Vladimir Putin’s opening remarks:

Good afternoon.

We are meeting today to discuss environmental problems and the protection of the environment – issues that are of concern to almost everyone.  I suggest that we focus on specific, concrete measures for improving the environmental situation and, of course, place the key emphasis on future work. That takes on added importance in light of the preparation of a framework document called “The Basic Principles of Russian Ecological Policy in the Period until 2030.”

The intensive development of agriculture, transport, and industrial infrastructure inevitably affects the environment. Outdated production facilities that fall short of modern environmental standards and pollute the areas around them also have an adverse impact. Annual government reports indicate that man’s influence on natural ecosystems, far from diminishing, is increasing. The levels of air and water pollution in practically all parts of the country remain high.

The contamination of the soil is also a serious problem. I am referring not only to environmental degradation due to past economic activity but also to the steady growth of the amount of waste that is not recycled and rather ends up in landfills, which unfortunately are often ill-managed and cause harm to nature and humans alike.

On the whole, about 15% of Russian territory is in a critical condition in environmental terms, according to experts. Failure to act may lead to irreversible consequences for the environment. The main causes of these problems are thought to be defects in conservation regulations, inefficient management and poor control on the part of the state, and a lack of incentives for using modern clean and green technologies.

To remedy the situation, we propose to introduce some amendments to the legislation. Above all, these have to do with regulating environmental impact through the introduction of better practices: i.e., technologies based on the latest scientific achievements in reducing adverse environmental impact.

An important condition for such technologies, of course, is that they be financially feasible and economically effective. Incidentally, among our neighbours in the European Union, the introduction of such technologies has been mandatory since 1996. The problem there is being discussed and, in fact, these methods began to be introduced at the expert level in 1984-1988, when these ideas were first being proposed and developed.

Economic incentives can also be seen as a measure aimed at reducing human damage to the environment. Thus, if an enterprise invests in modernisation, energy conservation, and green technologies, it is entitled to preferential treatment. For instance, the cost of environmental protection can be taken into account in setting an environmental tax.

By the same token, we propose to increase fines for those enterprises that violate (environmental) laws and established rules. I should emphasise here that all such proposed changes are in keeping with international practice and are essentially aimed at enhancing the ecological security of the country, improving quality of life, and contributing to the health of the nation. And, of course, they give an extra boost to technological innovation in our industry and economy.

In this regard, I would like to say the following. Certainly, we should get rid of high-polluting production facilities, adhere to high environmental standards, and deal severely with those who violate these rules. We should, however, pursue this work steadfastly without creating new administrative barriers to the economy. We need a truly positive result – an effective system that does not create additional problems for businesses while ensuring our environmental well-being.

There is always a conflict between development and conservation. There always has been, and there always will be, but we need to strike a balance.  I understand very well the concern of those experts who are working to raise our labour productivity and (economic) competitiveness. But we all understand that in the absence of incentives, production will remain steeped in old methods and old technologies. (Such) a commitment to extensive as opposed to intensive development will only cause us to lag behind in advanced technologies and never catch up with our rivals – we will always be trailing behind. And we will be lagging not only in terms of environmental protection but economic development as well. We will be playing an endless game of catch up, which is not the right way (to do things). It is not a path that will ever make us leaders – in terms of environmental protection and conservation, economic development, or social welfare.

Let us get down to business. Yuri Trutnev has the floor.

Yuri Trutnev: Thank you, Mr Putin.

Ladies and Gentlemen. Let me briefly describe the current environmental situation in Russia. As you can see in these diagrams, the levels of air and water pollution are more or less stable, but there’s been an increase in waste. Still, it would be wrong to describe this kind of stability as favourable.  Today, some ten million of Russia’s citizens live in highly polluted areas. Here you can see such zones, as well as environmental hotspots, formed as a result of (hazardous) economic activity.

Government regulation is the main tool for improving this situation. It should be noted that Russia’s regulatory system in the field of environment protection dates back to the 1980s, when it was developed using the ecological and economic models of the time. Clearly, this system has become obsolete.

What kinds of problems are we facing today? First of all, our (current) regulations allow enterprises to get away with just about any level of environmental pollution. The penalties are negligible and have not been adjusted to inflation since 1991. There are no economic incentives for companies to convert to environmentally-friendly technologies. There’s no mechanism for repairing environmental damage and no conditions in which recycling enterprises could develop. The institution of state environmental analysis has become virtually non-existent.

Mr Putin, you spoke about the importance of balance just now. A lack of efficient government regulation in the field of environmental protection leads to the deterioration of ecosystems and lowers the quality of human life.

