The Environment and Climate Change Law Review: Russia

Introduction

Russian policy and legal framework in the environmental and climate change sectors have undergone substantial development in recent years. Particular attention is currently paid to reduction of greenhouse gase (GHG) emissions, carbon neutrality and climate change initiatives.

On 29 October 2021, the Russian Government approved the Strategy for Low Carbon Social-Economic Development of Russia, which envisages reduction of GHG emissions by 60 per cent from the 2019 levels and by 80 per cent from the 1990 levels by 2050, among others. In addition, the Russian Federation intends to reach net zero by 2060. The strategy also envisages investments into reduction of GHG emissions of approximately 88.8 trillion Russian roubles.

The year 2021 was marked with a number of significant new pieces of legislation and recommendations of the regulators and other stakeholders. Notably, Central Bank of Russia's recommendations for disclosure of ESG information by public joint stock companies, the new law on limitations on GHG emissions and the Russian taxonomy, which is further described in Part VII.

Legislative framework

The Russian Federation is a party to a number of international environmental treaties and UN declarations, including:

  1. the Declaration of the United Nations Conference on the Human Environment of 16 June 1972;
  2. the Rio Declaration on Environment and Development of 1992;
  3. the Vienna Convention for the Protection of the Ozone Layer of 1985 and the Montreal Protocol of 1987;
  4. the Paris Agreement of 2015;
  5. the Convention on Biological Diversity (CBD) of 1992;
  6. the Convention on International Trade in Endangered Species of Wild Fauna and Flora of 1973; and
  7. the Basel Convention on Hazardous Wastes of 1989.

The Constitution of the Russian Federation provides that every person has the fundamental right to a favourable environment, accurate information about its state and to recover damages for any harm inflicted on such person's health or property by environmental offences. The Constitution also provides that every person is obliged to preserve the nature and environment and to take good care of the natural resources.

Building on its obligations under international environmental treaties and the Constitution of the Russian Federation, the Russian authorities have adopted over 4,000 environmental laws and regulations.

The cornerstone of the Russian environmental legislation is the Federal Law on the Protection of Environment of 2001 (the Environmental Protection Law), which establishes, among other things:

  1. the key principles that must be followed by the Russian authorities, legal and natural persons when conducting their business and other activities, including:
    • protection of the human right to favourable environment;
    • preservation of biodiversity;
    • protection of the right to accurate information about the state of environment;
    • responsibility of the Russian authorities for preserving the environment;
    • compulsory environmental impact assessment for planned activities; and
    • reduction of negative environmental impact of business and other activities through the use of the best available technology;
  2. the powers of Russian authorities related to environmental protection;
  3. the rights and obligations of individuals and non-governmental organisations related to environmental protection;
  4. the framework for rationing of emissions of pollutants;
  5. requirements for protection of environment applicable to certain types of business activities; and
  6. the framework for state monitoring of environmental protection.

In addition, there are a number of laws of the Russian Federation that supplement and detail the requirements of the Environmental Protection Law, including:

  1. the Federal Law on the Protection of Air of 1999 (the Law on Air Quality) and the Federal Law on Limiting Greenhouse Gas Emissions (not yet in force), which relate to air emissions;
  2. the Law on Subsoil, which, among other things, deals with protection of subsoil;
  3. the Water Code of 2006, which deals with protection of water bodies and establishes water use rights;
  4. the Forest Code of 2006, which deals with protection of forests;
  5. the Land Code of 2006, which deals with protection of land; and
  6. the Federal Law on Industrial Safety of Dangerous Industrial Facilities of 1997, which sets out requirements with respect to operation of facilities producing toxic, flammable and other substances.

The primary legislation on environmental protection is complemented by a comprehensive set of secondary legislation that sets out detailed technical standards related to protection of environment; these standards are further described in Part VI of this chapter.

