In Russia, Pollution Is Good for Business - New York Times

In Russia, Pollution Is Good for Business - New York Times: "It is one of the paradoxes of the Kyoto Protocol on climate change that companies in Russia and other Eastern European countries, which are among the world's largest producers of greenhouse gases, are poised to earn hundreds of millions of dollars through trading their rights to release carbon dioxide into the air.

The Kyoto treaty, negotiated in 1997 and adopted by 36 industrial nations, established a mechanism aimed at finding the cheapest way to curb emissions of gases that contribute to global warming. The idea was that countries that produced more than their treaty-imposed limits could reach their goals by buying rights from producers in other countries where controlling output is easier and less expensive.
t is not clear how successful that approach will turn out to be. But because Russia's companies operate such outdated and inefficient equipment, they can easily and cheaply upgrade. As a result, the Kyoto process has already emerged as a potential source of earnings for the country's big energy and manufacturing companies, according to company executives and analysts. They have hired consultants, inventoried pollution sources to earn credits, and opened carbon-trading divisions.

Unified Energy and Gazprom, Russia's natural gas monopoly, which together release more than 50 percent of greenhouse gas emissions in Russia, both have such trading units.

"We're intensely interested in the carbon-trading market," Andrey V. Gorkov, the head of the carbon-trading division at Unified Energy, said earlier this month in Montreal, where he was attending the United Nations climate conference. Member countries formally approved emissions-trading rules at the meeting.

The protocol requires the 36 industrial nations - with varying targets - to reduce their emissions of greenhouse gases below their 1990 levels, in the five years from 2008 to 2012.

For the European Union, the target is to reduce emissions to 8 percent below 1990 levels. In an indication of how robust the demand for emissions credits may be, this year the European Union is 6 percent above its 1990 levels. The United States, which generates a fifth of greenhouse gases but has not joined the Kyoto Protocol, is 19 percent above its theoretical limits.

Russia, in contrast, suffered an economic collapse in the 1990's, and is 43 percent below its 1990 baseline in the Kyoto agreement. In fact, Russia does not expect to reach 1990's emissions levels until around 2020 - attesting to the severity of the economic setback from which it is still recovering.

At the same time, Russian industry is generally wasteful with energy, so that a few cheap upgrades go a long way to reducing emissions. Thus, with both outdated equipment and a surplus of carbon emissions, Russian companies have become attractive to European, Canadian and Japanese companies that need emissions credits. "