Administrative resource

Five years have passed since Russia ratified the Kyoto Protocol. During this time, Moscow fulfilled all the institutional and political obligations it assumed under the agreement, but neither the state nor business were able to derive any economic benefit from it.

Alexey Shapovalov

Ecology and economics

In June 1992, the UN Framework Convention on Climate Change (UNFCCC) was signed and ratified by 186 states, including Russia. In our country, it came into force on December 4, 1994 and is a federal law. In 1997, in addition to the UNFCCC, the Kyoto Protocol was adopted, which fixed a quantitative goal - to reduce greenhouse gas emissions for 2008-2012 by 5% (from 1990 levels). The main obligations to reduce them were assumed by industrialized countries (the EU must reduce emissions by 8%, Japan and Canada - by 6%). The countries of Eastern Europe and the Baltics, which, according to the protocol, are “transition economies,” pledged to reduce emissions by an average of 8%, Russia and Ukraine - to maintain average annual emissions in 2008-2012 at the 1990 level. And, for example, China, India, Brazil and South Korea, which are classified as developing countries by the protocol, did not take quantitative obligations. To meet obligations, much of which fall on industry, the document introduced so-called market-based “flexibilities” that allow countries and companies that have succeeded in reducing emissions to sell these reductions (the so-called emission reduction units) on the open market or receive them in exchange. targeted green investments. In addition, Article 17 of the protocol provides for the possibility of sales and reductions received by an individual state.

A necessary condition for the entry into force of the protocol was its ratification by countries that account for at least 55% of global greenhouse gas emissions in CO2 equivalent. The US, which accounted for 35% of emissions, refused to ratify the protocol. In November 2000, George W. Bush was elected president, whose election program directly stated that this would cost the American economy too much. By this time, the document had been ratified by 121 countries, and the only hope for saving it was Russia, which accounted for 17% of greenhouse emissions.

The main opponent of the idea of Russia joining the Kyoto Protocol was the then economic adviser to the president, Andrei Illarionov. He argued that the government underestimated the threat of ratification of the protocol and the obligations that Russia would assume, noting that reducing the consumption of hydrocarbon fuels would lead to a reduction in GDP growth and, in addition, would leave Russia the role of a buyer of emission permits. The forecast made by Mr. Illarionov in 2004 assumed a planned doubling of GDP by 2010 with the required average annual GDP growth rate of 7% and an inevitable sharp increase in emissions, according to which by 2008-2010 CO2 emissions would exceed 1990 levels.

Andrei Illarionov's forecasts did not come true. From 2000 to 2007, the economy grew at an average annual rate of 8.5% and greenhouse gas emissions at an annual rate of 1.5%. GDP per capita in Russia in 2006 returned to the level of 1990, and emissions were below this level by 30% (by 34% in 2007). At the beginning of 2008, the Ministry of Industry and Energy predicted that on average every year in 2008-2012, Russia, thanks to a significant reduction in industrial production in the 90s, would have about 3 million tons of CO2 equivalent of the undrawn quota from the 1990 level.

One of the latest forecasts of CO2 emissions was made by the Agency for Forecasting Balances in the Electric Power Industry, commissioned by the Ministry of Energy until 2050. The basis is the innovative development scenario from the government concept of development of the Russian Federation until 2020. Two additional ones involve the active implementation by the government of measures that stimulate energy efficiency and the transition to renewable energy sources, as well as programs aimed at reducing greenhouse gas emissions (see chart). As fantastic as it may seem, the APBE forecast suggests that a combination of incentive measures will allow the Russian Federation to fulfill the commitment made by Russian President Dmitry Medved at the G8 meeting in July: to reduce CO2 emissions by 50% by 2050 compared to 1990.

Today, none of the forecasts suggests that by 2012 Russia will not cope with the obligations it has assumed under the Kyoto Protocol. Moreover, calculations by the investment bank Barclays Capital, taking into account the reduction in production in 2009, suggest an additional drop in CO2 emissions to 10% from 1990 levels in 2008-2009, due to which emissions will be reduced by 4.5 billion tons; Societe Generale's estimate is 5.5 billion tons. The Kyoto Protocol was ratified by Russia on October 22, 2004, and came into force on February 16. During the Kyoto Protocol period, approximately 5 billion tons of national emission reductions are traded. Leading carbon market analyst Point Carbon estimates that a tonne of Russian emission reductions could cost between €6 and €11. Based on this, Moscow’s “Kyoto” assets range from €35 billion to €55 billion, but until today Russia has not been able to earn a cent from the sale of its emissions reductions.