In order to improve relevant legislation, our ministry has drafted, in collaboration with the appropriate executive agencies, a package of eight environmental bills spanning various aspects of our impact on the natural world. What is their status now? Four of the bills mentioned in Figure 5 have been approved by all federal executive bodies and submitted to the Cabinet for consideration. A fifth one was approved on the eve of today’s meeting.

So, five of the eight draft laws are already through preliminary approval and ready for Cabinet deliberations. But three bills remain to be approved, including the most important, which authorises the improvement of existing regulations and creates economic incentives in the field of environmental protection.

I’d now like to talk about each of these three draft laws separately, with attention to their current status.

Let me begin with the most important of the three, which again calls for improved regulations and economic incentives. Clearly, environmental impacts vary from company to company. Of one million Russian enterprises that affect the environment in one way or another, as few as 11,500 account for 99% of all pollutants. So, with regard to a vast majority of companies, we seek not so much to toughen environmental legislation as to remove administrative hindrances.

We propose a transition to a declared impact scheme for 700,000 enterprises that pose only minor damage to the environment. For 290,000 others, we suggest that regulations should be set based on specific instances of improper waste disposal. As for the remaining 11,500 heavy polluters, the bill provides for their transition to the best in available environmentally-friendly technology.

We’ve opted for best available technology (BAT) principles by drawing from global experience. Along with BAT, the world community sometimes applies environmental quality standards, but these are used for monitoring the impact on particular areas rather than in regulation. That makes them a territorial development tool. On the other hand, such standards are absolutely impossible for companies to meet in practice because they call for a tenfold decrease on discharges.

BAT is about adopting affordable technology that has already been introduced at several companies. BAT-based regulations do not identify any specific technology, but rather set standards on discharges per production unit – creating a benchmark for enterprises to work toward.

To be able to introduce the best available technology, we’ll need some 6,000 technical specifications. In the European Union, these are divided between 27 sector-specific reference books, which are updated once every three years. This takes a lot of effort, and there’s a transition period envisaged for this process. But let me make it clear right from the start: We have no ambition to reinvent the wheel here. The best available technology is about technology that is already being internationally employed. So our job will consist primarily in translating and adapting BRIC (Brazil, Russia, India and China) reference books that are already in print.

Now on to the measures we have planned as part of an economic programme to accompany the introduction of the best available technology. We propose to increase the penalties on pollutant discharges in two stages: a two or threefold rise on the current rate in the year 2012 and a three or fourfold rise in 2016. These adjustments will bring the rate up to 1.1% of companies’ profits in 2020. The measure will be applicable to those enterprises unwilling to convert to best available technology standards.

On the other hand, groups that successfully adopt BAT principles will face lower penalty fees. Let me be clear: 1.1% is a (projected) national average. This figure will vary for some specific sectors and enterprises. We’ll need to further collaborate with the Ministry of Economic Development and the Finance Ministry, but there is sufficient time before 2020 to do so.

As for administrative measures and how they will be applied during the transition to BAT principles, we suggest that the period of 2012-2014 be devoted to the development of all necessary documentation – the division of enterprises into categories (these categories are to be confirmed by government resolutions), the drafting of regulatory acts, and the approval of plans for pollution-reducing measures. We also propose that starting in 2014, a ban should be imposed on the construction of new enterprises whose design does not comply with BAT principles. This is an internationally beaten track. In 2016, we propose a ban on the introduction of new facilities whose discharges do not conform to BAT principles, except for those designed before the change in regulations. Only in 2020 will these new administrative restrictions begin to apply to enterprises already in operation. Those that launch a modernisation programme before that year will be granted a five-year exemption period in which to follow through on the programme.

All of the proposed measures are long-term. The average penalty fee will account for 1.1% of a company’s profits. For enterprises that embrace BAT principles, the rate will be reduced by 70%. And before the introduction of BAT principles for operational companies, which is scheduled for 2020, the government will have an opportunity to analyse the economic situation and arrive at conclusions on the fate of each individual company.

Now a few words on the cost of modernisation. Obviously, sectors such as electric utilities will be among the most cost-consuming, largely because of the expensive switch from diesel and coal power to natural gas and other (energy) sources. Housing and public utilities will also require quite a lot of funding. Being, as it is, in public ownership, this sector will require closer attention. In my view, however, modernisation is a must in any case.