In terms of Russian judicial precedents,2 the following two resolutions of the Supreme Court of the Russian Federation related to the environmental protection legislation are worth noting:

  1. Resolution N 21 of 18 October 2021 on Application of Legislation on Liability for Violations of Environmental Protection and Nature Use Legislation, which primarily deals with criminal liability for environmental damage; and
  2. Resolution N 49 of 30 November 2017 on Certain Matters of Application of Legislation for Compensation of Damage caused to the Environment, which lays down the rules for application and interpretation of the environment protection legislation by Russian courts, the methods for calculating damages recoverable for environmental wrongdoings and the procedure for recovery of such damages.

The regulators

The Ministry of Natural Resources and the Environment of the Russian Federation (the Ministry of Natural Resources) is the key state authority tasked with environmental protection. The main powers of the Ministry of Natural Resources include:

  1. developing environmental policy and regulations, including those related to subsoil use, emissions, waste management and biodiversity;
  2. ensuring compliance by the Russian Federation with its obligations under international environmental treaties; and
  3. coordinating and monitoring the Federal Service for Hydrometeorology and Environmental Monitoring, the Federal Service for Environmental, Technological and Nuclear Monitoring, the Federal Service for Environmental Use, the Federal Agency for Water Resources, the Federal Forestry Agency and the Federal Subsoil Agency.

The Federal Service for Environmental Use is tasked with monitoring, control and supervision of the subsoil use, land use, waste management, use of water resources and protection of biodiversity.

The Federal Service for Environmental, Technological and Nuclear Monitoring is tasked with supervision and monitoring of nuclear energy use, licensing nuclear energy use, compliance with industrial and fire safety requirements at dangerous industrial facilities, compliance by businesses with energy efficiency requirements and setting nuclear waste rations.

The Federal Service for Hydrometeorology and Environmental Monitoring is primarily tasked with monitoring air and water quality, and providing information to the public on the state of environment.

The Federal Agency for Water Resources is tasked with protection of water bodies (including taking remedial actions and measures to prevent their pollution), maintenance of the state water register, issuance of permits for water use, development of the framework for water use and ensuring replenishment of water resources of underground water bodies.

The Federal Forestry Agency is tasked with protecting forests and reforestation, maintaining the register of forests, and forest fire monitoring and prevention.

The Federal Subsoil Agency is tasked with subsoil protection, issuance and revocation of subsoil use licences and maintenance of subsoil register.

Most of the above-mentioned agencies and services have broad enforcement powers, which include the right to impose a penalty on an individual or legal entity for failure to comply with environmental protection laws and regulations. An individual or legal entity may challenge an enforcement action in Russian courts.

Enforcement

Russian law provides for civil, administrative, disciplinary and criminal liability for violations of environmental protection laws. The key principle of enforcement of environmental laws is that a person who has caused harm to the environment must remedy or pay compensation, or both, for such harm, whether or not the person has been brought to administrative, disciplinary or criminal liability.

i Civil liability

In accordance with Article 77 of the Environmental Protection Law and Article 1064 of the Civil Code of the Russian Federation (the Civil Code), legal entities and individuals who are guilty of causing harm to the environment through its pollution, depletion, destruction, irrational use of natural resources, degradation or destruction of ecosystems, natural complexes and landscapes or otherwise violate environmental protection laws must remedy or pay compensation, or both, for such harm in full. In certain instances, such obligation may arise where the offender is not guilty of causing harm to the environment. For instance, the Civil Code provides for strict liability of individuals or legal entities engaged in hazardous activities or owners of hazardous industrial facilities. In such cases, force majeure is the only defence available.

There are broadly two forms of civil liability for violation of environmental protection laws and causing harm to the environment: monetary damages and imposing environment restoration obligations on the offender. Monetary damages are calculated based on actual costs of the environment restoration.

The statute of limitations for claims that arise out of, or in connection with, harm to the environment caused by violation of environmental protection laws is 20 years.