Failed CO2 market

Russia's accession to the protocol was greeted with great optimism by industrialists. The “flexibility tools” contained in the document, according to business representatives, made it possible to attract foreign direct investment in the reorganization of production and achieve increased energy efficiency. Moreover, the non-profit partnership "National Carbon Agreement" (NUS), created in 2003, which included Rusal, Evrazholding, RAO UES of Russia, AFK Sistema, CJSC MDM Group, whose share accounted for a third Russian volume of greenhouse gas emissions, was ready to propose to the government a scheme for creating a domestic market for trading in reductions, and the company to take on voluntary obligations to reduce CO2 emissions and in the future link the Russian market with the European one, where obligations are distributed by the state, and fines are imposed for their failure to comply. The Ministry of Economy and the Ministry of Industry and Energy also advocated the creation of a voluntary market, while the Ministry of Natural Resources and Rostechnadzor proposed regulating greenhouse gases, like other harmful industrial emissions: introducing mandatory uniform emissions standards with fines. But officials never came to a consensus; the Ministry of Economy openly declared the “incapacity of the authorities,” and the NUS ceased to exist.

However, this has not diminished the interest of Russian companies in the Kyoto Protocol. They still had one more “flexibility tool” in their hands, provided for in Article 6 of the Kyoto Protocol—joint implementation projects (JIPs). In essence, these are investment projects aimed at reducing emissions resulting from human activity or increasing the absorption of greenhouse gases, which are carried out by developed countries and countries with economies in transition, including at the company level. During the implementation of the project, the foreign investor receives so-called emission reduction units. Although it is possible to participate in the PSO from the moment the country ratifies the Kyoto Protocol, the investor will only receive reductions generated in 2008-2012 in order to fulfill its obligations. The main difference between PSO and conventional direct investment is that, according to the protocol, the project must satisfy the “additionality criteria” - in particular, without including the “Kyoto component” the project cannot be profitable. In addition, it must be approved by the government.

Companies and governments of EU countries considered investments in Russian projects to be among the most attractive, since it was here that the greatest reduction in emissions per unit of investment could be achieved. And in 2005, the Ministry of Economy expected to raise about $6 billion through PSO. The first sale of future reductions was to take place within the framework of an agreement between the Danish state Environmental Protection Agency (DEPA) and RAO UES dated June 28, 2005 (the share of the electric power industry is about 25% of CO2 emissions in the Russian Federation (see graph)). As a result of reducing CO2 emissions due to the transfer of power plants of OJSC Orenburgenergo and OJSC Khabarovskenergo from coal to gas, it was planned to receive €20 million. The Ministry of Economy assured that official letters of support from the Russian government, necessary for the transaction, will be received in the next two months , and by the same date they promised to finally approve the procedures regulating PSO, although the national action plan for the Kyoto Protocol approved by the government envisaged the development of a procedure for regulating PSO by the third quarter of 2005. However, already on June 28 and 29, 2005, regional prosecutors indicated that the deal with DEPA was illegal, since it was not regulated by Russian law. In October 2005, the contract was canceled.

The Russian procedure for conducting PSO was approved by a government decree of May 28, 2007, but it required a number of orders from the Ministry of Economy. Because of this, the “process of forming the regulatory framework” necessary for the approval of investment projects was completed by the beginning of 2008. The Ministry was designated as the “focal point” for the preparation and approval of the PSO. By this time, officials’ estimates of potential investments for Russian companies had dropped to $1.5 billion.

By the beginning of 2008, after the publication of the latest clarifications from the Ministry of Economy, Russian projects began to meet the “acceptability criteria” of the UNFCCC secretariat. From now on, investors could use national procedures for project selection and emission reduction assessment (called Track 1 in the protocol), rather than applying for recognition of projects to the Joint Implementation Monitoring Committee (JIMC) of the UNFCCC and following international procedures for JI, which were considered too bureaucratic (Track 2). Moreover, along with the completion of the formation of the national procedure for approval and audit of projects, Russia has finally fulfilled the institutional and political obligations under the Kyoto Protocol, given that quantitative ones are fulfilled automatically.

By March 2008, 115 PSOs were under consideration by the NCSO, of which 61 projects were developed in the Russian Federation. The total volume of emission reductions under Russian projects in 2008-2012 was 126.3 million tons of CO2 equivalent, which at a price of €10 per ton amounted to €1.2 billion. From March 10, 2008, the Ministry of Economy began to accept applications for PSO, legally limiting the volume of reductions that can be sold from 2008 to 2012 is 300 million tons of CO2 equivalent per year (about 10% of the unspent Russian quota at that time), of which, based on the priorities outlined by the ministry for economic modernization and energy saving, 205 million tons were accounted for energy.