Much of the required funding has been provided for in some sector-specific documents and in integrated formats for the infrastructure layout of electric utilities, such as the federal targeted programme and the comprehensive programme 'Modernisation and Reform of Housing & the Public Utilities Sector', to give just a few examples. On the whole, Russian economic modernisation will cost an estimated 2% of our GDP – about the same percentage as in countries that have carried out such reforms recently.

As we try to predict future economic development, it's important to realise that growth rates are possible to maintain using existing structures, but only for the time being. We stand to lose from this scenario in the long term, with modernisation incrementally bringing us to a higher level of economic development.

As for amendments, our draft laws need the approval of two federal executive bodies – the Finance Ministry and the Ministry of Economic Development. Their recommendations often contradict each other. The Russian Union of Entrepreneurs and the Ministry of Economic Development support the idea of economic incentives, while the Finance Ministry has certain reservations about it. As a balanced solution, we suggest listing appropriate incentives in a regulatory framework first. Details could then be formalised in government resolutions, to be adopted following consultations with the appropriate parties.

Now on to our bill on waste disposal.The existing laws don't spell out the responsibilities of local self-governing bodies and regional authorities in areas such as waste disposal, territorial planning, waste reduction and recycling. Our draft law fills this lacuna.

The bill also facilitates the revival of repeat recycling by offering a mechanism for establishing specific sectors and types of goods to which a deposit scheme will be applicable, with a product's [initial] cost factored into the cost of its recycling.

This scheme worked quite effectively in the Soviet Union, as a matter of fact. Only the Finance Ministry has reservations about it – officials there argue that the transfer of powers to regional authorities will create a need for additional funding. But we don't think we're actually vesting them with any fiscal powers.

The Finance Ministry's stance is that the annulment of fees for environmentally safe waste disposal will result in budget revenue losses.

You see, the bill involves a clause providing for exemption from waste disposal payments should industrial waste be disposed of safely and there is no risk of it spreading through soil drainage or aerial dispersal. Why have we included this particular clause? Because most of the dumping grounds today aren't properly equipped and therefore damage the environment. We need to ensure that industrial enterprises are interested in responsible waste disposal.

Going back to the Finance Ministry's point that this will lead to additional revenue losses, an estimated 600 million roubles could be lost in annual revenue nationwide. This isn't huge money, as compared with the actual scale of environmental damage.

This bill, Mr Putin, has been drafted in keeping with your instructions on how to repair the damage done to ecosystems across the country.

This year we're launching four cleanup projects: on Franz Joseph Land, Wrangel Island, the Dzhidinsky wolframite & molybdenum company on Lake Baikal, and the Selenga River estuary, which was polluted by oil spills. But no enabling legislation exists so far, which is why we'll have to develop the regulatory basis as we go along. This bill was finally approved yesterday, with the last remaining issue settled.

Another bill of much importance to us is one concerning nature preserves. There's a number of technical controversies surrounding this bill, but I don't think they're worthy of being discussed here. Suffice it to say that all the conceptual controversies here stem from a belief that any changes to the preserves' habitual mode of operation will put their sheer existence at risk while also undermining biodiversity.

We don't agree. Our proposals draw on international practice. They are well-balanced and protected by instruments of government regulation.

On the other hand, we believe we should have an opportunity to build tourist infrastructure in recreational areas designated within national parks and upgrade the infrastructure of wildlife preserves.

We began that work earlier this year.

Finally, there are situations in which people living in protected areas have no legal right to use the woods for mushrooms or lumber. This lacuna in the legislation needs to be filled, and, obviously, we cannot come and force those people out of their homes.

And the last point. We often see cases of ambitious, nationwide infrastructural projects being held back by the impossibility of revising the boundaries of nature preserves. We'd like to retain the clause prohibiting downsizing. But to be able to implement infrastructural projects, we should have an opportunity to modify the boundaries, compensating for every inch of appropriated land with plots elsewhere.

This problem became all the more evident during the [latest] wildfire season, when the lack of roads in national parks and wildlife preserves made the work of fire brigades impossible.

In summation, we believe that our package of proposals will create a new framework for regulating environmental protection in Russia – a modern regulatory basis that draws on global expertise.

We offer a set of instruments for introducing long-term incentives for the adoption of principles that promote minimal environmental impact, higher efficiency in the use of natural resources, and greater competitiveness.

The package will also help remove administrative barriers and reduce the scale of corruption in the field of environmental protection. It will create waste management systems for protecting marine ecosystems from oil pollution, introduce [new] mechanisms of environmental auditing and testing, and improve the efficiency of state-run environmental monitoring and control, as well as promote the development of nature preserves.

Thank you for your attention.