At Carbon-Neutrality Conference, PhosAgro and Russian Academy of Sciences Announce the Launch of a Project to Create a Carbon Farm in the Vologda Region

The conference was attended by Alexander Sergeev, President of the Russian Academy of Sciences; Andrey Guryev, PhosAgro CEO and President of the Russian Fertilizer Producers Association; Yelena Zlenko, Deputy Chair of the Federation Council Committee on Agriculture and Food Policy and Environmental Management; Andrei Sulin, a partner at Ernst & Young; Oleg Kobyakov, Director of the Liaison Office with the Russian Federation at the UN's Food and Agriculture Organization (FAO); and the heads of RAS institutes and research centres as well as experts on agribusiness.

"In connection with the introduction of the EU's Carbon Border Adjustment Mechanism (CBAM), the issue of monitoring and sequestering emissions not only of our individual enterprises and companies but also of entire regions is a burning issue on today's agenda. Interesting alliances are being formed where the interests of business, science and local authorities intersect. This is precisely the sort of alliance that has been created in the Vologda region, where PhosAgro's main production facilities are located," said RAS President Sergeev during his presentation.

He recalled that, at the St. Petersburg International Economic Forum in June of this year, the RAS, PhosAgro and the Vologda region signed a cooperation agreement on monitoring climate change and minimising environmental impact.

"We are starting to work together on low-carbon issues, having launched a joint project to create a system to monitor greenhouse gas dynamics at the regional level. The project to create a carbon farm in the Vologda region will be not only a pilot in terms of solving the problems of a low-carbon economy but also an example of properly aligned cooperation between Russian business and science," said the President of the Russian Academy of Sciences.

PhosAgro CEO Andrey Guryev noted that the pilot portion of the first carbon-neutrality project in Russia would be implemented by 2025 and that the farm would start full-fledged operations in 2028.

"New forest and field terrain will be prepared in the immediate vicinity of PhosAgro's Cherepovets site, in the Vologda region, the purpose of which will be to sequester carbon. It will have a design capacity of 0.7 million tonnes of CO2 per year. The scientific and methodological expertise of the Russian Academy of Sciences will help us achieve success in this project. I am confident that our joint work on carbon-farm projects will contribute to the efficient use of our country's natural resources and the successful search for new approaches to minimising the impact of industry on the environment," said Mr Guryev.

He stressed that PhosAgro had begun making serious investments to modernise its capacities and to introduce technologies that meet the most stringent environmental standards from the moment of the Company's founding 20 years ago (PhosAgro is celebrating its 20th anniversary this year).

"Last year, we adopted a comprehensive climate strategy that includes a low-carbon transition plan with a target of a 14% reduction in greenhouse gas emissions by 2028 from our 2018 baseline. We are implementing a programme to improve energy efficiency. We are constantly investing in equipment that allows us to generate electricity using waste heat generated during production. We are increasing the share of green energy from hydroelectric power plants and renewable sources in our energy consumption. This year, it will already account for over 20% of the energy consumption of our mining and processing site in Khibiny, above the Article Circle. Projects related to the creation of a carbon farm will be an integral part of our environmental strategy," said Mr Guryev.

The Deputy Governor of the Vologda region, Vitaly Tushinov, said that the sustained socio-economic development of the region was impossible without the implementation of environmental programmes.

"The Vologda region is one of the few regions that, in the context of the rapid development of industry and the forestry sector, has increased the volume of replanted forest more than fivefold. We are taking part in the 'Clean Volga' federal programme and in the 'Clean Air' programme, which is also being carried out in the city of Cherepovets thanks to PhosAgro and Severstal. Vologda aims to become one of the most environmentally friendly cities in the Russian Federation. We are implementing a programme for the transition to electric vehicles in Vologda and to natural-gas vehicles in Cherepovets. This is also helping reduce emissions," said Deputy Governor Tushinov.

According to the Deputy Governor, the new project to create carbon farms, undertaken by PhosAgro and the RAS, is a clear example of business responsibility.

"I'm confident that the joint efforts of big business, science and regional authorities will help make it a success and will make it possible to expand the project in the future to regions throughout Russia," added Mr Tushinov.

Yelena Zlenko, Deputy Chair of the Federation Council Committee on Agriculture and Food Policy and Environmental Management, noted that experiments related to assessing the absorptive capacity of ecosystems were of exceptional importance in light of Russia's international commitments.

