Milena Milic: Carbon Units as a Resource – What Will Climate Policy Change for the Arctic

The Arctic does not need abstract climate tools, but working mechanisms that simultaneously reduce risks to nature and infrastructure, support investment, and create measurable value for local communities and businesses. The conversation about the development of Russia’s carbon market needs to shift from merely counting issued carbon units to their economically justified application, says Milena Milic, an expert at PORА (Project Office for Arctic Development) and Special Representative of the Sakhalin Region Governor for Climate and Sustainable Development.

International experience confirms that carbon pricing is becoming a permanent part of the global economic agenda. For the Arctic, the international agenda matters not only because of the general decarbonisation trend. Northern territories are connected to global markets through raw material exports, maritime logistics, extractive projects, ports, and energy infrastructure. Therefore, for Arctic companies, the quality of climate data, comparability of monitoring, reporting and verification methodologies, and trust in the verified climate impact of projects are becoming increasingly important.

The Arctic is particularly sensitive to climate change: permafrost degradation increases risks to buildings, roads, pipelines, ports, and energy infrastructure. The Sakhalin experiment demonstrates that regulation can change corporate behaviour: it stimulates corporate emissions accounting, climate risk assessment, implementation of emission reduction measures, and the integration of climate indicators into investment planning. However, when scaling such an approach to the Arctic zone, it is crucial to consider its specific characteristics.

Carbon units can become a practical tool for project financing if their application is linked to real Arctic development objectives:

The quality of climate projects is of particular importance. For the Arctic, transparent monitoring, reporting and verification methodologies are needed that take into account the natural conditions of the North and make it possible to reliably confirm the climate effect. Without such trust from the state, investors and potential buyers of carbon units, the market cannot become sustainable.

International experience of Arctic countries shows that climate regulation is becoming part of the industrial and investment policy of the North. Norway has been participating in the European Emissions Trading System since 2008, while Sweden, Finland and Iceland combine trading mechanisms with carbon taxes. Canada operates a more differentiated system: mechanisms for industry are adapted at the provincial and territorial levels, including Yukon, the Northwest Territories and Nunavut; the price benchmark for industrial systems for 2026 is 95 Canadian dollars per tonne of CO₂-equivalent.

For Russia, it is important not to mechanically copy foreign models, but to take into account their main lesson: climate mechanisms work when they are predictable for business, take into account regional specificities, and channel investment into real emission reductions, reliable energy, and sustainable infrastructure. For the Arctic, this is particularly relevant given the high cost of energy and logistics, the vulnerability of permafrost, and the dependence of many settlements on isolated power systems.

The competitiveness of Arctic territories will increasingly be determined not only by their resource base and transport accessibility, but also by their ability to integrate climate risks, carbon performance, and modern standards into investment decisions.