The general assumption is that the titleholder of the relevant land plot or facility located thereon is responsible for securing that its activity and activity of third parties on its land are in compliance with the regulatory requirements. Thus, in case of any damage to the environment, public authorities will first make a claim against a titleholder who should compensate the damage and only after that has a right to apply to the responsible third party (including the previous titleholder) with a subrogation claim. This does not relate to criminal or administrative liability, which should be applicable to guilty persons only.

ii Administrative liability

To the extent that a violation of environmental protection laws constitutes an offence under the Administrative Offences Code of the Russian Federation (the Administrative Offences Code), the offender may face administrative liability. Administrative offences include failure to comply with waste management requirements, requirements for handling substances that are damaging to the ozone layer, concealment or provision of inaccurate environmental information and failure to provide or provision of inaccurate waste utilisation reporting. Administrative sanctions include fines, warnings, seizure of products and equipment used for causing environmental harm, and revocation of licences. In addition, in exceptional cases, Russian state authorities may suspend the operations of the offender's business for a period of up to 90 days. Such sanctions vary depending on whether the offender is an individual, legal entity or a governmental official. Russian authorities have a broad degree of discretion in choosing sanctions. An offender can avoid administrative liability if it proves that it was not guilty. A person or legal entity is guilty of an administrative offence if it is established that it could have complied with environmental protection legislation but has failed to take all measures at its disposal to ensure such compliance. However, in practice, a fact of non-compliance is sufficient for the administrative liability to be imposed, and Russian governmental authorities and courts do not take into consideration whether a person or legal entity was indeed guilty of an administrative offence. Another defence available is the 'insignificance' defence, which can be relied on when the relevant administrative offence has not posed a significant threat to the matters protected by Russian legislation.

iii Criminal liability

Serious violations of environmental protection laws may also result in criminal liability for individuals.3 Violations of environmental protection laws that are considered criminal offences are set out in the Criminal Code of the Russian Federation (the Criminal Code) and include failure to comply with environmental protection requirements in the course of design, commissioning and operation of industrial facilities, waste and toxins management requirements; in each case to the extent that such failure caused harm to human health, water and air pollution, resulting in material harm to the environment and destruction of forests.

Sanctions for criminal offences related to the environment range from a fine to imprisonment and vary depending on the offence and circumstances thereof. An offender can avoid criminal liability if he or she was not guilty of an offence. An individual is guilty of a criminal offence in this context if he or she acted or failed to act wilfully or negligently.

Reporting and disclosure

Russian environmental law provides for regular reporting of any activity that causes an adverse impact on the environment (e.g., air emissions, discharges into water bodies, waste generation and disposal) to the Russian regulators.

Russian law currently does not provide for mandatory public reporting of non-financial information, including on environmental matters. The Russian government has recently proposed a draft of law on Public Non-Financial Reporting (the Draft Law), which provides, among others, for mandatory disclosure by state corporations, state-owned companies, public joint stock companies and certain other types of legal entities of information on such entities' strategy, goals and results with respect to social responsibility and sustainable development.

The Central Bank of Russia (the CBR) has recently recommended4 that Russian public joint stock companies disclose non-financial information as part of their annual reports. The CBR recommendations are based on Recommendations of the Task Force on Climate-Related Financial Disclosures and Global Reporting Initiative Standards and encourage Russian public joint stock companies to disclose the following information:

  1. a strategy of sustainable development;
  2. the key short-, medium- and long-term environmental and social risks and opportunities related to a company's businesses, the impact of such risks on its business model, operations and financial performance, as well as the process for managing such risks;
  3. the corporate governance, business model, policies and procedures, including whether
    • board members are experienced and qualified in matters of sustainable development, environmental, social and governance (ESG) matters;
    • the company has assigned consideration of sustainable development, ESG matters and related risks and opportunities to designated board committees; and
    • sustainable development and ESG matters are integrated into the company's risk management and remuneration policies and procedures;
  4. GHG emissions, rates of energy, fuel and water consumption, waste management and utilisation, use of hazardous substances, impact on environmental resources and biodiversity; and
  5. the impact of climate-related performance of the company on its financial performance.

Environmental protection

i Air quality

The main Russian law in the field of air protection is the Law on Air Quality. This Federal law establishes the legal basis for protection of atmosphere, favourable environment and reliable information about its condition.

