Russia and the Kyoto credits market

The Kyoto Protocol  comes into force today, 90 days after Russia’s ratification meant that countries making up 55% of global energy are now signed up.

A major part of the protocol involves the creation of a market for buying and selling carbon emission credits – if a country’s emissions fall within its quota, it will earn credits which it can then sell on to countries that have exceeded their own emissions quotas. 

Up until now it has been thought that Russia had agreed to some very easily achievable targets so that it could raise foreign currency by selling its unused credits.  But this RIA Novosti article suggests that Russia may actually soon find itself in the position of having to buy credits.

…the Russian GDP is 10-fold more energy-intensive than the Japanese GDP. Russian energy losses account for nearly 40 percent of all nationwide consumption.

While this may come as a rude shock to those in the Russian government who negotiated the deal, the costs and political embarrassment of having to buy credits should – assuming the rules of the free market work in this case – force Russia to modernise and clean up its grossly inefficient energy sector.  Which is exactly what the Kyoto Protocol is for.

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