Russia’s dilemma – Is Russia going to sign the Kyoto treaty

Global warming is a scientifically recognized process of the Earth’s ozone and atmospheric decay that was first put on the political agenda by the UN(United Nations) with the adoption of the UNFCCC(UN Framework Convention on Climate Change) in 1992 and it came into force in 1994. 1 The main reason behind the global warming is the unregulated and irresponsible use of fossil energy, which results in the release of climatic gases and eventually a rise in the global temperature.

Unfortunately, an increase in the global temperature leads to the rising of the sea level, changes in precipitation and wind patterns, loss of biological diversity and a decrease in the quality of life, especially in the poorer parts of the world. The challenges involved with solving climate issues is first and foremost connected to use of fossil energy, and can generally be solved by increasing production of renewable energy and efforts made towards increased energy efficiency.

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If we continue to use fossil energy as we do today, we will experience a quadrupling of the world’s greenhouse gas emissions in the course of the next 125 years, as the result of energy consumption and increase in population. 2 The Kyoto Protocol, adopted at a December 1997 conference in Kyoto, Japan, obliges all signatory countries to reduce their greenhouse gas emissions by a yearly average of 5. 2 percent in order to reach a goal by 2012 where participating countries are producing fewer greenhouse gases than they were in 1990.

However, only developed countries are covered by the protocol because developed nations are responsible for the lions’ share of greenhouse gas emissions that lead to the global warming and risk the Earth’s environmental balance. To become internationally legal, the Kyoto Protocol must be ratified by a minimum of 55 countries accounting for at least 55 percent of the world’s greenhouse gas emission. Until now, although 118 countries accepted Kyoto treaty, their total greenhouse gas emission level is well below the necessary 55 percent.

Russia is responsible for 17 percent of global emissions in the base year of 1990, which makes it the second biggest emitter of greenhouse gases in the world after the United States. So it is vital that Russia ratifies the Kyoto treaty in order to reach the 55 percent threshold level considering that the United States, which is by itself responsible for the 34 percent of the world’s greenhouse emissions, pulled out of the protocol while the world’s two other greenhouse gas emission giants, China and India, aren’t covered by the protocol since they are considered developing countries. Under these circumstances, Russia is faced with the dilemma of ratifying or resigning the Kyoto treaty and Russian government has been trying to weigh the pros and cons of signing the treaty based on Moscow’s economic and foreign policy goals.

In the time being, Russia is still reluctant to ratify the protocol and it seems like Russian’s ambiguous stance on ratification will continue at least for a while considering Vladimir Putin recently pointed out in the UN World Climate Change Conference that Moscow still needs more time to study the ratification issue. It was long assumed that Russian approval of Kyoto treaty was a foregone conclusion, since Russia would be able to earn billions of dollars by selling to Western countries its unused capacity to emit greenhouse gases. According to the terms of the protocol, countries achieving less greenhouse gases production levels than they had in 1990-which Russia is currently doing- can sell their ’emissions credits’ to overproducing countries, a clause that could provide Russia with an instant international commodity.

Russia will have a near monopoly on emissions credits under Kyoto’s emissions-trading system” says economist Richard Baron, an expert in the trading system at the Organization for Economic Co-operation and Development(OECD) in Paris. 6 After the collapse of communism and USSR in 1990, Russia lost almost half of its large and small scale industries which are the biggest sources of greenhouse gas emissions. Currently, Russian carbon dioxide emissions are 32 percent below 1990 levels because of lost industry due to post-Soviet economic collapse that has shuttered factories and shrunk agriculture since 1990.

Russia expects its carbon emissions to be down by almost 20% from 1990 levels when Kyoto comes into force in 2008, which means Russia’s quota, under the Kyoto deal will not be fully utilized. 7 As a result, Russia can financially benefit from the treaty through the trade market where it can sell its unused pollution quotas to defaulting nations that pollute more. According to Oleg Pluzhnikov, Russia’s ministry of energy, the amount that Russia could gain and invest into its energy –sector is between $4 billion to $34 billion a year by selling emission quotas to other countries.

This flow of revenues could even exceed Russian earnings from natural gas exports in a year. ($10 billion in 1997). 8 Another argument in favor of ratifying the treaty is that besides selling its own reduction credits, Russia as a signatory country, would be able to acquire ’emission reduction units’ by financing projects reducing green house gas emissions in other developed countries through a Kyoto Protocol mechanism known as ‘joint implementation. 9 Russian companies would have access to these joint implementation projects with other countries, paving the way for Russia to acquire newer anti-pollution technologies and systems of management. In addition, if Russia could successfully invest the money it makes out of selling surplus emission quotas into the introduction of cleaner technologies in Russian plants, this can further decrease the level of gas emissions in Russia which leaves more surplus quotas to sell to the other countries to make even more money.

