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EAST-WEST-RESEARCH  October 2003

EAST-WEST-RESEARCH October 2003

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Subject:

Kyoto threatened by Russian antics

From:

Andrew Jameson <[log in to unmask]>

Reply-To:

Andrew Jameson <[log in to unmask]>

Date:

Sat, 25 Oct 2003 16:03:59 +0100

Content-Type:

text/plain

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text/plain (266 lines)

Johnson's Russia List
#7383
25 October 2003
[log in to unmask]
A CDI Project
www.cdi.org

#12
New Scientist (UK)
October 25, 2002
Last chance for Kyoto: The most ambitious international effort to avert
global environmental disaster is in danger of collapse. The cause, as Paul
Webster reports, is the bizarre antics of Russia's economy
By Paul Webster

A WAVE of disbelief swept the world in March 2002 when the US rejected the
Kyoto protocol. Here was an international effort to curb greenhouse gases
and bring global warming under control, yet the biggest polluter of all
would not play ball. European nations and other countries  supporting the
treaty were dismayed: how could the treaty survive? Then they realised they
had a secret weapon--Russia. For the protocol to come into force, it must
be ratified by countries responsible for at least 55 per cent of the
greenhouse emissions from industrialised nations in 1990. Adding Russia's
contribution to those already signed up would just tip the balance. Dismay
turned to smugness.

Until last year, that is, when the first rumbles began to emerge that
Russia might also turn its back on Kyoto. Despite encouragement and
protests from the treaty's supporters, those rumbles have grown. Then,
three weeks ago at the World Climate Conference in Moscow, President
Vladimir Putin stated openly that Russia is still studying the potential
impact of the treaty. "The decision will be taken at the end of that work
and in conformity with Russia's national interests," he announced.

What lies behind Putin's indecision is the extraordinary growth of Russia's
economy over the past four years, fuelled by cheap energy and a massive
surge in oil and gas production. That expansion has sent emissions of
greenhouse gases through the roof and so long as growth continues, so will
the emissions. What Russia has still to decide is whether signing Kyoto
will stifle its expansion. The treaty's advocates are on tenterhooks.

It's a predicament few could have envisaged back in 1997, when 171 nations
signed the protocol. Its aim was to restore releases of gases such as
carbon dioxide and methane to their 1990 levels. Nations with emissions
below that level would be handed "carbon credits" which they could sell on
to nations that had not cut back enough. Today, more than 70 nations,
including Japan, Canada and European countries, have ratified Kyoto,
representing 44 per cent of the emissions needed to activate the treaty.
Russia's 17 per cent would lift the world over the threshold. If Russia
decides not to take part, the treaty in its existing form would die.

In spring 2002, Putin had promised to press the Russian parliament to
ratify Kyoto. But since then, his pledge has been contradicted by a string
of statements from official sources. Most recently in March, the Ministry
of Economic Development concluded that ratification was not in Russia's
interest. In June, Putin's top economic adviser, Andrei Illarionov told
reporters that Kyoto offers Russia only "illusory" benefits, and would
force Russia to undertake expensive restructuring. "The US decided that
these expenses were excessive," Illarionov said. "I'm not convinced that
Russia can afford expenses that the world's richest country couldn't afford."

The events that have led Russia to its present state of indecision began
with the choice of 1990 as the yardstick for the Kyoto targets. That year
was the last in which the Soviet economy operated at full throttle. It was
followed by economic and industrial collapse which slashed greenhouse gases
emissions. According to official Russian estimates, between 1991 and 1999
the country's emissions dropped by 39 per cent. Though this caused a
national humanitarian crisis, from an environmental perspective it was a
blessing.

Under the protocol, if Russia's emissions had stayed low, the country would
have qualified for a huge number of marketable carbon credits which would
have delivered a windfall when carbon trading started around 2008.
According to Richard Baron, a carbon trading specialist with the OECD in
Paris, Russia would have had pretty much a monopoly on credits, which could
have allowed it to dictate the price. The country stood to profit to the
tune of $8 billion a year, reckons Marina Martynova of Russia's electricity
monopoly Unified Energy Systems. That gave the country a massive incentive
to join Kyoto.

But in 1999, everything changed. That year Russia's economy began to boom.
By 2001 it was growing at 10 per cent a year. In 2002 it grew 6 per cent
and it is expected to grow 7 per cent this year. The Kremlin expects the
economy to almost double before 2010 and triple before 2020. This rapid
growth is driving up greenhouse gas releases, but the big question is by
how much?

