Emissions Impossible

I write my column Emissions Impossible in TCS Daily on 25 August 2003.

Russia holds Kyoto hostage, but for the wrong reasons

Among other things, the old Soviet Union was one of the most horrible examples of economic and environmental mismanagement. Now the Russian Federation is seen that way by the EU since it still has not ratified the Kyoto Protocol. The treaty can only come into effect once the industrialized countries ratify it that account for 55 per cent of global emissions, and since the US has pulled out, Russia's participation has become of utmost importance to Eurocrats.

The European Union's emissions trading directive is also an important factor. It is no wonder that the EU is keen for emissions trading to begin as well outside its borders. The bloc won't be able to meet its targets without purchasing excess credits from elsewhere.

Kyoto makes exceptions for some of the worst polluters in the world, such as the People's Republic of China. It blocks the trading of emission rights with these countries, and gives their more polluting industries an advantage over European competitors.

This puts Russia, if it ratifies the Kyoto agreement, in an advantageous position relative to the EU. The collapse of Soviet-era industry has left Russia well below its 1990 level of emission of greenhouse gases (perhaps with more than a third less of its base-year emission levels), with lots of emissions credits to sell to EU members that do not meet their goals. It has been calculated that Russia at the most will emit 2.2 billion tons of emissions a year between 2008-2012. This would leave it with some three billion tons of its quota unused -- which Moscow was in fact saving up to sell to the US, before the US finally withdrew from the treaty in 2001.

At a conference in March on Russia's Participation in the Global Market Mechanisms under the Kyoto Protocol, Nikolai Ratsiborinsky, an advisor to the Russian Foreign Ministry, said the Kyoto Protocol is ineffective and expensive. Two Russian scientists, Alexander Bedritsky and Yuri Israel, have been questioning whether the deal is scientifically sound, and even suggesting Russia might benefit if global warming makes its colder regions more productive.

One would hope that Russia's stalling is a result of doubts about the Kyoto Protocol because its leaders are questioning the soundness of the science behind it (we also have recently received new scientific reports about the effects of solar activities on global warming), or because they see the negative effect it would have on Russia's economic development. Unfortunately, the most probable cause for its delaying tactics is not that of long-sighted leadership and a wish for sound science, but more that Russia wants to negotiate with the EU to make the most out of its ratification.

It is, said Mukhamed Tsikanov, deputy minister of economics, to the newspaper Pravda, because... we don't have the economic stimulus, the economic interest in the Kyoto Protocol. That stimulus could quite possibly involve a high price for its credits: development grants, trade concessions, the EU's support in international negotiations etc. Certainly Russia has good reasons for trying to raise the price the EU has to pay for its quotas; the Russians need these revenues for crucial modernizations and to cut down their economy's heavy dependence on oil and gas, which account for more than half of their government's budget revenues. Russia's Parliament, the Duma, returns to session in early September, giving it only a month to ratify Kyoto before an ecological summit in Moscow aimed at discussing the treaty's future.

Most troubling for European taxpayers is that they could be forced to pay to prop up the emissions trading directive's necessity to buy Russian expensive emission quotas. In this system of emission rights, governments have created an artificial shortage of energy and allocate emissions rights to individual corporations. These quotas would mostly benefit a small number of large energy producers that would receive a sort of artificial monopoly on the right to generate so-called greenhouse gases. As a result, they will have a vested interest in preventing any reversal of the artificial shortage. A new technological or climatological breakthrough could make their emission rights, which they may have bought for significant sums, worthless. Elements of central planning would be incorporated into new areas of our economies under the banner of exploiting seemingly market-based mechanisms, which would represent a step backward in the trend toward more market and less government. It's a terrible deal for European taxpayers.

The Russians dragging their feet on signing the Kyoto protocol may be to their own benefit, but it may also ultimately benefit us all if we manage start a new debate on global warming based on sound science and with a different ideological outlook.