However, in order for the project to be ultimately approved by the government, it had to go through five stages of approval, starting from consideration by the Ministry of Economy and coordination with the relevant ministries and ending with an interdepartmental commission. But despite this, the flow of those wishing to receive “Kyoto investments” did not weaken. Moreover, many companies began implementing their projects even before receiving government approval. It should be noted that not a single project has yet received approval from the ministry or government. “Over 40 projects with a total potential for reducing greenhouse gas emissions of more than 100 million tons of CO2 equivalent have been submitted for approval to the Ministry of Economic Development,” says the RUIE statement on September 9. “Among them are projects of companies such as Rosneft, TNK-BP, SUEK, TGC-4, Metalloinvest, Uralchem, Ilim Group, Arkhangelsk Pulp and Paper Mill, Lesozavod-25 and others.” At the same time, according to industrialists, the income of companies and budgets of all levels from the implementation of reductions in accumulated PSO could amount to about $1 billion, and the total investment in relevant projects could be at least $5 billion. Point Carbon as of the end of 2008 was still assessing the potential The Russian PSO market accounted for 58% of the world market, second place was occupied by Ukraine (16%) which is already selling both national emission reductions (in particular, in March, 30 million tons were sold to the Japanese government for $375 million), and reductions within the PSO Track 1 and Track 2.

“The existing procedure for approving the PSO within the framework of decree N332 was recognized by all players as too complex and bureaucratic, since none of the projects submitted to the government for consideration was approved,” the Department of Economics of Environmental Protection of the Ministry of Economy told BG.

Carbon-intensive Sberbank

By government order dated June 27, Sberbank was appointed as the authorized organization for “trading greenhouse gas emissions.” It also instructed the Ministry of Economy, with the participation of the Ministry of Foreign Affairs and Sberbank, to conduct negotiations with “national authorities of interested states” to conclude agreements on the trade of Russian national abbreviations in accordance with Article 17 of the Kyoto Protocol. Responsibility for Kyoto projects at Sberbank is assigned to the head of the energy efficiency project management directorate, Vsevolod Gavrilov. It was Mr. Gavrilov, who until the end of 2007 held the position of Deputy Director of the Department of Property and Land Relations, Environmental Economics of the Ministry of Economy and was responsible for developing the legislative framework for the implementation of Kyoto projects in the Russian Federation. “We really want to do our work faster. Negotiations are underway, but we are a year late: now the market is not a seller’s, but a buyer’s,” Mr. Gavrilov described to BG the prospects for selling national abbreviations by the end of 2012.

In June, the government instructed the Ministry of Economy and Sberbank to change the government decree of May 28, 2007, regulating the approval of PSO and recognized as ineffective. As a result, by resolution of October 28, Sberbank becomes an “operator of carbon units.” “The commercial structure that will be responsible for government obligations is Russian know-how. To launch the mechanism for reviewing projects under Article 6, it was enough to force the ministries to work,” marvels the head of the National Organization for the Support of Carbon Absorption Projects, Yuri Fedorov. According to him, the new resolution simplified the procedure for passing projects, abolished the limit of 300 million tons that Russian projects could count on, but “it turned out to have more questions than answers.” “Yes, there were limits in Resolution 332, but everything was clear and precise,” says Mr. Fedorov.

In accordance with the new procedure for approving PSO, Sberbank will hold a competition for 40 projects accumulated in the ministry, and then submit it for approval by the Ministry of Economy. Oleg Pluzhnikov, secretary of the interdepartmental Kyoto commission, promised that the rules of the competition would be prepared within a month, but they still have not appeared. “Strictly speaking, Sberbank is tasked with determining the rating of the application in relation to other applications submitted to the competition. This is a fairly formal procedure. Problems may arise for those organizations that are no longer able to implement projects within the declared characteristics. And even in this case, it is possible to restructure the project documentation and submit a revised application for the competition,” Vsevolod Gavrilov reassures investors.

“The competitions that appeared in the new resolution may turn out to be a serious obstacle to the implementation of projects,” warns Mikhail Yulkin, director of the Center for Environmental Investments. The rules of the competition must also contain new indicators of the project’s effectiveness. “This is absurd,” says Yuriy Fedorov. “How can we develop the same efficiency criteria for projects in metallurgy and housing and communal services? Moreover, the effectiveness of projects has already been proven by independent auditors.” But the resolution of October 28 says that one of the main measures of effectiveness will be its compliance with “the decisions of the commission under the President of the Russian Federation on the modernization and technological development of the Russian economy.”

