Russia to review coal plans, mull carbon tax after Glasgow

Russia will look to cut its ambitious goals for boosting coal production in the coming decade and consider imposing a carbon tax or other regulation in the wake of the deals reached by major powers at the COP26 summit in Glasgow.

If approved, the moves could amount to a major shift in climate policy by Russia, one of the world’s largest hydrocarbon producers. Officials in Moscow were surprised by the deal announced in Glasgow between the U.S. and China that would reduce coal consumption in the Asian country, a market that the Kremlin had been counting on for its growth plans, according to two officials familiar with the situation.

The government also plans to start discussions with business on the outlines of carbon regulations, possibly including a tax, the people said, speaking on condition of anonymity to discuss matters that aren’t public. The idea has so far gotten little support in Russia, one of top-5 emitters of carbon dioxide.

President Vladimir Putin stayed home from the Glasgow summit, citing Covid-19 risks, but has stepped up efforts to address climate change this year, ordering the government to draw up a strategy and signing a law that created a framework for green projects and carbon trading. He also set 2060 as the deadline for reaching net zero carbon emissions.

Russia won’t join the global agreement to reduce methane emissions, the people said, noting that the government’s plans to boost liquefied natural gas output substantially in the coming years are likely to mean more methane leaks.

The U.S.-China agreement was the biggest surprise for Russia, which had been planning to boost coal production to meet growing Chinese demand. But the deal reached in Glasgow would mean consumption there could begin to decline after 2025, well before Russia had expected it to, dealing a potentially major blow to the industry, the officials said. How much of an overhaul the country’s coal strategy might get as a result remains unclear, they said.

Russia is the third largest coal exporter globally after Australia and Indonesia. Its current strategy calls for ramping up output to a bit less than 700 million tons per year in 2035 compared with just about 400 million tons in 2020. Russia is spending more than $10 billion on railroad upgrades that will help boost exports of coal to meet the demand in Asia. 

“Even if China accelerates the reduction of coal use, this process will be slow, so Russian miners will have a lot of time to adjust output,” said Kirill Chuyko, chief of research in BCS Global Markets.

Possible carbon regulations could take several forms, including a tax or some kind of border mechanism like the one the European Union introduced, these people said. First Deputy Prime Minister Andrey Belousov will lead the discussions, which are expected to last at least a year, they said. His press office didn’t immediately respond to a request for comment.

Publicly, Belousov Tuesday was showing no sign of a shift in position, telling an industry conference, “Demand for hydrocarbons, including for hard fuel for Southeast Asia and China, will remain for years, if not decades,” Tass reported.