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Carbon Units as an Object of Civil Rights
 
PIIS231243500023791-8-1
DOI10.18254/S231243500022875-0
Publication type Article
Status Published
Authors
Elena Sidorova 
Affiliation: SPIMEX, JSC
Address: Russian Federation,
Ksenia Khachaturova
Affiliation: SPIMEX JSC
Address: Russian Federation
Journal nameEnergy law forum
EditionIssue 4
Pages15-23
Abstract

Federal Law No. 296-ФЗ on Limiting Greenhouse Gas Emissions dd. July 2, 2021, was adopted to implement the Paris Climate Agreement adopted at the 21st UN Conference and meant to reduce the carbon footprint. The Law introduces a new article into the stream of commerce, “carbon units”, which can be transferred to another person under a contract. Taking into consideration the novelty of this object of civil rights, the article reviews the possibility of referring carbon units to the existing objects of civil rights as per Article 128 of the Civil Code of the Russian Federation, proposes an approach to the legal regulation of carbon unit transfer contracts, and analyzes the possibility of circulation of carbon units at exchanges.

Keywordsenergy law, legal regulation of exchange trading, legal regulation of relations connected with greenhouse gas emissions, circulation of carbon units
Received23.12.2022
Publication date27.12.2022
Number of characters28800
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1 As of 2020, the global average surface air temperature exceeded the pre-industrial level of 1850-1900 by 1.1 degrees Celsius, [1] and the level of greenhouse gas concentration in the atmosphere was above the level recorded in 2011-2019. Possible consequences of climate changes may be global warming, an increase in extreme weather events, and risks of degradation of various ecosystems as a result of changes in thermal and moisture conditions. The Paris Climate Agreement was adopted at the 21st UN Climate Conference in 2015 to avoid the consequences of climate risks. Article 6 of the Paris Agreement stipulates a mechanism to help reduce greenhouse gas emissions and support sustainable development. Russia ratified the Paris Agreement in 2019. Order of the President of the Russian Federation No. 666 on Reducing Greenhouse Gas Emissions dd. November 4, 2020, was adopted to implement the Paris Agreement. The Order establishes the need to ensure the reduction of greenhouse gas emissions to 70 percent from 1990 levels by 2030 and the need to enable measures to reduce, prevent greenhouse gas emissions and increase the absorption of such gases. These measures are stipulated, in particular, in Federal Law No. 296-ФЗ on Limiting Greenhouse Gas Emissions dd. July 2, 2021 (hereinafter referred to as the Greenhouse Gas Law). The creation and development of regulations to enable the sustainable and balanced development of the economy of the Russian Federation while reducing greenhouse gas emissions is justified not only by environmental and legal reasons but also by economic reasons. Tt is planned to introduce a mechanism of cross-border carbon regulation since 2023 introducing a fee for the import of carbon-intensive commodities to the EU, the production of which is associated with greenhouse gas emissions, to implement the Paris Agreement in the European Union. The possibility for Russian exporters to pay this fee to the EU budget encourages the State to take measures and create a national system of carbon regulation and ensure its recognition by foreign countries. V.V. Romanova rightly stated that such issues stir up interest and become the subject of legal research. [2]
2 According to the Major Areas of Development of the Financial Market of the Russian Federation for 2022 and the Period of 2023 and 2024 approved by the Board of Directors of the Bank of Russia, Russia has plans to create a national system of carbon units trading. Carbon units are allowed to be traded, inter alia, in the form of on-exchange trading to form a price indicator and determine the market value.
3 In view of the planned exchange trading of carbon units, it is important to understand the legal qualification of carbon units, contracts entered into to transfer carbon units, and the admissibility of exchange trading of carbon units.
4 The legal qualification of an object admitted to trading, i.e., commodities under Federal Law No. 325-ФЗ on On-Exchange Trading dd. November 21, 2011 (hereinafter referred to as the On-Exchange Trading Law), is essential to arrange exchange trading because as per sub-clause 9 of Part 1 of Art. 2 of the On-Exchange Trading Law commodities mean things (except for securities and foreign currency) of a certain type and quality and in any aggregate state not excluded from circulation and are admitted to on-exchange trading.
5 The Greenhouse Gas Law stipulates that a carbon unit is a verified result of the implementation of a climate project expressed in the mass of greenhouse gases equivalent to one ton of carbon dioxide. Carbon units are not referred to as an object of civil rights in Article 128 of the Civil Code of the Russian Federation (hereinafter referred to as the CC RF). However, given the dispositive nature of civil law, the absence of a closed list of objects of civil rights in the CC RF, and the potential economic value and transferability of carbon units, we can assume that carbon units are objects of civil rights in the context of Article 128 of the CC RF. However, the type of such objects is not obvious.
6 Objects of civil rights include things, other property, including property rights, works and services deliverables; protected intellectual activity deliverables and similar means of individualization (intellectual property); or intangible benefits. It is obvious that carbon units do not belong to works and services deliverables; protected intellectual activity deliverables and similar means of individualization (intellectual property); intangible benefits. We would like to further analyze the possibility of referring carbon units to things, other property, including property rights.
7 1. Are carbon units things?
8 Carbon units have no tangible medium of expression, i.e., they are “intangible”, and have no aggregate state because they are only a result expressed in the mass of greenhouse gases equivalent to 1 ton of carbon dioxide and are an entry made by the operator of the carbon units register. The scientific literature is ambiguous about referring “intangible objects”, such as electricity, to things [3]. There is almost no judicial practice in referring “intangible” objects to things. In its Resolution No. 1944/12 dd. July 17, 2012, the Presidium of the Supreme Commercial Court of the Russian Federation determined that based on the specific features of a non-certificated share it was impossible to own it as a tangible thing in the form of physical possession. Ruling of Judicial Chamber for Civil Cases of the Supreme Court of the Russian Federation No. 35-КГ21-1-К2 dd. April 13, 2021, stipulates that “the WMZ title unit is a conditional virtual accounting unit, which can only be used within Webmoney Transfer, the issuer of these conditional virtual units, is not a subject of the tangible world, does not exist in a physically tangible form, does not have attributes of a thing...” Things include objects in physical and tangible forms. Moreover, by virtue of provisions of the continental legal doctrine, which recognizes only material (tangible) objects as things, intangible objects cannot be subject to proprietary rights. The Greenhouse Gas Law mentions no right of ownership or other proprietary rights to carbon units. The right holder of carbon units is the owner being a legal entity, an individual entrepreneur, or an individual owning carbon units. The legislator uses a similar approach to non-certificated securities. As per Art. 2 of Federal Law No. 39-ФЗ on the Securities Market dd. April 22, 1996, the owner is a person indicated in accounting records (personal account or custody account records) as the right holder of non-certificated securities or a person owning or otherwise possessing non-certificated securities.

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