(Bloomberg) — PhosAgro PJSC, Russia’s biggest producer of phosphate fertilizer, is calling for the government to help mitigate potentially billions in losses for the country’s raw-materials producers if Europe introduces a carbon tax.
The European Union is looking at how a potential carbon tax could help meet its 2050 goal of climate neutrality. If imposed, the levy would hit imports, including raw materials and products produced in countries without duties on emissions, such as Russia. The European Commission, the bloc’s executive arm, will next propose a draft regulation on the levy in June 2021.
A European carbon tax could potentially cost Russian companies between $1.8 billion to $8 billion every year “depending on the scope of the processes and products to which the tax may be applied,” Andrey Guryev, PhosAgro’s chief executive officer, said in an interview in Moscow.
“Europe is a big export market for all of us,” Guryev said.
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While the precise rules of a Europe-wide carbon tax haven’t been worked out yet, EC President Ursula von der Leyen warned in January that fossil fuel producers must pay a levy on pollution at home or risk being hit with a planned greenhouse gas duty on products imported into the EU.
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Guryev said the Russian government could help companies mitigate carbon-tax costs by re-examining the potential for the nation’s forests to absorb pollution.
Russia is home to about 20% of the world’s forests, but their ability to absorb carbon is currently thought to be less than other countries, such as Finland. Dmitry Islamov, Russia’s deputy head of the energy commission at the State Duma, said last year that the ability of Russian forests to absorb CO2 is underestimated and needs to be re-studied.
Guryev said Russian companies could potentially cut future carbon-tax bills by investing in their own forests. The government should also look at introducing legislation to help companies, such as allowing free leases of state-own forest, he said.
The Economy Ministry says it’s aware of the potential cost issues for Russian companies and is draftomg a low-carbon development strategy. This includes efforts to increase the absorptive capacity of forests, deputy minister Ilya Torosov said through the ministry’s press service. Developing the trading of carbon units remains one of the priorities, he added.
Other Russian commodities exporters to the EU are trying to be greener:
Novolipetsk Steel PJSC, Russia’s largest steelmaker, already has lower greenhouse gas emissions than most of its peers and it seeking to cut them further, according to ecology director Nikita Vorovyov. It is currently building a power plant fueled by gases emitted from the company’s smelting operationsSeverstal PJSC plans to cut its emissions from operations by 3% through 2023. It’s also studying how to curb its carbon output further, including using hydrogenUnited Co. Rusal International PJSC uses hydropower for aluminum smelting and is now working on developing inert anode technology, which has the potential to reduce the company’s carbon footprint to a record low level of 2 tons of CO2 per ton of aluminum produced. It also has planted over 1 million trees since last year in the regions where it works.
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