And if this money is successfully directed towards low-carbon infrastructure investments( e. . , gas pipelines), surplus transfers could reinforce and partially lock-in decarbonization of the world energy system. 10 Other than its economic and environmental benefits, signing the Kyoto treaty could be a great chance for Russia to prove itself in the political arena by demonstrating its responsibility for multilateral action on a truly global issue. And also it could be a great opportunity and a first step to raise environmental awareness in a nation with a post-communist mentality that benignly saw climatic change as an antidote for shoveling snow until recently.

In some way, ‘the treaty gives the cash-strapped Russian government a financial incentive to think’. 11 Now the question in hand is if signing the Kyoto treaty has this many benefits and all economic assessments of the impact of this agreement show that Russia will actually profit from signing it, why is Russia still hesitating? Historically, the USSR has been totally oblivious about the environmental issues. With the fall of the communist regime, Russia took over for the USSR’s position in climate negotiations.

At the first 1995 climate meeting, COP I in Berlin, Russia kept a low profile conceding there might be negative climate effects from carbon dioxide build up, while arguing for special concessions for countries in transition and the inclusion of carbon sinks in the process. At COP II in Geneva, Russia sided with OPEC expressing their skepticism towards the scientific evidence on climatic change. However, by 1997 and COP III in Kyoto, Russia was siding more closely with the US arguing for zero growth in carbon over 1990 and for emissions trading in alignment with OECD outside of the EU.

It was only after Kyoto that the signatories started to realize the key role Russia might play in a trading regime. 12 However, Russia is still reluctant about the role it should take in Kyoto Protocol. First of all, the Russian government argues that the Kyoto Protocol is discriminatory against Russia since Russia is not the biggest emitter of green gases, but it is still supposed to have limit on emissions, while the US and China will not. Also, Vladimir Putin’s climate change and economic advisor, Illarinov, points out that the United States and Australia opted out of the protocol after claiming that compliance would be too costly.

Illarinov argues compliance with Kyoto would be even less affordable for Russia whose economy is only a fraction of the US or Australian economies. 13 Other argument that the Russian government makes is that with the United States rejecting the treaty and China and India being kept out of the protocol, there would be no significant buyers for Russia’s ‘hot air’ other than Japan, Canada and maybe few countries in Europe. 14 Russian officials argue that they wouldn’t be able to make billion dollars of profit as calculated and Kyoto treaty’s costs will be more than its profits for Russia.

Another reason why Russian government hesitates to ratify the Kyoto treaty is the Russian government officers’ fear that signing the protocol would put constraints on Russia’s economic and industrial growth and damage Russia’s international competitiveness. Especially, Illarionov argues that even though currently Russia’s emissions are lower than the 1990 goal, they are, with economic and industrial growth and Putin’s plan to double gross domestic product in 10 years, again beginning to rise, which would leave Russia with an even smaller margin to trade in Kyoto emissions credits. 5 Russians even consider the likelihood of stronger Kyoto emissions curbs later, which can eventually turn Russia into a buyer rather than a seller of emissions credits. In a study released last year by Alexander Nakhutin, Russia’s chief greenhouse gas emissions forecaster, it is found that Russian greenhouse gas emissions have ballooned as much as 13% annually. If Nakhutin’s projects are correct- and he is one of only a very few researchers with access to the best Russian industrial data, Russian carbon emissions will be 6% greater than they were in 1990, or %30 higher than originally envisioned.

This forecast totally contradicts with the Kyoto supporters who believe that between 1991 and 1999, the collapse of Russian economy reduced greenhouse gas emissions there by 34%, a figure they’ve always said will be only partially offset by Russian economic growth before 2008. 16 Although Dr. Nakhutin’s studies are still underway, Russian officers are closely following his analyses as well as the important data related to Russia’s economic growth. Russian economic growth was 10% in 2001.

In 2002 it was 6% and 7% growth is expected this year. Looking at these numbers President Putin claims the economy may double before 2010 and triple before 2020. 17 In an assessment of the case for Kyoto ratification published last year, the Kremlin acknowledged that Russian greenhouse gas emissions are rising fast, and that energy consumption per unit of GDP will have to be reduce by 36% over five years if greenhouse gas emission levels are going to be 20% below 1990 levels in 2008.

Although Russian Prime Minister Mikhail Kasyanov raised this energy conservation figure to 50% last May, according to Russian energy specialists like Igor Beshmatov, director of Moscow’s Center for Energy Efficiency(CENEF), such pronouncements are disingenuous at best. With funding from the US Environmental Protection Agency, Bashmatov carefully reviewed the Russian government’s actual spending on energy efficiency and found it disastrously below official pledges.

According to Bashmatov, negligible political commitment means the 36% increase in Russian energy efficiency needed to hit Kyoto targets is out of the question and in the face of massive economic growth and emerging evidence of a huge boom in Russian greenhouse gas emissions, Russia has no incentive to accept the Kyoto protocol. 18 If these analyses are true and accurate, then it seems like Kyoto planners got their estimates wrong and it seems reasonable that the Russian government is reluctant to sign the Kyoto treaty and they ask more time to debate the protocol.

