Russia Gains Economic Boost By Ratifying Kyoto

by Sanjay Suri

(IPS) LONDON -- Nobody stands to gain more than Russia through its move to ratify the Kyoto Protocol, an agreement to cut atmosphere-warming emissions and through that to contain climate change.

Clearly Russian President Vladimir Putin did not wake up one day and decide to do his bit to cool down a warming atmosphere. Ratification had its reported opponents within Russia but few can argue that at least for the next eight years Russia has much to gain and little to lose.

Ratification by the Lower Duma is expected to be approved by the upper house of Parliament and then by President Putin, all within the next couple of weeks. That would then satisfy conditions for the Kyoto Protocol to come into force.

The protocol had been awaiting ratification by at least 55 countries said to be producing at least 55 percent of greenhouse gases (principally carbon dioxide and methane that are said to cause global warming). Russian entry would take it past the barrier.

The Kyoto Protocol would bind signatory countries to reduce emissions to at least 5 percent below 1990 levels in the period 2008-2012. The overwhelming view of climate scientists is that this would be too little to do the climate much good. But a lot of companies stand to gain through mechanisms agreed to make such reduction possible.

And with companies, countries; and none more than Russia. Its representative had made sure of that at a meeting in Marrakesh in Morocco in November 2001. The Marrakesh agreements set out the nuts and bolts for implementation of the Kyoto targets. The Marrakesh agreements are more significant than the protocol itself signed in Kyoto in Japan in 1997.

The principal tools given shape were emissions trading, two other agreements called joint implementation (JI) and the clean development mechanism (CDM), and the so-called carbon sinks. Hard bargaining by Russia at Marrakesh gave it strong advantages in all these.

Under emissions trading a company that is emitting less than its permissible limit of greenhouse gases can 'sell' the excess credit to a company counted as emitting more. The idea is that the buying company can find this a cheaper option than introducing technology to reduce emissions.

Under joint implementation an agreed group of industrialised countries (what are called the Annex I countries of the United Nations Framework Convention on Climate Change) were allowed to gain credits for reduction of emissions by implementing reduction measures in other countries on the same list. In effect this would mean implementation in Eastern Europe where the cost of implementing such measures would be much less.

Under the CDM credits could be earned for emissions-savings in projects in developing countries where measures were likely to cost even less than in Eastern Europe. Carbon sinks was a facility to gain credit through the existence of forests, on the ground that trees absorb carbon dioxide and therefore count as contribution towards carbon reduction.

These measures all place Russia in an enviable position. Following a decline in industrial activity in the 1990s, emissions in Russia have been calculated -- on the basis of data supplied by the Russian government --- to have fallen to 30 percent below 1990 levels anyway. That means Russian industry has to do virtually nothing to meet its reductions target by the end of the first Kyoto reduction period (2008-2012).

The low recorded emissions translates potentially as a lucrative industry for emissions trading, that is due to begin within the European Union (EU) from January next year. It is hardly a coincidence that Russian ratification means that the Kyoto protocol will take effect at the same time. Russia would be on the emissions market straightaway for EU emissions trading and for wider emissions trading among other Kyoto signatory countries.

Since Russian industry is emitting far less than the quota its officials have negotiated, large sections of the Russian industry will be in a position to 'sell' their quotas to emit more. Depending on how the market goes, this could bring significant income for Russian industry with almost no investment required to upgrade to more environment-friendly technology.

At the same time Russian industry is well-placed through investments and partnerships in Eastern Europe through historical associations to claim reductions in emissions to its credits at a cost far lower than is likely for Western industry. It can also add to its huge reserves of the right to emit through CDM projects. Both these provide cheap opportunities for Russia to develop new environment-friendly technology, which too it can sell.

Russia finally capitalised on its huge lakes and forest reserves available to count to its credit by way of carbon sinks. Russian officials managed at Marrakesh to double the amount of credits it was assigned for these 'sinks' from 17 million tonnes of carbon to 33 million tonnes. The Russian demand was accepted because if it rejected the Kyoto protocol as the United States had done, the protocol itself would be seen to collapse.

Russian leaders waited seven years after the Kyoto protocol to move towards ratification. Because it is only now that the Kyoto protocol is taking shape as the Kyoto market.