AIM Carbon: Integration of Carbon Units into International Climate Processes

Countries participating in the Paris Agreement are increasingly focusing on international cooperation to prevent climate change. This includes being subject to cross-border carbon regulation, which has been gradually introduced in the EU since 2023 and is expected to be adopted by other major trading partners.

In 2023, the Climate Doctrine was approved, detailing plans for low-carbon development. One key initiative involves implementing natural climate projects aimed at reducing emissions and increasing greenhouse gas absorption through natural ecosystems. Experts from AIM Carbon predict a significant rise in demand for carbon units generated by such projects. With the anticipated introduction of cross-border carbon regulation (CBAM) and international initiatives like CORSIA for aviation emissions compensation, climate projects are increasingly relevant.

Carbon payments are expected to be introduced between 2026 and 2028. This will coincide with the enforcement of the European Cross-Border Carbon Adjustment Mechanism (CBAM) and similar measures by countries like China, Kazakhstan, India, Turkey, and others. These measures, along with the launch of CORSIA, will create substantial demand for carbon units.

"Our analysis has identified which methodologies of natural climate projects are likely to be acceptable under both cross-border carbon regulation and the CORSIA program. Companies interested in these projects should start planning now, considering that deployment takes 2-3 years," emphasized Andrey Ptichnikov, Deputy Director for Scientific and Methodological Support at AIM Carbon.

Experts note that many certified climate projects may not always meet the additionality criteria set by international standards. For instance, projects certified under ISO14064 greenhouse gas standards or registered in national carbon registries might not be deemed suitable for offsetting carbon footprints in cross-border processes. Buyers of carbon units, including regional and national cap-and-trade systems and voluntary market programs, impose strict requirements on the methodologies and quality of these projects.

AIM Carbon is actively developing feasibility studies and designing climate projects that meet international standards, including Article 6.2 of the Paris Agreement. These projects are planned for implementation not only domestically but also in several African countries, where their socio-economic impact will be most significant.

Thus, participating in the Paris Agreement and implementing natural climate projects are vital steps towards sustainable low-carbon development, crucial for combating global climate change.

Additional Information:

Article 6 of the Paris Agreement allows countries to voluntarily cooperate to achieve their nationally determined contributions (NDCs). This means that under Article 6, a country can transfer carbon credits resulting from greenhouse gas emission reductions to help one or more countries meet their climate goals. Article 6.2 sets the foundation for trading greenhouse gas emission reductions between countries. The mechanism described in Article 6.4 is expected to resemble the Clean Development Mechanism of the Kyoto Protocol, facilitating emission reductions trading under the supervision of the Conference of the Parties.

According to the World Bank, carbon markets are essential tools for achieving global climate goals, especially in the short to medium term. They mobilize resources and reduce costs, offering countries and companies opportunities to transition smoothly to low-carbon technologies and achieve carbon neutrality efficiently. Carbon markets stimulate climate action by allowing parties to trade carbon credits earned from reducing or removing greenhouse gases from the atmosphere, such as switching from fossil fuels to renewable energy or increasing carbon stocks in ecosystems like forests. Estimates suggest that carbon trading can halve the cost of implementing countries' NDCs to $250 billion by 2030, potentially increasing emissions removal by 50% (about 5 gigatons of CO2 per year).

The EU Cross-Border Carbon Adjustment Mechanism (CBAM) requires organizations exporting materials/products to the EU to report greenhouse gas emissions and purchase certificates for these emissions. Costs will be proportional to the carbon intensity of the exported goods. Reducing the carbon intensity of exports is thus a cost-cutting measure and the primary mechanism of CBAM. Full-scale regulation requires exporters to report quarterly greenhouse gas emissions, submit annual CBAM declarations, and purchase certificates covering these emissions, priced according to the average weekly cost of carbon within the EU Emissions Trading System (EU ETS).

According to the Ministry of Economic Development, key trading partners such as China, India, Turkey, Kazakhstan, and others are actively implementing carbon regulations in response to the EU's mechanism. Russian exporters might need to pay these fees in the countries to which exports are redirected. This perspective was shared by First Deputy Minister of Economic Development Ilya Torosov.