In a study published this year, atmospheric physicist Alexander Nakhutin,
chief greenhouse gas analyst for Roshydromet, the Russian Hydrological and
Metrological Service, charted a 12.9 per cent rise in Russian greenhouse
emissions between 1999 and 2001. "Russian emissions in that two year period
rose almost as rapidly as economic growth did," says Nakhutin, who based
his research on official figures which he admits may be underestimates. He
calculates that Russia's emissions reached 61 per cent of their 1990 levels
in 1999, and 70 per cent in 2001. "These results surprised me," Nakhutin
says, "and they also caused broad worry within the government."

Data for 2002 and 2003 are not yet in, but if greenhouse gas emissions
continue to grow at the same rate, by 2008 Russian carbon emissions will be
6 per cent greater than they were in 1990. Instead of raking in a carbon
windfall, Russia will be faced with having to cut its emissions. It may
have to pay to join the Kyoto club.

What really complicates matters is the lack of dependable information on
the nation's emissions. International experts judged Russia's first report
to the UN commission on climate change, submitted in 1997, as "highly
unreliable" in crucial aspects. The verdict on the second report, in 2000,
was no better: it was full of holes and contained "low quality" data. A
third report, delivered last year, has yet to be formally reviewed, but
Alexei Kokorin with the World Wide Fund for Nature in Moscow warns that it
"doesn't conform to international norms".

Perhaps the largest hole in the latest report is crucial data on emissions
from the oil and gas industry. Nakhutin, who signed the latest report,
blames its weakness on government data which are "often entirely
unreliable". This is a serious problem, says Bill Chandler, an expert on
Russian carbon emissions at the US Department of Energy's Pacific Northwest
Laboratory. "Without accurate data the system crashes," he warns.

Until the true state of Russian emissions becomes clear, the Kyoto planners
are guaranteed sleepless nights. They had singled out Russia as the main
banker for their carbon marketplace. "Can it work without Russia? That's
the key question," says Stephane Willems, a Russian greenhouse gas
inventory specialist with the International Energy Agency in Paris. Baron
thinks that if Russia's emissions are not well below 1990 levels in 2007,
the all-important carbon market will at the very least suffer "a radical
change in expectations".

While Russia itself waits for the emissions statistics, the possibility
that the country's huge carbon windfall could go up in a puff of smoke has
not been lost on its government. Something dramatic needs to be done. In an
assessment of Kyoto published last year, the Kremlin announced that
"improvement in energy efficiency is the most important task of social and
economic development of Russia". The official line is that if the country
wants to hold on to its carbon windfall, energy consumption per unit of GDP
will have to be reduced by 36 per cent over five years. In May this year,
Russian Prime Minister Mikhail Kasyanov raised that figure to 50 per cent.

Officially at least this mammoth task is feasible. According to an
ambitious national energy strategy approved in 2000, a 48 per cent
reduction in energy consumption is possible through existing conservation
practices. The thinking behind this statement comes from within a massive,
Soviet-era office block that houses the Russian Ministry of Energy, just
across Red Square from the Kremlin. It is here that Russian and foreign
energy company executives negotiate the export quotas that give ministry
officials their tremendous power. Oleg Plujnikov, the Ministry's
straight-talking deputy head of ecology, says that energy efficiency is now
"mandatory" for Russia. He argues that Russia can have its carbon windfall
as well as foreign revenue from its booming oil and gas industries. That's
not to say that Russia can have its cake and eat it, jokes Plujnikov:
better to say "Russia will have two cakes."

To keep its energy efficiency strategy on track will mean spending more on
it, peaking at $2.9 billion in 2010--that's equivalent to 10 per cent of
all investment in the energy sector. Plujnikov concedes that official
forecasts are treated with suspicion since the days of the infamous Soviet
five year plans, but insists that the energy efficiency projections are
reliable. The way he sees it, Russia's energy supplies are finite and will
quickly grow costly as they start to dwindle. Reducing energy wastage is
the only way to maintain profit margins. "In the end, the market economy
will deliver energy efficiency for us," he says.

Such pronouncements provoke sharp derision from Russia's leading
independent energy efficiency analyst. "There really is a lot of hot air
out there," says Igor Bashmatov. He works on the other side of Moscow from
the Ministry of Energy in a decaying building surrounded by Brezhnev-era
apartment towers that offer feeble protection from the freezing winters.
With funding from the US Environmental Protection Agency, Bashmatov's
Center for Energy Efficiency (CENEf) has thoroughly assessed the
government's actual spending on energy efficiency and found it disastrously
below official pledges.