However, even if assume that all the estimates of the Kyoto planners are right and Russia’s greenhouse gas emission levels are going to be 20% below 1990 levels in 2008, Russia is still faced with the serious problem of doubts about the accuracy of its emissions inventories. In 4 years’ time those inventories will be open international scrutiny by the other 83 Kyoto-signatory nations. Experts point out that if Russia can’t prove its reduction in emissions since 1990, its partners are unlikely to let it cash in.

For example in 1997, a panel of scientists convened by the United Nations to review data compiled by the Russian Federal Service for Hydrometrology and Environmental Monitoring(Roshydromet) labeled Roshydromets’s approach ‘insufficient’ and highlighted its poor presentation of data and its lack of uncertainty levels and information on data collection methods. Carbon dioxide emission figures, the UN team said, were ‘highly unreliable since they were based upon hypothetical assumptions. ‘ Estimates for emissions from the oil and coal industries and the carbon consumption of Russian forests and peat lands were similarly criticized. 9 Apart from the opacity of Russian industry, the basic competence of Russian climate change researchers is also causing concern.

A 1999 review of the research by Nina Poussenkova of the Russian Academy of Sciences’ Institute of World Economy and International Relations revealed plenty of well-trained scientists. But their isolation from the mainstream, combined with a Soviet-era fear of challenging official information, makes them uneasy in the highly internationalized and politicized climate change field. Lack of funding is also a problem.

The UN team that reviewed Roshydromet’s data in 2000 declared that Russia’s financial commitment to climate change research was ‘marginal. ’20 As a result, a significant amount of investment in climate change research is vital for Russia to meet the protocol’s scientific requirements and be eligible for emissions trade. Russia, as the world’s largest gas exporter and second largest oil exporter, also fears that fossil fuel prices would fall if the protocol were implemented, thus forcing Western countries to implement renewable sources of energy.

Gazprom with over 90% of Russian gas production, supplying over 50% of domestic energy consumption, generating 15% of hard currency, providing a quarter of world gas production, and being the largest gas exporter will also play an important role on whatever decision Russian government is going to take about signing Kyoto protocol. 21 Obviously the ratification of Kyoto protocol will severely affect the profits of Gazprom. The other main sources of opposition to Kyoto are companies such as Yukos and Interros, heavy polluters who do not want their operations opened to the close monitoring that Kyoto entails.

However, other big Russian businesses such as the electricity giant United Energy Systems are strong supporters of Kyoto ratification. Three-quarters of regional governers are in favor of Kyoto and are competing to bring European investors to their regions. Especially companies like Gazprom and Lukoil, which have partnerships with European energy firms, are keen to maintain a ‘green’ image. 22 Subsequently, there is also the political side of the ratification issue and the self- interest of government agencies play an important role for the ratification decision.

For example, the Ministry of Economic Trade and Development, tasked with preparing legislation for Kyoto ratification, initially liked the idea of emission trading, which their own industry would manage. But they saw little benefit for their own organization in investment projects, which would be handled by the Ministry of Energy and the companies themselves. So this summer the economy ministry came up with a proposal to link Kyoto ratification to Russia’s accession to the WTO(World Trade Organization).

Russian officials negotiate that Russia’s membership in the WTO might provide Moscow with an incentive to sign the Kyoto Protocol. 23 However, Mikhail Fradkov, Russia’s Ambassodor to the EU recently indicated that WTO countries would never agree to such linkage and the ratification question ‘should not be over-politicized. ’24 Another political aspect of the ratification discussion is that the strong anti-Kyoto campaigns in Russia has persuaded Putin that it would be politically dangerous to move forward with the treaty now, with elections pending for the Duma in December and for the presidency in March. 5 So Putin finds it safer for the government to move ahead with ratification next summer.

Recently, also a conspiracy theory has been created in media that the US administration attempts to lobby Moscow to take a particular stand on the Kyoto Protocol and pressure Russia to delay its decision. It is more interesting that former US Secretary of State Henry Kissinger and former US President George Bush Sr. made a visit to Kremlin to discuss about the Kyoto Protocol and other energy resources. Experts point out that the Washington administration argues about the fundamental flaw of Kyoto Protocol.

So if the Kyoto Protocol comes into force, this argument loses a lot of strength and it would be a foreign policy disaster for the Bush administration. 26 This is why it sounds pretty logical that the US administration may want to put pressure on Russia to delay its decision. In conclusion, Russia has been going through a tough transition period from totalitarianism to democracy and it is still in the progress of building an effective environmental regime. Limited resources, personnel shortages, and perceived conflicts between environmental and economic goals are few of the several reasons that explain why this progress has a slow pace.

However, even more intractable obstacles include lack of training or experience in self-government, corruption, poorly functioning legal systems, and a basic lack of trust in government. 27 In this kind of an atmosphere, having consensus and alliances necessary to make environmental decisions as well as developing effective environmental laws is a big challenge. This is why Russia has been still struggling to come to a firm decision about ratifying the Kyoto protocol since 1997 and it unfortunately seems like this reluctance will continue at least for a while…

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