The Law on Air Quality introduces restrictions on emissions of pollutants, dividing emissions into three categories depending on their hazardous level:

  1. Category I, where a special permit is required;
  2. Category II, where a special declaration on atmospheric pollution is required; and
  3. Category III, where only reporting on emissions is necessary.

There are also many bylaws that establish specific rules for particular directions of air quality control:

  1. design, construction, reconstruction and operation of objects of various industrial facilities;
  2. operation of gas purification;
  3. production and operation of transport; and
  4. storage, disposal, neutralisation and incineration of production and consumption waste.

New levels of permissible emissions of hazardous substances have been recently introduced in the Russian Government Decree of 9 December 2020, No. 2055 on maximum permissible emissions, temporarily permitted emissions, maximum permissible standards of harmful physical effects on atmospheric air and permits for emissions of pollutants into atmospheric air. The list contains more than 500 types of pollutants, including benzapyrene, ozone, formaldehyde and phenol.

Persons operating hazardous objects must comply with a broad range of specific requirements in the field of air quality control, the most recent of which were introduced in January 2021 by the Russian Chief State Sanitary Doctor (CSSD Resolution No. 3):

  1. carrying out laboratory tests at the borders of sanitary protection zones of the facilities; and
  2. informing the population and public authorities about all cases of emergency situations, emergency and unplanned emissions into the atmosphere that pose a threat to the sanitary and epidemiological well-being of the population, and the measures taken to eliminate them.

ii Water quality

The law establishing requirements for water quality is the Federal Law on Water Supply and Sanitation of 7 December 2011, No. 416-FZ, which contains requirements for the quality of drinking and household water. Separately, certain requirements for the protection of water objects are established by the Water Code of the Russian Federation of 3 July 2006, No. 74-FZ.

Requirements for the quality of drinking and household supply water

The main requirements for the quality of drinking and household water were renewed at the beginning of 2021 and are now established by the CSSD Resolution No. 3. These requirements include:

  1. the appearance and composition of water (compliance with the hygienic standards for microbiological, parasitological, virological indicators, levels of intervention for radiological indicators, among others);
  2. the mandatory flushing and disinfection of commissioned water supply systems; and
  3. the specific design of water supply systems (e.g., presence of a mechanism to protect the water source from contamination).

The quality and safety of water should also comply with various hygienic standards, including those established in January 2021 by the Chief State Sanitary Doctor of the Russian Federation (Water Hygienic Standards). These include requirements for smell, color, taste, transparency, impurities and composition of substances in the water.

If the controlling authority finds that the supplied water does not meet the requirements, the water supply organisations should improve the quality of drinking water at the earliest convenience and, in case of a significant decrease in water quality, they should inform the population about this fact in the media.

Requirements for protection of water objects

The Water Hygienic Standards are also applicable to water objects, but there are some additional specific requirements. For example, there is a restriction on the discharge of certain types of waste into water objects. These include:

  1. wastewater of all types that contains pathogens of infectious diseases of bacterial, viral and parasitic nature in quantities above hygienic standards;
  2. wastewater that contains substances (or products of their transformation) for which hygienic standards are not established and there are no methods for their determination;
  3. untreated wastewater of water transport;
  4. pulp, snow;
  5. wastes; and
  6. petroleum products and oily waters.

It is prohibited to carry out works being a source of water pollution in the absence of special protective constructions and equipment to prevent water objects from pollution, clogging, siltation and depletion of water.

Chemicals

Production and handling of potentially hazardous chemicals, including radioactive, other substances and microorganisms are allowed on the territory of the Russian Federation only after conducting the necessary toxicological and hygienic studies of these substances, establishing the procedure for handling them, and state registration of these substances in accordance with the legislation of the Russian Federation.

Neutralisation of potentially dangerous chemical and biological substances is carried out in the presence of duly agreed technological documentation.

