MOSCOW Russia's government on Tuesday opened
the door to applications from entrepreneurs and big polluters
to profit from greenhouse gas emissions cuts by selling these
to Western countries.
The U.N.'s Kyoto Protocol puts limits on greenhouse gases
from 36 rich nations but softens the restrictions by allowing
governments to fund emissions-cutting projects in poor and
former communist countries and count the cuts as their own.
Legal doubts have paralyzed such sales of carbon offsets
from Russia, which has the potential to account for about a
tenth of total emissions cuts under carbon trading through
2012, estimated at roughly the annual emissions of Australia.
Western intermediaries and speculators have already
ploughed millions into the Russian market -- five times more
than Russian investors, say economy ministry officials -- in
anticipation of a potential 3 billion euros ($4.4 billion)
On Tuesday the government said project developers could now
submit applications, after the Justice Ministry passed the
necessary procedures for the Economy Ministry to approve
"In terms of documentation this is it, this opens the
application window," said Morten Prehn Sorensen, a director at
the Core Carbon Group, in which Merrill Lynch took a stake last
In the next step, a Russian judging panel will decide which
entities can vet projects. Applications will also need approval
by the Russian panel and a U.N. body, in a drawn out process.
READY TO GO
"Finally!" said Steve Eaton, a director at C6 Capital,
which invests in carbon credit projects in Russia.
"Everything should be in order now. Project participants
can be expected to start handing in applications almost
immediately. There are a lot of them that are ready to go,"
Russian industrial giants such as Gazprom, Unified Energy
System and United Company RUSAL have all announced plans to
cooperate on projects.
Rich countries face emissions limits from 2008-12, putting
a 2012 deadline on definite demand for offsets.
Russia has already ratified the Kyoto Protocol and last
year passed a decree giving the green light to carbon trading
in principle. But businesses have had to wait for the
government to draw up the necessary legal framework.
"The key reason is to attain ecological benefits both
globally and locally here in Russia," said Vsevolod Gavrilov,
deputy director at the natural resources department in the
economy ministry, explaining the move to a briefing in Moscow.
In Kyoto carbon trading jargon, rich countries can either
buy carbon offsets from developing countries under the clean
development mechanism (CDM), or from former communist countries
under join implementation (JI).
Russia is considered potentially a big seller under JI for
two reasons. First, it can cut greenhouse gas emissions cheaply
from its Soviet-built industry, for example by insulating pipes
to reduce heat waste or plugging leaky gas pipes.
Second, it is well within its own Kyoto targets to limit
greenhouse gas emissions, meaning it can sell any cuts it
-- To see an interactive chart on the JI project pipeline
or for additional analysis on the carbon markets, log on to
(Reporting by Simon Shuster, additional reporting by Gerard
Wynn and Michael Szabo in London, writing by James Kilner,
editing by Anthony Barker)