20. Environment law and renewable energy

General

Over the past decades, Russia has adopted complex environmental legislation that is generally in line with commonly accepted international standards. Its practical implementation, however, remains limited due to the general character of regulations and the inconsistent application of the corresponding penalties. This forces the legislator to develop the respective regulations further with clearer commitments and a more transparent system of liabilities and sanctions.
One may also see further developments in such areas as waste treatment and climate change regulation.
Notwithstanding efforts applied by the state, investment in environmentally efficient technology in Russia remains low in comparison to developments in the rest of the world. This is due to regulatory constraints as well as to a lack of public awareness and understanding of environmental issues.

Legislation on environmental protection

The Environmental Protection Law provides for an overall framework for environmental management and imposes general requirements related to the construction and operation of various facilities that may be harmful to the environment.
Types of environmentally dangerous facilities
The Environmental Protection Law classifies facilities depending on the level of their environmental impact and indicates which methods of state control are applicable to each category of facility, as follows:

Таблица

Таблица

The criteria to classify facilities are currently established by the Russian Government.

Air protection

Main requirements
The main federal laws regulating air protection are the Environmental Protection Law and Law on Air Protection.
One of the main principles of the state policy on air protection is mandatory state regulation of emission of polluting substances into atmospheric air.
The following activities are expressly prohibited:
· Emitting pollutants into the air without a permit (when such permit is required by law);
· Exceeding the established maximum concentrations of pollutants in emissions; and
· Emitting prohibited pollutants into the air.
Owners of facilities of Categories I and II must prepare a project of maximum allowable emission values and regularly report to the supervising authorities. As for owners of facilities of Category III, they only have reporting obligations.

Water protection

The main federal laws regulating water protection are the Environmental Protection Law and the Water Code.
Similar to air protection, it is expressly prohibited to:
· Discharge pollutants into bodies of water without a permit (when such permit is required by law);
· Exceed the established maximum concentrations of pollutants in discharges; and
· Discharge prohibited pollutants into bodies of water.
Owners of facilities of Categories I and II must prepare a project of maximum allowable discharge values and regularly report to the supervising authorities. As for owners of facilities of Category III, they only have reporting obligations.

Land protection

The main federal laws regulating land protection and preventing its contamination are the Environmental Protection Law, the Land Code and the Law on Agricultural Lands.
Unlike with air and water protection, landowners are not subject to a requirement to hold any permits or submit reports with respect to the use of land.
However, they must prevent any contamination, depletion, degradation, damaging or destruction of their land.
Land quality monitoring must be also continuously conducted to ensure compliance with applicable sanitary standards.

Environmental payments

Pollution discharge fees
Pollution discharge fees are calculated for each waste ingredient and pollution type depending on the level (volume or weight) of the danger they pose to the environment and public health.
The following activities are subject to pollution discharge fees:
· The emission of polluting substances into atmospheric air by stationary sources;
· The discharge of polluting substances into bodies of water; and
· The storage and burial of production and consumption waste.
The corresponding pollution discharge fee structure is calculated depending on the following elements:
· Pollution within the permissible norms and established limits;
· Application of an increasing coefficient for certain regions and environmental facilities based on ecological factor;
· Application of an increasing coefficient for the above-limit discharge (x25 for waste, and x25 or x100 for other polluting substances depending on the facility’s category); and
· Application of an incentive system (reducing coefficients down to x0 depending on the application of environmentally friendly technologies and so-called “best available technologies”, implementation of measures and plans aimed at reduction of pollution, etc.).
Environmental fee
The environmental fee must be paid by goods and packaging manufacturers and importers who fully or partially fail to perform their waste management obligation by not meeting the established compulsory recycling targets. The list of goods and packaging, in respect of which this environmental fee is payable, is quite broad and includes textiles, paper products, petroleum products, plastic products, batteries, computers, communications and electrical equipment as well as packaging of various materials. The environmental fee rates are set in Russian roubles for each ton of the product and/or packaging to be recycled.
Vehicles recycling fee
Manufacturers and importers of vehicles must pay a recycling fee.
The Russian Government sets the types and categories of vehicles subject to the recycling fee and ratio of this fee.
This ratio varies depending on the engine volume, capacity, weight and age of a vehicle.
The recycling fee is calculated by multiplying the established base rate by the applicable ratio set for a vehicle type.
The Russian Government sets and regularly reviews the above base rates.