According to the CENEf, between 2002 and 2005 the Russian government has
only allocated 14 per cent of the funds it promised to energy efficiency.
Worse, says Bashmatov, only 4 per cent of that money is spent directly on
efficiency: the rest goes on industrial subsidies aimed at expanding oil
and gas production. He stresses that it is very difficult to find good
figures for what's happening with energy efficiency. Even after CENEf's
intense efforts to investigate the government's real spending, he can't be
sure of the real figures. "The best indicator of commitment is allocation
of funds," he says, "but we've never really seen anything more than verbal
support." In his view, the government's call for even a 36 per cent
increase in energy efficiency is simply not realistic in the next decade.

It would be hard to overestimate the scale of the task ahead. The
government owns most of the housing in Russia, much of which is
uninsulated, Soviet-style buildings. Some 40 per cent of overall Russian
fuel goes on heating these buildings, and energy wastage is stupendous.
Yet, according to CENEf, spending on energy efficiency in this sector
amounts to only 2.5 US cents per person per year, which is chicken feed.

Energy in Russia is heavily subsidised and, for most people, extremely
cheap. So car drivers in Moscow pay just 30 US cents a litre for gasoline,
and residential and industrial electricity rarely costs more than 1.6 cents
per kilowatt-hour, notes Chandler. Even basic schemes for cutting
consumption have not found favour with Russian politicians, who consider
cheap energy to be crucial to economic growth and political stability.
(Only about a third of apartment buildings and almost no individual
apartments have electricity meters). Russia's real attitude to the issue
may have been revealed by its recent decision not to join the World Trade
Organization, which would have put a stop to domestic fuel subsidies.

Industry in Russia does not seem to be much better at saving energy. In the
petroleum sector, the big problem is the ageing infrastructure. According
to Nina Poussenkova, a carbon emissions analyst with the Moscow-based
Institute of World Economy and International Relations, an arm of the
Russian Academy of Sciences, 25 per cent of Russian pipelines are more than
30 years old, and another 5 per cent are 20 years old. "Production
infrastructure in the oil and gas sector has seriously deteriorated during
the '90s," she says. The ageing equipment leads to some 75 to 80 pipeline
ruptures a year, says Poussenkova, "contributing to fugitive emissions that
are rather difficult to account for". The greenhouse gases released in
these accidents are regarded as commercially confidential and never made
public.

The Kremlin acknowledges that measures to cut wastage and pollution are
essential here, estimating the cost at up to $150 billion. Yet it has
pledged only $400 million to fund efficiency measures before 2005, says the
CENEf. Individual companies themselves are no better. Despite profits that
have shot up to stratospheric levels in recent years, Poussenkova says
Russian oil companies are investing only minimal amounts in energy
efficiency, using slivers of massive subsidies from Moscow and Washington
aimed at expanding production.

Gasprom, a government-controlled monopoly which dominates the natural gas
sector says it emitted 232 millions tonnes of carbon dioxide in 2002--about
a 10th of the national total. According to a study by the Global Change
programme at the Massachusetts Institute of Technology, production
increases are expected to increase the industry's   methane emissions to 34
per cent above 1990 levels by 2010. Again, methane emissions from gas
fields and pipeline leaks are not quantified. "There's wide uncertainty
throughout their entire system for natural gas," says Chandler. Like oil
companies, Gasprom is chasing profits by pursuing new gas fields rather
than by increasing efficiency.

By comparison with the oil and gas sectors, electricity generation is
relatively efficient in terms of its emissions, says Ludmilla Khoudogarova
of the Russian Academy of Science's Energy Research Institute in Moscow.
Carbon emissions from power stations, which stand today at about a quarter
of Russia's releases, will increase as the economy grows. But their impact
could be offset as plants switch from coal to natural gas. Yet even here
there is a cloud on the horizon. President Putin has promised Russia's army
of coal miners that he'll expand the use of coal to generate power. The
national energy strategy calls for a doubling of coal consumption until
coal-fired plants produce half the nation's electricity.

With this kind of strategy on the cards, a booming economy and little
evidence of serious measures to cut energy consumption and wastage, it's
small wonder that Kyoto's supporters are growing increasingly nervous. "The
situation is urgent," says Chandler. According to Plujnikov at the energy
ministry, Russia's brinkmanship over Kyoto is all part of a strategy
designed to milk as much from the treaty negotiations as possible. And
talking tough has paid off in the past. Under Kyoto, some emissions can be
cancelled out by carbon absorbers, such as forests, and in 2001 Russian
negotiators managed to double the accepted estimates for the amount of
carbon that Russian forests absorb.

Until definitive figures and forecasts emerge for Russia's greenhouse gas
emissions, the world can only wait to see which way the country will swing.
Once collated, the figures will have to be audited by Kyoto administrators
which, judging by past experience, is likely to be a heated affair. Yet
Plujnikov is sanguine about the process. "First we'll give them Russian
vodka," he says. "Then we'll give them the Russian numbers."

*******

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