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The First Russian Carbon Units on the Joint Implementation Projects Go to Japan

The Kyoto Protocol mechanisms - Joint Implementation Projects (JIPs) - started in Russia with the delay of three years. The first JIP on capturing associated gas is performed in the Yamalo-Nenets district. The Reuters Group reported that Japanese JIP partners receive the quota of 290,000 tonnes of CO2 equivalent, the emissions reduction due to the project). To implement the current potential of JIPs by the end of 2012, Russia has to perform thousands of projects.

The equipment for collecting associated gas has been put into operation at the object of the JIP - the Ety-Purovskoe oil field in Yamal-Nenets autonomous district. The project has been performed jointly with “Gazprom Neft” company operating the oil field and Japanese companies “Mitsubishi Corp” and “JX Nippon Oil & Energy Corp” at the expenses of the Japanese partners.

The mounted equipment collects the associated gas, which is further transported to “Sibur Holding” gas-processing plant. The project implementation at the Ety-Purovskoe field now allows to use up to 95% of the associated gas. Before, the gas was flared, as it was at almost all other fields in Russia. As a result of this project, reduction of GHG releases to the atmosphere amounted 290,000 tons of carbon equivalent by January 1, 2011.

The beneficiary from associated gas sales is “Gazprom Neft”. The recipients of Emission Reduction Units (ERU) are Japanese companies that invested in the project. Mitsubishi and JX Nippon Oil & Energy have not yet reported whether they are going to use the quotas received on their own or to sell them at the market. According to current prices of the international carbon market, 290 thousand ERU cost approximately 3.33 million euro. The project participants expect that the equipment installed at Ety-Purovskoe field will allow to reduce GHG emissions by 3.1 million tons CO2-equivalent by the end of 2012. In current prices, it will be 35.6 million euro. In addition to the profit from using associated gas, the Russian partners will receive economic effect from reducing payments for the nature contamination. Global GHG emissions will be reduced by 3.1 million tons and will contribute in prevention of further climate changes. Despite the criticism of the Kyoto Protocol during the last years, it still has no alternatives in international climate negotiations.

The Russian Socio-Ecological Union (RSEU) welcomes starting JIPs in Russia, but underlines the fact that, due to the late start, 3 years have been missed already. Performance of the Kyoto Protocol mechanisms have been planned for the period of 2008-2012, but Russia has approved national JIP procedures only in 2010.

At the moment, 33 JIPs, including Ety-Purovskoye field, have passed the established procedures of evaluation and coordination with the Ministry of Economic Development and the Saving Bank of Russia, and are ready for implementation. The total anti-greenhouse effect from all these projects will be approximately 68.6 million tons ERU. In current prices of the carbon market, it is about 800 mln euro. Experts evaluate the potential of Russian JIPs as hundreds million tons of CO2.

According to the JIP mechanism, Russia does not receive any emission reduction units, but it receives a strong inflow of investment from countries and companies interested in receiving ERUs. Russia also receives technologies, international cooperation experience, revival of economic activities in the regions, additional profits of participating companies and the corresponding replenishment of the budgets.

Now Russia is much behind in development of all partnership mechanisms under the Kyoto Protocol. The total turnover of the global GHG market (the so-called Emission trading scheme, ETS) exceeded 90 billion euro in 2010. The ETS scheme was started in 2005 and now it is being participated by more than twelve thousand enterprises located in 27 EU countries, enterprises from Norway, Iceland and Liechtenstein, participating enterprises of the Swiss emission trading scheme, 200 enterprises (power plants) located in 10 U.S. states and 4,000 companies - aircraft operators from 152 countries - members of the European trading scheme for aviation emissions, companies-member s of over 400 JIPs implemented in more than one hundred countries around the world, and participating companies from more than 7000 Clean Development Mechanisms (CDM) projects.

These are missed opportunities for Russia! According to M.A.Yulkin, the head of the climate change working group of the RSEU of Industrialists and Entrepreneurs (RUIE), "it is necessary to achieve the situation when Russian companies have an unimpeded access to the carbon market, are allowed to freely invest and earn money on emissions reduction. Emission reduction should become a habit and a routine business practice for Russian companies. Then we will be able to set much more ambitious goals for ourselves and for the world community and to become leaders in issues of counteractions to the global climate change and its catastrophic consequences.” (http://www.ng.ru/energy/2009-12-08/13_projects.html).

Besides economic and social benefits, JIPs can favour development of new resourse-saving branches of economics. Therefore, RSEU considers it necessary to give priority to support JIPs on related to renewable energy. This is a “sustainable” that will help Russia to “fly off the oil needle” in the future. So far, renewables are absent in the list of the first bunch of approved JIPs, though they were present among the projects submitted for the competition.

Prepared by Vladimir Latka

On the subject, see also:

http://www.reuters.com/article/
http://en.rian.ru/Environment/20110107/162067434.html
http://lenta.ru/articles/2011/01/10/quotes/
http://www.lenta.ru/news/2011/01/07/quotas/