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‘Green’ investor benefits: What privileges should be given to eco-friendly Arctic projects

May 22, 13:59 UTC+3 MOSCOW

A number of experts interviewed by TASS supported this initiative, while others said the existing instruments of business support are sufficient

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© Alexei Druzhinin/Russian presidential press service/TASS

MOSCOW, May 22. /TASS/. A member of the State Duma committee for budget and taxes, Raisa Karmazina (United Russia party), on May 16 submitted to the lower house a draft law on tax benefits for companies investing in ecological modernization of their onshore industries in the Arctic.

A number of experts interviewed by TASS supported this initiative, while others said the existing instruments of business support are sufficient.

The draft law envisages state support for industry modernization and implementation of environmentally friendly investment projects in Russia’s continental Arctic zone.

The draft law also envisages amendments to the Tax Code implying benefits for investors in case of spending on industry modernization within the framework of nature protection projects that prevent or minimize negative impacts on environment, compensate for ecological risks and preserve natural conditions of the Arctic zone.

However, according to lawmakers, such projects should be implemented in the continental Arctic zone, and the investments should be at least 30 bln rubles ($530 mln) for the five-year period.

"If the bill is adopted, companies that come to work in the continental Arctic will be interested in investing in ecological modernization. This is important for the Arctic fragile nature," Karmazina told TASS. "Moreover, nature protection equipment is being constantly modernized, and tax benefits will stimulate business to use modern technologies."

She said the draft law aims not only at the implementation of major investment projects in the Arctic but also at the introduction of new nature protection technologies in order to improve the ecological situation in the region.

The draft law is currently being discussed by the government, Karmazina said. But the initiative has received different assessments. Deputy Economic Development Minister Alexander Tsibulsky said the attitude towards such mechanism as tax benefits should be cautious. He said the current legislation offers enough instruments for comfortable investment conditions.

"I am talking about the special economic zones, the territories of advanced development and industrial parks. I can name at least 15 such mechanisms and each of them offers tax benefits to investors. The key to successful development of Arctic territories lies in the combination of proper use of these instruments," the official said.

Karamzina said the authors of the draft law are give reasons to the government for the necessity to adopt additional benefits.

Officials in the Krasnoyarsk Region said benefits are given to investors already working in the region.

"It is not so easy to receive benefits," said Pavel Semizorov, a local lawmaker.

"The territorial government gave benefits to oil, gas and energy companies already at the stage of investment and I think the federal government will do the same thing," he said. "Any tax benefits are a result of precise economic calculations and the draft law raises two important issues, the Arctic development and preservation of the northern environment."

According to State Duma Deputy Speaker Olga Yepifanova, the implementation of any investment projects in the Arctic has major environmental risks.

"The Arctic territories have a very fragile ecosystem that has already been damaged by human activities. And now we are taking titanic efforts to minimize this damage," she said. "As far as this draft law is concerned, any activities in the Artic imply additional spending in order to minimize negative human impact on the environment."

Authorities is Yakutia, one of Russia’s largest Arctic regions, have approved the draft law. Sakhamin Afanasiev, the republic’s minister of nature protection, told TASS that he intends to encourage investors to use new nature protection technologies.

Yelena Golomareva, a member of the Yakut legislature committee for the Artic affairs, said the new draft law will help resolve a serious problem, the permanent lack of funds for nature protection events.

"This is the first bill aimed at nature protection in the Arctic. This is very important for our regions populated by small indigenous ethnic groups with a traditional way of life," she said.

Under the draft law, only big investors will receive benefits.

"At the moment, we are talking about investments of 30 bln rubles and more that bring new industries using modern environmental technologies to the Arctic," Karmazina said.

She added that investors who have less than 30 bln rubles will not come to the Arctic. However, a number of experts said this threshold should be reduced.

Maxim Belov, the head of the economic policy and energy committee at the Murmansk regional legislature, said the law will not work if the terms of granting benefits are not changed.

"Under the existing parameters, the new law will have no global influence on the region, as it will not bring many investors," he said.

Belov said he could name a few initiatives of this level in the Arctic, Novatek’s shipyard and Norilsk Nickel projects among them.

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