Russia wants to make sure that the carbon-taxation system it’s developing is recognized by the European Union and other major trading partners, according to Deputy Finance Minister Alexei Sazanov.

“The Finance Ministry sees that developing a system of trading carbon quotas would be the best option,” he said in an interview. “We don’t need to start from scratch. Practices have already been developed globally, for example, in Europe and China, which can be taken for a basis.”

Making sure that any quotas that Russia may adopt are accepted internationally is vital, since the system would allow Russian companies to claim credit for them under the EU’s planned border levy. Estimates put the cost for that to Russia at as much as $3.4 billion a year starting in 2026.

Introducing carbon regulation would also be necessary if Russia wants to impose its own border levy, he said. 

President Vladimir Putin 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.

“Our level of per capita income is objectively lower than in developed economies. We can’t afford the same cost per unit of emissions as, for example, the European Union,” Sazanov said. This is the reason why the EU has 2050 as the carbon neutrality target, while Russia can’t reach it that soon, he added. 

A system of traded quotas is optimal because it regulates emissions and creates long-term economic incentives for companies, even though Russia isn’t considering tax incentives to stimulate the green transition, Sazanov said.

He said there’s no timeline yet for when the government will approve the new mechanism.