Russia sets rules for carbon credits

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Russia’s government set the rules needed for businesses to start trading carbon credits earned by cutting greenhouse-gas emissions, creating a market that may be worth more than $1.5 billion a year. “The necessary framework is in place as of today,’’ Vsevolod Gavrilov, the deputy head of the Economy Ministry’s natural resources department, told reporters in Moscow on Monday.

So-called Joint Implementation Projects established under the 1997 Kyoto Protocol allow companies to earn tradable credits for reducing emissions at mines and factories. Russia, the largest producer of greenhouse gases after the US and China, is home to thousands of Soviet-era plants that could generate credits through efficiency upgrades. Curbing gas flaring and modernizing heating systems are among the projects that “will improve the efficiency of the national economy and make it greener,’’ Gavrilov said. Russia ratified Kyoto in 2004.

Though many Russian projects are in the pipeline, until today companies had no way of officially submitting them for approval by the Economy Ministry, said Steve Eaton, director of C6 Capital, a Moscow-based investor and developer of projects to reduce greenhouse-gases in Russia and the former Soviet Union.

“Theoretically, the potential for Russia is enormous, but due to the delays in getting the regulations in place some companies have focused on developing projects in other markets’’ such as China and India, Eaton said by phone.

Russia could produce 300 million tons of so-called carbon dioxide equivalent reduction units in the next five years, former deputy economy minister Andrei Sharonov said in June. That tonnage may be worth 5 billion euros ($7.38 billion), Eaton said. The global market was worth 40 billion euros last year, he said.

The power industry accounts for a quarter of Russia’s greenhouse-gas emissions, according to Anatoly Chubais, chief executive officer of OAO Unified Energy System. Russia’s national power utility is seeking to raise $1 billion by selling emission credits for cutting coal use.

Chubais said in June Moscow-based Unified had 40 investment projects that would cut emissions of carbon dioxide by 35 million tons through 2012 and create credits under Kyoto. —