Prospects for Investing in Forest Climate Projects in Russia

Abstract

This study examines the usefulness of forest climate projects as a vehicle for investment in the domestic carbon market. The main objective is to identify the prerequisites for establishing a Russian carbon market, which would set the stage for sustainable reduction of greenhouse gas emissions. The article begins by analyzing the global climate agenda in detail, highlighting the functions and significance of forest climate projects in regulated carbon markets, and describing the market dynamics for carbon units. Since 2021 the Paris Agreement's provisions have been implemented, the EU Green Deal has been initiated, forestry and land use regulation have became part of the EU emissions trading system, and the CORSIA compensation mechanism for emissions from international air travel has been launched. The article assesses the potential for a Russian carbon market in forestry units. The Siberian regions and Far Eastern federal districts offer the greatest opportunity for carrying out forest climate projects. That opportunity depends upon improving crucial components of forest management in Russia's state forest holdings in order to increase the carbon stock and reduce greenhouse gas emissions; this would entail reforestation of clearcut areas (with additional measures that enhance carbon storage and prevent emissions from unfavorable factors) as well as planting new forests. The article then elaborates a method for estimating and developing the carbon market potential of forestry units in Russia in order to evaluate the prospects for implementing such projects (a carbon budget). A calculator for carbon credits has been prepared for use by potential Far East investors, and services are available for them to select a forest site via online auctions and execute transactions online.