Environmental liability

Violation of environmental law can lead to civil, administrative or criminal liability.
Civil liability
The Environmental Protection Law sets the principle of the full reimbursement for the damage caused to the environment.
There are two methods for such reimbursement:
· Recovery of damages by paying compensation; or
· Restoring the disturbed state of the environment.
The court hearing the case will choose which method of reimbursement applies.
In the first case, the amount of compensation is determined based on the actual costs of restoring the disturbed state of the environment (considering also the losses incurred, including loss of profit), or based on the established rates and methods of calculation.
In the second case, a restoration works project must be prepared to define the offender’s obligation to restore the environment.
An extended limitation period of 20 years applies to claims for damages caused to the environment (instead of the standard three-year term).
Administrative liability
Administrative liability in the field of environmental protection comes for offences set forth in Chapter 8 of Russian Code on Administrative Offences.
Within the framework of administrative liability, the offender can be warned or fined, the products and technical means of committing an environmental offence seized, or the offender may be deprived of a licence to use natural resources or conduct business activities related to environmental management.
For many offences, instead of a fine, an administrative suspension of activities for up to 90 days is possible.
The amount of fines for the same offence is different for individuals, company officials, legal entities and individual entrepreneurs.
Administrative liability is often combined with civil liability (see above).
Criminal liability
Criminal liability for environmental crimes is provided by Chapter 26 of the Russian Criminal Code.
Unlike administrative offences, crimes usually result in severe damage to the environment, harm to health or death.
Depending on gravity of its consequences, an environmental crime may lead to a fine, deprivation of the right to hold certain positions or carry out specific activities, mandatory works, correctional tasks, limitation of freedom, arrest or imprisonment.
Under the Russian Criminal Code, only individuals may be subject to criminal liability. Legal entities cannot.
It is not possible to hold an individual liable both administratively and criminally for the same violation at the same time.

Climate change

Even though Russia participates in the United Nations Framework Convention on Climate Change adopted in 1992 and acceded to the 1997 Kyoto Protocol thereto, the implementation of the main principles of climate change mitigation in Russia has been rather fragmentary. The relevant activities accelerated upon adoption of the Paris Agreement on climate change mitigation in 2019.
On 30 December 2021, the Law on Greenhouse Gas Emissions came into force. In particular, it provides that the Government sets targets for reducing greenhouse gas emissions, distinguishing between an all-Russia target (to be established in accordance with presidential executive orders and strategic planning documents) and target indicators for individual sectors of the economy. Another key measure for limiting greenhouse gas emissions is the introduction of mandatory state accounting for greenhouse gas emissions generated by regulated organisations.
The above law also determines support measures to encourage voluntary implementation of the respective climate projects. As a result of the implementation of these projects, the implementers will be credited with carbon units expressed in the mass of greenhouse gas equivalent to one ton of CO2. Information on climate projects, the parties implementing them, accrued carbon units and operations with units will be entered into the register of carbon units to be created. Implementers will be able to credit accrued carbon units to comply with the requirements to limit greenhouse gas emissions or reduce carbon footprints, or transfer units to other parties.
In 2021, the Russian Government adopted a strategy of socio-economic development of Russia with low greenhouse gas emissions to 2050 (the “GHG Strategy”).
The GHG Strategy identifies measures to ensure a reduction of greenhouse gas emissions by up to 70% compared to the 1990 level by 2030 and defines areas and measures for development with low greenhouse gas emissions until 2050.
The GHG Strategy also sets out two scenarios in relation to further dynamics of greenhouse gas emissions – inertial and target (intensive) ones. The differences in the development scenarios lie in the different approaches to adapting the Russian economy to the global energy transition.
Under the target (intensive) scenario, which is proposed to be the basic one for the implementation of the GHG Strategy, the goal is to ensure a further reduction in greenhouse gas emissions by 80% compared to the 1990 level by 2050.
The Russian President has also announced that the country is aiming to achieve carbon neutrality by 2060.
In 2022, the national register of carbon units was created.
Since 2022, 108 climate projects have been registered in the above register, with almost 37 million carbon units in circulation and almost 105 million carbon units to be issued. However, the offset volume is currently less than 200,000 carbon units, i.e. less than 1% of those in circulation. Such low demand is mainly due to the fact that the national voluntary carbon-trading market is just emerging. It is supposed that it will be driven by supplies to international markets, primarily China. But it is still subject to verification of the Russian carbon units under the international standards.

