The submission of Russia’s first joint carbon emissions reduction project to the UN was welcomed as a model to follow, but cashing in on environmental protection has been slow to materialise.
The joint project at the Shaturskaya Thermal Power Plant in the Moscow region is expected to be accepted in November, making it the first to receive a certificate in compliance with the Kyoto treaty.
“This is a much anticipated and very welcome development,” Christiana Figueres, executive secretary of the UN framework Convention on
Climate Change, said in a statement.
Figueres added that it was a “signal to followers”, but Russia has failed to unlock the vast tranche of potential carbon credits available.
The emission reduction units granted by UN projects could be a cash cow for Russian firms, potentially unlocking around 450 million Euros at current market prices.
“The price range for a Russian greenhouse gas quota is about 11-12 Euros per tonne, and total volume of quotes is 39.5 million tonnes,” said Alexander Klimanov, director of C6 Capital, a company focused on energy and environmental projects that reduce greenhouse gas emissions.
Klimanov estimated that the reduction cost for a gas distribution network – the sector which most of Russia’s carbon cutting could come from – was between one Euro and three Euros per tonne.
Russia is expected to account for around two-thirds of the emission reduction units under the UN’s joint implementation scheme.
Aside from companies selling the emission reduction units they have earned, energy savings can increase efficiency within firms.
“Some greenhouse gases like methane, for example, are sources of energy by themselves, which are used for heating,” said Klimanov.
The joint implementation program has targeted large businesses, but thre are not always incentives for small companies to save energy.
“The process was structured here in a way that companies have to wait for certificates for too long,” said Klimanov. “Only well financed structures could afford investing in this and waiting for several years to get the return through the certificates.”
The Kyoto protocol, which was signed in 1997, targeted Russia with ensuring greenhouse emissions did not rise above the 1990 level by 2012.
According to Julia Dobrolyubova, an expert on climate change with the Russian Regional Environmental Centre, this was not a challenge because “many factories simply ceased to exist, and the level of greenhouse gas emissions on a national scale declined drastically” after 1990.
Some 30 per cent of Russia’s fixed quota of emissions reduction units can be sold to other countries, but currently local law limits sales to 10 per cent said Dobrolyubova.
The UN’s joint implementation program is currently in its first phase, which runs between 2008 and 2012, and many projects are still under construction.
While some Russian corporations have been slow to catch on, another 15 companies have been accepted for the program according to the UN.
“The carbon community has been waiting for this for four years,” said Benoît Leguet, the chair of the joint implementation supervisory committee, Business Green reported.
If Russian emissions units can finally hit the market, it could ease the pressure on some European countries struggling to hit their Kyoto targets.
The Kyoto Protocol expires at the end of 2012, but negotiations for the next stage of the environmental agreement are due to start at the end of November in Cancun, Mexico.
“Any progress in negotioations will positively affect the market,” said Klimanov of C6. “If they invested in projects that will bring them income in the 2012-2020 period – it’s only good for them.”