This week Dubai welcomes COP28, an annual UN conference on combating global warming. The significance of the climate-change issue is underscored by the fact that this October marked the hottest month ever recorded in the history of meteorological observations, and scientists predict that the year 2023 may set a new historical temperature record.
COP28 is taking place amid escalating geopolitical conflicts worldwide and a slowdown in global economic growth, partly due to changes in the energy market. Nevertheless, even contentious political issues such as US and EU protectionism regarding green goods from China, such as solar panels and electric cars, or economic sanctions against Russia, are being set aside.
Climate transcends politics. Preventing an increase in the average global temperature by more than 1.5 degrees Celsius by 2050 is a global imperative achievable only through international cooperation and coordinated efforts by all countries.
Sultan Al Jaber, the president of COP28, has stated that one of the summit’s tasks will be a “global inventory” of progress in fulfilling the commitments, nationally determined contributions (NDCs), that countries have undertaken within the framework of the Paris Climate Agreement.
He also emphasized the importance of fulfilling a long-standing commitment by wealthy nations, which historically accounted for the majority of greenhouse gas emissions, to provide US$100 billion annually to support poorer countries in their efforts to combat climate change and transition to renewable energy sources.
This year, China will be one of the most active participants in COP28. Despite the challenges posed by its rapidly expanding industrial output, President Xi Jinping committed in 2020 to achieving net-zero emissions by 2060.
The country is making significant strides toward this goal. China has led the world in electric-vehicle production for eight consecutive years and boasts the highest installed capacity of solar and wind power plants globally, aiming to surpass 1.2 billion kilowatts by 2030.
China is also assisting 40 developing countries, particularly in Africa and small island states, in addressing climate-change effects and adopting green energy solutions based on Chinese photovoltaics (solar panels).
Russian involvement
Russia will also be a significant participant in COP28, with a high-level delegation and its own pavilion at the conference. In October, President Vladimir Putin signed the Climate Doctrine outlining a concrete action plan to achieve carbon neutrality by 2060.
Many Russian companies are already at the forefront of implementing climate programs. For instance, Rusal is the world’s leading producer of low-carbon aluminum, much of which is supplied to China.
The state corporation Rosatom plays a crucial role in Russia’s climate agenda, not only operating nuclear power plants, which account for 20% of Russian electricity supply, but also constructing nuclear power facilities in other countries, promoting decarbonization.
SIBUR, a leading Russian producer of polymers and rubber, is also actively pursuing a climate strategy. SIBUR is the first Russian company to receive carbon units through the implementation of climate projects, which it monetizes in both domestic and international markets.
In September, it was it was reported that SIBUR was in discussions with Chinese firms regarding the sale of carbon units. By purchasing carbon units in Russia, Chinese companies interested in supplying eco-friendly products to global markets can reduce their carbon footprint. As environmental regulations tighten worldwide, the volume of such transactions is expected to increase.
Russia established a national register of carbon units last year and is gradually developing a carbon-unit trading system. Trading carbon units provides economic incentives for investment in modernizing production and transitioning to green technologies.
Russia is drawing inspiration from China, where the carbon-unit trading market was established in 2021 and has already become the world’s largest, with a total transaction volume exceeding 365 million tons of carbon dioxide. Moreover, the price range for carbon units in China, ranging from 50 to 70 yuan ($7 to $11) per ton of emissions, is lower than in Europe.
While national carbon markets are important, the fight against climate change must be waged on a global scale. Thus carbon markets in different countries should ultimately become interconnected.
Pilot cross-border trade agreements are crucial steps in this regard. To achieve this, international validation, mutual recognition of carbon units from different countries, and the use of blockchain platforms that enable secure and legally significant transactions are required.
Russia’s SIBUR is collaborating with Chinese partners and plans to negotiate one of the pilot cross-border carbon unit sales in the coming months.