Friday, October 01, 2004

Kyoto Comes Alive

As I predicted in my article in Diplo magazine last month, Russia seems set to ratify the Kyoto Protocol in return for European Union support for its WTO accession. As well as this quid pro quo, the Russians also have huge quantities of rights to emit CO2 that they don’t need after the collapse of the Soviet economy, which Stanford expert David Victor believe might generate ten to twenty billion dollars a year in revenue for them, and leave Western Europe free to maintain emissions at their current level. Victor cautions, according to the NY Times:
Russia had nothing to lose in moving ahead, given that it surpassed its Kyoto targets even before they were negotiated. After the Russian economy collapsed with the fall of communism, the country's greenhouse-gas emissions plummeted far below 1990 levels, leaving it with a bonanza of tradable credits earned when it surpassed its targets.

Russia's agreement on the treaty's terms in 1997 hinged on its getting what could amount to billions of dollars in revenue from selling such credits to other industrial powers, which could use them as a cheap way of meeting their obligations under the treaty.

For Europe, however, this bundle of credits is a markedly mixed blessing now, Mr. Victor said.

The European Union recently passed legislation creating an internal trading market under the protocol's terms, so that its richer member states, like Britain, could get credit toward targets by investing in emissions-cutting projects in poorer, more polluted, ones, like Spain, where the cuts could come more cheaply.

But under the treaty's terms, Europe, Japan, and other industrialized participating countries can buy credits from Russia as well.

If Russia now starts selling its credits to Europe, there will be little incentive for companies within the European Union to push ahead with emissions-cutting schemes that would be more costly, Mr. Victor said.

That could lead to big fights within Europe, where the Green Party holds significant sway in many parliaments. Greenpeace and other environmental groups have derisively labeled the Russian credits "hot air," because they don't represent fresh reductions in emissions.

Russia's accounting system for its credits also remains murky, Dr. Victor said, meaning "there could be a potentially infinite supply."