Enviromnment investment project power efficiency and methods of project implementation

O.N. Shtemberg, Russian Federation Chamber of Commerce and Industry, Task Team on implementation of Kioto Protocol mechanisms within the territory of Russian Federation

1. Ratification of Kioto Protocol appended to U.N.O Climate Fluctuation Framework Convention was the very event that summed up long-lasting discussion held between the Russian and foreign analysts on the matter of its benefits for Russian economy development both in the near future and hereafter.   Whether due to respectively low level of greenhouse gas emission and to quite a large field to be used for implementation of energy-saving policy, Russia can use any economic goods, the supporters of international agreement ratification accounted for. If to cater for the forecasts made up by the analysts of RF Ministry of Economic Development, Economy Higher School, RAS Energy Research Institute, Energy Strategy Institute (RF Ministry of Energy), Economic Analysis Department, the following aspects shall be considered:

·  With the Russian economy being developed on the basis of previously used technologies (by pessimistic estimation), the rate of greenhouse gas emission shall not exceed the base level of 1990 within the term specified for the first stage of obligation fulfillment (2008-2012);

·  With the industry production basis innovated and energy production and consumption up-to-date efficient technologies adopted, the rate of greenhouse gas emission shall not exceed the base level up to 2020.

2. Russian economy is characterized with its high power efficiency and, respectively, high carbon output, i.e. large volumes of greenhouse gas produced as a result of production and energy consumption are emitted in atmosphere. The rate of Russian gross national product power efficiency is 3-7 times higher than the one of any developed country. This rating is stipulated not only by engineering and technological backwardness of basic industries or high ageing of stock, but also by climatic conditions, as well as by irregularity of distribution of energy resources and consumers within the territory of Russian Federation.

As per the data gained by the analysts of RAS Energy Research Institute, about 20% of energy saving potential or 70-85 million tons per year may be realized at the expenses of 15 USD/t and less. The most expensive events with cost of more than 60 USD/t may be considered as enough for realization of only 15% of energy saving potential. With the potentialities of Russian and developed countries economic sectors matched, the volumes of greenhouse gas emitted within the territory of Russia need to be reduced to the level, valued to the cost specified in terms of 1 metric ton, by 100-300 times less than, for example, in USA, Japan or Germany. This kind of event might be used as a supplement motive need for attraction of “green investment”.

3. In compliance with the economic development scenario offered by President of Russian Federation, with the view of the gross national product to be doubled within the period of 2003-2012, the rate of gross national product carbon output may be decreased, on the average, by 4-5% per year, and as compared to the level specified in 1990, by 2012, the rate of gross national product carbon output should amount to 53%.

Now, in Russia there is quite a reserve of about one billion tons of ÑÎ₂-equivalent that may be supplemented with the environmental investment projects to be implemented for reduction of greenhouse gas emission. With the energy-saving policy being efficiently realized, Russia would gain both short-term and long-term external investment sources including the ones for the purpose of Kioto Protocol quota operation, as well as jointly implemented projects that, in case of favorable conditions, might be valued by several billion USD per year and additionally used for maintaining of any structural changes held within the sector of Russian economy. As a result, power and fuel industry companies, as well as housing and communal sector business bodies would be considered as the main invested objects and carbon market players.

4. Developers of Russian Federation Energy Strategy believed that Kioto Protocol had to be used as an additional reason to be enough for implementation of energy-saving policy. Therefore, the document states out that “With view of reduction of greenhouse gas emission, Russian Federation will use the mechanisms of flexibility specified by Kioto Protocol, but will establish institutional and legal project organization scopes implemented in terms of this Protocol ensuring efficiency and transparency of their implementation”.

Protocol consists of three mechanisms (Clauses 6, 12 and 17) permitting to transfer (for a certain reward) greenhouse gas emission units from one Party of Protocol to other one including joint implementation-and-development projects and emission quota operations. But the above mechanisms may be accessible only on the assumption of arrangement of national greenhouse gas emission assessment system, carbon unit register and emission inventory regular reporting.

5. Russian Federation Directives for establishment of National carbon unit register was published in February 20, 2006 and for National system of source anthropogenic emission and greenhouse gas absorbing assessment – in March 1, 2006. The above documents prove that Russian Federation set out fulfillment of obligations implied by adopted international regulations. Unfortunately, the very documents can not be considered as legislative acts to be applied for arrangement of national behavior in view of emission quota operations and reduction of greenhouse gas emissions, as that is the necessary criterion for Russian players to enter the carbon international markets and for National environment projects to be legally approved.

But a number of Russian Federation regulations make some contributions to reduction of greenhouse gas emissions and promoting of implementation of some energy-saving technologies, including Decree of 1 June 2005, No.410 that ascertains the rates of payments for methane emissions increasing them by 1000 times; Decree of 1 November 2005, No. 653 that regulates development of National renewable energy sources; Decree of 2 October 2005, No. 609 that institutes automotive engineering ecological classes and respective requirements to their ecological characteristics (also with respect to greenhouse gas emissions) in compliance with U.N.O EEC Regulations and Decree of Russian Federation Ministry of Industrial Energy of 4 October, No. 268, about organizational events directed to reduction of greenhouse gas specific emissions generated by group of companies of National United Energy System.

6. Though, the aforesaid documents are able to contribute to creation of sustainable development base, but can not resolve all the matters related to realization of Kioto Protocol requirements and efficient application of its economic mechanisms in Russia. Therefore, there appears the need for motivation of business activity of large and authoritative public organizations established for cooperation with national business sector that could play the role of:

• Participants responsible for developing of legal normative and instructive methodological documents to be essential for implementation of Kioto Protocol economic mechanis
• Project joint implementation and external partner searching managers;
• Personnel training managers to be able to settle all the technical and managerial enterprise-assigned matters of greenhouse gas emission quota operations and emission reduction;
• International negotiation conferees protecting the interests of Russian financial and production structures;
• Managers responsible for development of industrial plant greenhouse gas emission inventory systems, as well as for respective process conformity verification and certification.

Among the above kind of public organizations to be able to arrange and promote implementation of Kioto Protocol regulations in Russia, Russian Federation Chamber of Commerce and Industry is the key body consolidating of hundreds large Russian companies and protecting national business interests.

7. Today, new special-purposed organization “Russian Federation Kioto Protocol implementation Task Group”, to have been established at the beginning of the last year for operation within the bounds of Russian Federation Chamber of Commerce and Industry, includes representatives of the largest and reputable joint-stock companies, state run public authorities, scientific societies, Public Chamber and regional authorities. As per its wide-scale strategy aimed to promoting of any government obligations and involving of Russian business in the Kioto process, Task Group commenced activity directed to cooperation with concerned federal body executives. Development of the previously established system for the purpose of certification of the companies that managed to direct their business activity for reduction of greenhouse gas emissions within a number of large Russian regions, as well as implementation of environment investment projects are planned in not-so-distant future. The need for arrangement of the similar system is stipulated by the Kioto Protocol Parties’ respective decisions.