Access to the competition for foreign legal entities is closed. “The approval of the project is carried out by the coordination center (Ministry of Economy - BG ) based on the results of a competitive selection of applications submitted by Russian legal entities,” the resolution emphasizes. Of the 31 projects received by the ministry as of December 26, 2008, 20 were submitted by foreign companies.

Those companies and projects that are included in the competition will, in accordance with the government decision, pay for Sberbank’s services. The amount of payment should be determined by the Ministry of Economy. “The fee will be charged to compensate the bank’s own costs for organizing the service, as well as a reasonable level of profitability of operations. It is already clear that the investor’s costs will be incomparably small compared to the proceeds from transactions with emission reduction units and will fit exactly within the corridor of normal market price fluctuations carbon units,” says Vsevolod Gavrilov.

But companies will have to pay not only for the bank’s services. As explained by Mr. Gavrilov, it is necessary to make contributions "to the regulatory authorities of the Kyoto Protocol, which provide the activities of the international transaction system (transfer of abbreviated emissions to the buyer. - BG ), including taking into account the existing debt", which is estimated at about $ 400 thousand. The bank representative emphasizes What "such a solution is fair: the functioning of the international transactional system is carried out on a paid basis, which means that Russian participants, not the state, should be carried out."

As Kommersant explained to Kommersant, the First Deputy General Director of the Energy Carbon Fund Sergey Roginko, a debt of $ 400 thousand to the "International Transaction System", or rather, by an international journal of operations, belongs to the state: "The Ministry of Finance simply did not pay." The fact is that by order of the Government of December 15, 2006, the National Register of Carbon Units was created on the basis of the Ministry of Natural Resources in accordance with the UN requirements. This is an electronic database that records all operations related to their introduction into circulation, storage, transfer and acquisition. In the register, accounts should be created for operations with carbon units, which can belong to both individuals and legal entities. Its administrator was appointed by the Federal State Unitary Enterprise "FCGS" Ecology ", which in January due to non-payment of contributions for the first year of the budget period of the Kyoto Protocol was disconnected from the international transaction system. Now it registers the only account - the government on which national abbreviations are concentrated.

At the FSUE "FCGS" Ecology "in Sberbank an account will be opened to which part of the State Foreign Assistance to emissions corresponding to the abbreviations of each PSO will be transferred. In turn, Sberbank, in order to introduce carbon units into circulation, intends to discover sub -accounts for each of the companies and transfer them to the buyer. This will be its role as the "operator". According to Sergey Roginko and Yuri Fedorov, the issue of the national register is not settled by the resolution: whether Sberbank becomes now, which, according to observers, cannot be connected to the international transaction system. "Now software is being developed to offer Russian companies an adequate service," Sberbank says.

Another fundamental issue has not been resolved by a new resolution on PSO, notes Mr. Roginko. The project investor must provide a report on the progress of the project, on the basis of which he receives units of abbreviated emissions on his own account, to Sberbank and the Ministry of Economy annually (until September 30). It turns out that in the first budget year of the Kyoto protocol, the investor was to report on September 30, 2008. This problem will arise in those companies that have already made investments in the PSO. For example, Rosneft in February 2008 signed an agreement with Carbon Trade & Finance Sicar SA (a joint venture Dresdner Bank and Gazprombank OJSC) on the purchase of units of greenhouses of greenhouses obtained as a result of the disposal of associated oil gas in Kharampur and Khasyreysk deposits Western Siberia. Carbon Trade & Finance has already transferred Rosneft an advance payment for reductions received in 2008-2012. How 2008 reductions will be made is not clear.

In 2008, the World Bank evaluated the demand of developed countries for all types of abbreviations made by the implementation of projects in developing countries and countries with transition economies in 524 million tons of CO2 equivalent. According to Sergei Roginko, by reducing emissions provoked by the economic crisis, these figures can be reduced to 350-400 million tons. “If we are a little sloppy, then this demand will satisfy projects from other developing and transitional economies,” he notes. It seems that there are actually no chances for selling abbreviations from Russian PSO.

"Business Guide (Environmental Economics)". Appendix No. 228/P dated 07.12.2009, p. 21

Authors:

Alexey Shapovalov

Themes:

Ecological problems

Lost Opportunity Protocol