The following chemicals have to be registered:

  1. a chemical, a biological substance or a medicine (or all three) that has been introduced into production for the first time and has been previously unused, as potentially dangerous to individuals;
  2. certain types of products that pose a potential danger to individuals; and
  3. certain types of products, including food products, imported into the territory of the Russian Federation for the first time.

There is also a specific regulation regarding agrochemicals and pesticides that was established in January 2021 by the CSSD Resolution No. 3. The requirements relate to information duties, methods of use, permitted distance to settlements and other conditions for the use of agrochemicals and pesticides. Finally, specific restrictions related to air, land and water pollution also apply to chemicals included in the list of hazardous substances.

Solid and hazardous waste

The main aspects of regulation of solid and hazardous waste are covered by the Federal Law on Production and Consumption Waste (Waste Law) of 24 June 1998, No. 89-FZ.

All wastes are divided into hazardous classes I–V, according to the degree of negative impact on the environment:

  1. class I–extremely hazardous waste (e.g., containing mercury compounds, lead oxide, soluble lead salts, radioactive compounds of polonium and plutonium);
  2. class II–highly hazardous waste (e.g., containing chlorine, arsenic, lithium and cobalt);
  3. class III–moderately hazardous waste (e.g., containing nitrates and fresh bird droppings);
  4. class IV–low-hazard waste (e.g., containing sulfates, chlorides and bronze); and
  5. class V–practically non-hazardous waste (e.g., household garbage, paper and cardboard waste).

Entities engaged in waste management should meet the following criteria:

  1. have technical documentation on the use and disposal of generated waste;
  2. have places for waste collection;
  3. prepare waste generation standards and limits on waste disposal to reduce their volume;
  4. conduct inventory of waste and facilities for their placement;
  5. monitor the state and pollution of the environment in the territories of waste disposal facilities; and
  6. immediately inform the state authorities in the event of occurrence or threat of potentially dangerous accidents related to waste management.

Legal entities and individual entrepreneurs who are engaged in collection, transportation, processing and disposal of waste of hazard classes I–IV are required to obtain an appropriate licence.

If the waste is classified as dangerous, then it should have a waste passport and be subject to special rules of transportation, while the relevant entities dealing with such wastes should employ specially trained people and have technical capabilities to ensure safe handling of wastes.

Contaminated land

According to the Land Code of the Russian Federation of 25 October 2001, No. 136-FZ (Land Code), the implementation of measures for protection of land, forests, water bodies and other natural resources and the prevention of pollution, depletion, degradation, damage, destruction of land and soil and other negative effects on land and soil are the responsibilities of titleholders of land plots.

The preservation of soil and its fertility is one of the main and most important duties of titleholders of land plots. Titleholders are obliged:

  1. to carry out production of agricultural products in ways that exclude or limit the adverse impact of such activities on the environment;
  2. to comply with the norms and rules in the field of ensuring the fertility of agricultural land;
  3. to submit information on the use of pesticides and agrochemicals to the relevant executive authorities in accordance with the established procedure;
  4. to promote agrochemical, soil, phytosanitary and ecological-toxicological surveys of agricultural lands; and
  5. to inform the relevant executive authorities about the facts of degradation of agricultural land and soil pollution on land plots in their possession or use, among others.

If soil or land is already polluted, the legislation provides for a number of measures to restore them, including amelioration, recultivation and conservation.

In the event of non-compliance with the above-mentioned requirements, the relevant legal entities or individuals may be subject to criminal (for individuals only), administrative or civil liability as described in detail in Section IV above.

Climate change

i Climate targets and national plans for meeting those targets

At the end of 2020, the Russian President for the first time officially requested the government to take measures to decrease GHG emissions. In response to that request, in October 2021, the government adopted a new development strategy under which it announced a new interim target to reduce GHG emissions by 70 per cent in comparison with 1990 by 2030. By 2050, net-emissions of green-house gases should be reduced by 60 per cent in comparison with 2019 and by 80 per cent in comparison with 1990, while carbon neutrality should be achieved by 2060.

