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Moscow Times
October 28, 2004
Time to Put Kyoto Treaty to Work

After the Cabinet's endorsement of the Kyoto Protocol last month, the votes in the State Duma and Federation Council to ratify the treaty had all the suspense of waiting for a bus. Nevertheless, it was symbolically important. Russia took a big step toward Europe with that vote and got the honorary final word in the decision to launch a global fight against climate change -- a fight that will clearly be one of the most pressing issues of the coming century.

For Russia what matters now is getting its Kyoto strategy right. The treaty creates new opportunities that must be grasped and new pitfalls that should be avoided. In particular, Russia should move quickly to take advantage of the green investment schemes allowed by the treaty. It is a chance that Russia can ill afford to miss.

The Kyoto Protocol aims to get industrialized countries to limit emissions of greenhouse gases to predetermined targets by 2012. So far much of the debate surrounding Kyoto has focused on Russia's potential to sell unused emissions quotas as allowed under the treaty. Today, Russia is far below its target, leading the treaty's supporters to argue that Russia will make hundreds of millions of dollars selling extra emissions. Critics counter that Russia's emissions could increase quickly, thanks to speedy economic development, and that Russia will be forced to buy credits from other countries.

But Russia's leadership would be wise to look beyond the debate over quota sales and embrace the potential for green investments into Russia's aging energy infrastructure -- a provision of the treaty that will likely prove far more significant than the ability to sell the right to pollute. Such investments do not affect the country's ability to sell quotas, and can provide much-needed capital for modernizing industry. What's more, they actually cut down on pollution, unlike quota sales, which are mostly a paper shuffle.

Under Kyoto, a foreign investor -- say, the Dutch government or a German gas company -- can pay for reduced emissions abroad and count the reductions as their own. Russia's leaky gas pipeline network is a prime target. So are its coal-guzzling power plants. Russia should jump at the chance to modernize its infrastructure while foreigners are offering to foot the bill.

Major quota buying and selling may not begin until the 2012 deadline looms. But green investments are already taking place. Russia has so far been out of the running because it was late ratifying the treaty and hadn't set up the basic bureaucratic structure to allow foreign investors to reap the necessary emissions bonuses. Now is the time to declare Russia open for green business.