Russia, Denmark strike first Russian Kyoto Deal

Publish date: June 30, 2005

On June 28th, Russia marked the first commercial transaction under the Kyoto protocol.

Orenburgenergo and Khabarovskenergo, subsidiaries of the national electricity giant Unified Energy Systems (UES), sold some of their greenhouse emission quotas to the Danish Environment Protection Agency for more than EUR 20 million, RIA Novosti reported.

The electricity companies are going to invest the money into converting two coal-fuelled power plants to natural gas, which is expected to dramatically cut greenhouse gas emissions.

Analysts say Russia has managed to negotiate a good deal: The 5.5 to 6 euros per metric ton of greenhouse gas is an average European price. Critics warned, however, that Russia might soon wish it had not sold its quotas because an anticipated rise in industrial activity would raise emissions accordingly, narrowing the safety gap between Russia’s Soviet-time high quotas and real emissions.

Academician Yury Izrael, head of the Institute for Global Climate and Ecology, had said previously: “We might get $5 per metric ton of carbon dioxide now but later we will have to invest $150 to $160 per ton in new [emission-saving] technologies.”

Other experts, however, welcome the current price as a great success for the first deal. Negotiations had started at a mere 3 to 4 euros per metric ton, they said because Russia had failed to adopt laws regulating the quota trade.

“UES, nonetheless, managed to sell the quotas at a market price,” said Andrei Kokorin, head of the World Wildlife Fund’s Climate and Energy Program. “The government did not give any state guarantees on the deal, which means that the Danes will assume all the related risks.”