigation” as to whether or not it is even feasible to ratify the agreement in the first place.


Some Russian businesses have started to recognise that the state of green competitiveness in Russia has been slowly deteriorating; leaving them increasingly exposed to the risks and threats of external carbon regulation and adjustment measures; not to mention an advance loss of earnings derived from any mitigation activities they pursue.


Based on these assumptions and on the rational interest to develop a common institutional environment and space with the EU in the first place, our principal alternative approach towards Russian climate policy issues is to promote:


  • Entitlement of the companies and individuals to keep and trade the fruits of their environmental mitigation activities,

  • A common environment and space for fair, international environmental footprint-based competition,

  • Compatibility of rules, carbon emission regulation mechanisms, commitments and rights, especially compatibility with relevant European institutions and requirements,

  • Fungibility and transferability of mitigation instruments and outcomes.


Based on these principles, the following proposals have also been agreed among members of the Association of European Business in Russia and various Russian companies and have been duly sent to the Government:


  • To provide for the recognition and approval of current pilot mitigation activities for mitigation outcomes, to be accountable under future state regulations which correspond to the Paris Agreement provisions regarding internationally transferable mitigation outcomes,




  • To provide active support to climate responsible businesses in the development of Government-to-business dialogue, innovative climate policy approaches, plans, mechanisms, tools, and platforms which are so      instrumental for the private sector in Russia to effectively compete and cooperate internationally in the field of low-carbon development,

  • To join UNFCCC Party and Non-Party efforts to develop and formulate internationally recognised quantitative parameters for a low-carbon economy, low GHG emissions’ goods and services; starting with developing quantitative low carbon and carbon neutral criteria for energy intensive export products.


The underlying objective is to overcome the jurisdiction barriers facing climate mitigation activities, due to the fact that GHG emissions impact cannot simply be limited by jurisdictions and borders.


On May 24, 2016, the Russian Carbon Fund officially unveiled the Integrated Program for Climate Initiatives (IPCI) to support the practical implementation of these proposals and principles.


To promote the development of a universal common environment which is not limited by specific jurisdiction barriers, the international team is developing an IPCI blockchain technology-based digital ecosystem for environmental assets and liabilities, which will include transferable mitigation units. The platform basic modules and the digital application have already been released, and on December 1 2016, the first actual emission of trial carbon units took place on the Ethereum main network. Representatives from the “Russian Carbon Fund” and Airalab participated in the trial emission within the capacity of the “Operator”, with Baker and Mackenzie as the “Auditor”, Aera Group as the “Issuer”, whilst Microsoft Corp. provided technical and informational support. The very first commercial transaction is already on the way.


Apart from the registration, transaction, offsetting of modules (ex. for international aviation) that are already in place, the IPCI blockchain platform would support carbon footprint competition.


Transferable mitigation outcome or unit is the first instrument, which has a chance to break through the borders and provide initial linkage and collaboration mechanism. To provide for environmental integrity, the mitigation outcome should be indisputable, absolute and unlike existing carbon offsets should not be based on the most probable of hypothetical baseline scenarios, but on ex-post actual emissions, removals by sinks, anthropogenic, and should be covered by sufficient security. These are the kinds of effective approaches that the initiators of Russian pilot schemes are seeking to pursue.


With all the geopolitical difficulties currently hampering Russia - EU relations, it is business-to-business and peer-to-peer collaborations which might ultimately prove to provide the most progress toward establishing better relations.


A decentralised IPCI blockchain platform that runs smart contracts, and is based on strict and fair rules could well be instrumental in providing the mutual trust and the integral digital ecosystem that such a collaboration would require.


Figure 1 - Chain of carbon footprint data and smart contract blocks to create carbon neutral or low carbon commodities:

Oleg Deripaska, the President of UC RUSAL, launched an initiative to establish a universal fixed carbon price and zero-revenue carbon fund scheme. It is in line with the same approach and principles, targetting fair global common environment for carbon footprint-based competition. A universal carbon pricing scheme needs common economic space for GHG limitation and reduction in the first instance. It is now in the further stages of development with a view to launching a pilot voluntary testing scheme.


Figure 2 - Fixed price and zero-revenue carbon fund pilot scheme for the IPCI blockchain platform implementation:

These specific examples demonstrate that in the field of Russia - EU climate policy collaboration, it might be more pragmatic for businesses to take the lead in the development of sustainable business customs and climate initiatives. This would then pave the way for Governments to follow through with the necessary legislation and intergovernmental agreements, much in the same way a considerate landscape gardener might pave an existing pathway for the benefit of others already walking down a beaten track.



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