A variety of measures are proposed to achieve the announced strategy, including replacing part of the coal-based energy generation to non-coal or low coal sources, increasing utilisation volumes of associated gas and intensifying hydrogen export.

ii Climate disclosures for companies and financial companies

Starting from 2023 the key greenhouse gases producers (with emissions exceeding 150,000 tons of CO2 per year until 1 January 2024 and 50,000 tons per year after this date) will be subject to carbon reporting requirements. However, no liability for non-reporting has yet been established.

In 2021, the Central Bank of Russia also issued its recommendations for voluntary disclosure of ESG sensitive information by public legal entities as described in detail in Section V above.

At the same time, there are no ESG reporting requirements or climate stress tests for banks and other financial institutions.

iii Law on limitations on GHG emission

The new law on limitations on GHG emission enacted in 2021 and coming into force from 30 December 2021 introduces the 'carbon unit' concept. Each company that is developing a climate project (i.e., a project that is aimed to reduce emission levels) may get a certain amount of carbon units. However, it is not clear how companies will be able to use received carbon units as neither incentives nor calculation mechanics have yet been introduced.

iv Russian taxonomy

In September 2021, the Russian government introduced the first level of the Russian taxonomy, which contains criteria for sustainable projects in key sectors of economy, requirements for verification of such projects, criteria for financial instruments of sustainable development, valuation standards, criteria for verificators and the documents required for verifications.

There are two types of sustainable projects: green and adaptational (i.e., those that are aimed at adapting the economy to climate change).

Green projects may be introduced in eight key areas:

  1. waste management and utilization;
  2. energy (including nuclear power industry where all projects aimed at construction or reconstruction of nuclear stations are considered green);
  3. construction;
  4. industrial facilities;
  5. transport and industrial equipment;
  6. water supply and sewage services;
  7. natural landscapes, rivers, reservoirs and biodiversity; and
  8. agriculture.

Adaptational projects may be developed in six key areas:

  1. waste management and utilisation;
  2. energy (excluding nuclear power projects);
  3. sustainable infrastructure;
  4. industrial facilities;
  5. transport and industrial equipment; and
  6. agriculture.

The Russian state development corporation VEB.RF is generally responsible for the development of investment activity in the field of sustainable (green) projects.

Although the regulation represents a substantial move forward, an important part of the regulatory framework – the exact measures of governmental support and remuneration for sustainable projects – remain under discussion and are intended to be introduced at a later stage.

Outlook and conclusions

The Russian legal framework in the environmental and climate change sectors is a moving target and is subject to numerous developments.

A new draft law is currently considered by the Russian Parliament to establish a special experimental regime of carbon neutrality for Sakhalin projects. The experiment should take place in 2022–2025 and, if successful, will be extended to other Russian regions.

The key purpose of the experiment is to reach 'carbon neutrality' of Sakhalin projects by the end of 2025. The draft proposes to establish obligatory carbon reporting for all affected companies, emission quotes and penalties for exceeding them, incentives (including tax incentives) for use of new technologies and if the company reached carbon neutrality. VEB.RF is to be coordinating the experiment.

The Russian taxonomy, which was also designed by the Russian state development bank VEB.RF in conjunction with the Climate Bonds Initiative (CBI), is intended to be broadly in line with the taxonomies already published by the CBI and the European Union. The Russian government intends to develop a detailed plan for climate projects by May 2022 and to start their implementation soon after. It also considers broadly aligning the environmental legislation with other jurisdictions (such as the European Union) to make cross-border investment easier and the sector more attractive for global investors.

Footnotes

1 Anna Saenko and Sergey Shiposha are managing associates at Linklaters.

2 While judicial precedents are not considered a source of law in the Russian Federation, under the Civil Procedural Code and the Arbitrazh Procedural Code, a failure to comply with the interpretation of law of the Supreme Court of the Russian Federation constitutes grounds for reviewing a lower's court decision upon the discovery of new facts.

3 Under Russian law, legal entities cannot be found criminally liable. As a general rule, to the extent a legal entity commits a criminal offence, an individual serving as the general director or dedicated compliance manager will face criminal liability in connection with the offence.

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