MOSCOW – The Russian economy can easily weather the carbon border tax as proposed by the European Union in July 2021, the World Bank said on Friday, calling on Moscow to take cooperative action along the global path to a green transition.
The EU proposed a Carbon Border Adjustment Mechanism (CBAM), or CO2 tariff, on polluting goods from 2026, which think-tanks said could lead to increased fee charges on products from Russia, mainly on metals and fertilisers.
“Even if Russia continues its current growth model, the economy-wide macroeconomic effect of EU CBAM would be negligible to small depending on its design,” the World Bank said in a report on risks and opportunities of the green transition.
“Even if the U.S. joins the EU in introducing a carbon border adjustment, Russia’s losses will increase only negligibly.”
The World Bank lowered Russia’s economic growth forecast earlier this month, highlighting risks related to the green energy transition among others, including geopolitics and the COVID-19 pandemic.
After shrinking by 3% in 2020, its sharpest contraction in 11 years, the Russian economy is set to grow 4.3% this year, according to the World Bank, but momentum will likely wane in the next few years.
“The low-carbon transition efforts of the EU and other large trading partners create a fresh incentive for Russia to catch up with overdue diversification and modernisation of its economy,” the World Bank said.
Russia is the world’s fourth-largest emitter of greenhouse gases and relies heavily on fossil fuel exports – but President Vladimir Putin has ordered the government to work towards cutting emissions.
Russia’s plan to reduce its carbon footprint by 2050 will require investments of between $13.6 billion and $54.5 billion per year, the central bank said last month.
($1 = 73.4600 roubles)
(Reporting by Andrey Ostroukh; Editing by Andrea Ricci)
