Economic collapse pays big dividend in carbon credit profits

Published Date: 24 November 2009
By Arthur Max in Konstantinovka, Ukraine
UKRAINE'S economic collapse has produced a potential multibillion-dollar bonanza, allowing the country to reap windfall carbon credit profits from the dead chimneys of its industrial decline.
The industrial collapse has been bad for jobs but good for the climate. Ukraine produces less than half the greenhouse gases it did 20 years ago, and under a system devised in the negotiations for the 1997 Kyoto Protocol curbing the gases blamed for global warming, it is allowed to sell credits for every ton of carbon dioxide saved.In the central city of Konstantinovka, Vladimir Gapor, a plumber by trade, is a scavenger now, prying bits of scrap steel from the ruins of his old factory and selling them for a pittance.The factory, which made glass for the Soviet military and space programme, shut in the early 1990s after the Soviet Union disintegrated. Private wrecking crews and desperate jobless people like Mr Gapor then turned the industries, which once employed 16,000 workers, into heaps of bricks.While Western industrial powers must cut emissions, and many developing nations are asked to shift to low-carbon economic growth, a few Eastern European countries have no incentive to constrain their polluting, since they're already far below emissions limits.These nations can make millions selling carbon credits, while enjoying a comfortable cushion to pump the gas into the atmosphere without worrying about energy efficiency or cleaning up their factories.Countries or companies that cannot meet commitments to reduce emissions can buy these "allowances" from those that have cut emissions and have a surplus to sell. Earlier this year, each one-ton allowance sold for $10 when Ukraine signed a $300 million deal with Japan. The Kiev government has almost one billion more tons to put on the market, said Irina Stavchuk of the National Ecological Centre of Ukraine."The hot air business is the main goal of the government," Ms Stavchuk said.Income from such deals is supposed to be earmarked for clean-energy and other "green" projects. But critics question how well that guideline is followed.But the credits could lapse in 2012, when the Kyoto Protocol expires. Russia, Ukraine and other beneficiaries want these pollution rights extended in the new deal to be struck at Copenhagen. As part of a new climate treaty, Ukraine is being asked to commit to a ceiling on emissions and it has pledged to emit 20 per cent less in 2020 than it did in the benchmark year of 1990. Since its current emissions are about 52 per cent below 1990, it will be left with plenty of credits to sell.The international diplomatic debate in the Danish capital seems a world away from grimy Konstantinovka, where Gapor chips away at concrete blocks.Nearby, crusading local journalist Vladimir Berezin climbed on to a mound of rubble."We call this place the cemetery of Communism," he said. A dozen 180-metre tall chimneys stand like memorial obelisks over the devastation. The entrance to an abandoned building bore the slogan honouring Vladimir Lenin, founding father of the Soviet Union: "Our Aim is Communism and the Ideas of Lenin are Immortal.""It's true," Berezin said. "Here you can see Lenin's ideas. Here you see our communism."