Russia Demands Its Credits

Moscow, to Keep Its Carbon Permits, Threatens to Block a Global Climate Deal

By GUY CHAZAN and JACOB GRONHOLT-PEDERSEN
A Russian demand that it keep its huge surplus of emissions permits after they expire in 2012 is overshadowing global climate talks now under way in Copenhagen, with some observers saying it could hamper efforts to reach a deal and upset the global carbon market.
Russia has warned it could reject any deal from Copenhagen that doesn't allow it to carry forward the unused carbon permits it holds as a result of the 1997 Kyoto Protocol. Those who argue against letting Russia keep the credits say Moscow could end up selling them abroad, leading to a collapse in the price of carbon.

That in turn could hurt efforts to green the world's economy. One principle behind promoting an international system of carbon credits -- the currency for buying and selling the right to pollute -- is that the price of carbon should be high enough to encourage investment in nonfossil-fuel technology such as nuclear, wind and solar.
In a bid to reassure leaders meeting at Copenhagen, Alexander Bedritsky, an adviser to Russian President Dmitry Medvedev, said Russia had no plans to sell its unspent permits abroad. But he stressed that Russia would endorse a global deal only if it allowed Moscow to bank its permits.
Observers say Moscow hasn't decided what to do about the surplus. "There is a chance that Russia could relinquish the permits if it will help the talks," says Vladimir Slivyak, head of Ecodefense, a Russian environmental group. "The authorities would like to be seen as saving Copenhagen if the talks get into trouble." He noted that Mr. Medvedev was due to join world leaders at the summit next week. Previously, Mr. Medvedev had said he would stay away.
The dispute dates to the Kyoto Protocol of 1997, the first international treaty obliging countries to cut their emissions of greenhouse gases. Under Kyoto, a country that has difficulty meeting its emissions goal can buy credits from another country that has reduced them beyond its target.

Russia was required by Kyoto to maintain its carbon-dioxide output at 1990 levels, rather than cut them. But in the aftermath of the Soviet breakup in 1991 and Russia's subsequent economic collapse, its emissions plummeted, and it easily exceeded its Kyoto targets.
That left it with a surplus of carbon allowances equivalent to six gigatons of carbon dioxide, or roughly the same as China's annual emissions. In theory, Russia could sell the stockpile to other countries -- a potential multibillion-dollar bonanza.
The fate of the allowances is unclear once Kyoto expires in 2012. Russia wants them carried forward, in recognition of its achievement in cutting its CO2 volumes, which it says have fallen by 34% since 1990.
Mr. Bedritsky said Russia wasn't ready to curb its economic growth for the sake of reducing emissions.
Write to Guy Chazan at guy.chazan@wsj.com