Renewables

State policy
Since the Russian Energy Strategy to 2030 was adopted in 2009 , the Russian legal and regulatory framework has improved but still remains inconsistent, with the renewable energy sources (“RES”) generation target being revised several times.
Currently, the target set by the Russian Government is 6% by 2035, excluding large hydropower plants of more than 25MW.
As of 1 January 2026, the RES share amounts to 2.82% of the country’s total installed power capacity of about 270GW.
The Russian legal and regulatory framework sets the rules on wholesale and retail energy trading, and offers certain incentives.
Subsidy scheme and incentives
In 2011, a support mechanism was introduced by the Law on Electricity: the promotion of RES through the capacity market. This scheme aims to ensure the financial viability of investments into renewables by concluding “Capacity Supply Agreements” with RES project developers.
The legal framework for this scheme was further developed in 2013 under Russian Government Decree No. 449 dated 28 May 2013 (“Decree 449”). Decree 449 establishes the regulatory mechanisms for selecting new RES projects and for their capacity supply agreements. Under a capacity supply agreement, the supplier undertakes to construct RES generation facilities in the relevant region. Once constructed, the project enjoys a long-term beneficial capacity price, which aims to guarantee returns on investments (with a 12% profit margin) over 15 years. The capacity to be produced by such facilities is selected by way of annual tenders for renewables at a price that is usually several times higher than the price for existing conventional capacity.
In March 2021, a new regulation governing the activities of the renewable energy market for the period from 2025 to 2035 was adopted.
The new regulation has generally maintained the existing capacity supply scheme implemented under Decree 449. However, it imposes additional requirements on manufacturers and suppliers in terms of increased local content ratio and target value of products to be exported.
More specifically, the bidders must provide a technical and commercial description of the project, including the percentage of localisation (local content), export commitments as well as ratio between the required annual proceeds from capacity and power sales, and planned annual volumes of power generation (efficiency rate of generating facilities). On that basis, the trading system administrator will select the winning bids, and a relevant RES capacity supply agreement will be signed. After completion of the construction, the authorities check that the generating facility meets certain requirements, such as those relating to the localisation of the equipment installed on the generating facility.
Also, since 2024, the qualified RES producers can sell the green attributes of the produced low-carbon power via power purchase agreements or guarantees of origin (green certificates) to partially return their investments. However, demand on such green attributes remains low since they cannot be used abroad so far.
Various other financial, legal and tax incentives are available at the local, regional and federal levels, depending on the specifics of a particular RES investment project (e.g. region of investment and degree of localisation, type of capital expenditure, legal and project financing structure such as a special investment contract (SPIC).
Outlook
Russia has the potential to increase the use of all types of renewable energy technologies. Historically (since the Soviet period), it has a well-developed hydropower segment. Its bioenergy potential is also significant, as this technology is used in the agriculture, forestry, infrastructure and trade sectors.
More generally, there are a number of drivers in Russia that explain the increasing focus on renewables and decentralised energy. New energy solutions are seen as a way to modernise the power system and meet the recently declared goals of decarbonisation of the economy. However, they are also a part of a broader socio-economic development model to achieve higher living standards. In addition, a decentralised electricity generation system is of interest to Russia’s remote and distant regions, as it is economically impractical to extend high-voltage electricity lines to these regions.
Furthermore, decentralised electricity generation is also attractive for industrial complexes. It offers opportunities and allows them to become more independent from the centralised power system. The current situation of relatively high electricity prices is another reason to explore new energy solutions.
Finally, in response to the sanctions imposed, Russia’s local content requirements have become one of its main economic policy drivers supporting inbound investments and technology transfers to develop local innovative technologies, including in the RES sector.