"The proactive position of science and business is very important in order to develop the necessary methodologies. Today, the forestry sector covers every constituent entity of the Russian Federation. We have an opportunity not only to preserve forests but to start trading carbon credits on the basis of our forestry sector. To do this, it is important for us to provide in the near future a full and objective account of greenhouse gas emissions and absorption, and to stimulate support for reducing emissions by improving industrial energy efficiency," said Ms. Zlenko.

Ernst & Young's Andrei Sulin stressed that, in the context of the discussion on the CBAM and the European Green Deal, forestry-based climate projects (carbon farms) were of strategic importance, adding, however, that it was already time for them to be systematically worked out in terms of regulation and possible areas of monetisation.

"Russia has colossal forest reserves; the potential for carbon sequestration is enormous, but this opportunity has to be properly managed in order to make it attractive for investments. Right now, unfortunately, carbon sequestration by carbon farms isn't taken into account for the purposes of the CBAM, but the question of the advantages of counting such offsets can be raised once again through the EU's open public consultations. The current price for carbon credits in voluntary markets is negligible – at such prices, carbon farms won't be able to recoup their investments. In addition to expectations of increased demand, initiatives to regulate voluntary markets to reduce their uncertainty (risks) could also boost the price of carbon in voluntary markets. Also, prior to the upcoming UN Climate Change Conference in Glasgow, the discussion of Russia's position on the market mechanisms of Article 6 of the Paris Agreement, which could become an additional channel for monetising carbon credits, is gathering steam. And, of course, we must not forget about the need to develop regulations for the methodologies used for absorption calculations and for their verification, as well as other regulatory issues concerning carbon farms. They shouldn't be isolated from the rest of the world; on the contrary, they should be built into global/European regulations to ensure comparability and opportunities for offsets and monetisation in international markets," said Mr Sulin.

According to the FAO's Oleg Kobyakov, there is no alternative to a transition to a low-emission economy and achieving carbon neutrality.

"Russia's attention to climate issues, and the entire world's attention to Russia as an active participant in the UN climate agenda, has significantly increased since the country's President, Vladimir Putin, took part in the Leaders Summit on Climate in April of this year. It must be said that Russia, which is one of the five largest emitters of greenhouse gases, also has huge resources for neutralising the greenhouse effect," said Mr. Kobyakov.

"Today's discussion has shown that [Russian] science is at the forefront of work on the climate agenda and on carbon neutrality; science is supported by business, by PhosAgro in particular, and government authorities and administrative bodies are taking forward-looking decisions," added the Head of the FAO Office for Liaison with Russia.

The conference also noted that changes in biomass accumulation, the speed at which carbon is transported through soil and the absorption of stored carbon by plants play an important role in achieving carbon neutrality. Since these are the functions of soil-based microorganisms, the issue of achieving carbon neutrality is directly related to the issue of the biologisation of agriculture, the recarbonisation of soils and the development of eco-efficient fertilizers, crop protection products and growth stimulants. All these aspects are already under development. In the fields of Nemchinovka, PhosAgro demonstrated its progress in 50 agronomic tests of promising grades of biomineral fertilizers on spring crops.

About PhosAgro

PhosAgro (www.phosagro.com) is one of the world's leading vertically integrated phosphate-based fertilizer producers in terms of production volumes of phosphate-based fertilizers and high-grade phosphate rock with a P₂O₅ content of 39% and higher. PhosAgro's environmentally friendly fertilizers stand out for their high efficiency, and they do not lead to the contamination of soils with heavy metals.

The Company is the largest phosphate-based fertilizer producer in Europe (by total combined capacity for DAP/MAP/NP/NPK/NPS), the largest producer of high-grade phosphate rock with a P₂O₅ content of 39%, a top-three producer of MAP/DAP globally, one of the leading producers of feed phosphates (MCP) in Europe, and the only producer in Russia, and Russia's only producer of nepheline concentrate (according to the RAFP).

PhosAgro's main products include phosphate rock, more than 50 grades of fertilizers, feed phosphates, ammonia, and sodium tripolyphosphate, which are used by customers in 102 countries spanning all of the world's inhabited continents. The Company's priority markets outside of Russia and the CIS are Latin America, Europe and Asia.

PhosAgro's shares are traded on the Moscow Exchange, and global depositary receipts (GDRs) for shares trade on the London Stock Exchange (under the ticker PHOR). Since 1 June 2016, the Company's GDRs have been included in the MSCI Russia and MSCI Emerging Markets indexes.