Green Investment Scheme: unused resource in Russia


By the end of 2011, Czech Republic managed to find funding under the Green Investment Scheme for more than 50,000 projects worth 424 million euros. Thus, a small European country completed its plan to attract environmental investments by more than 80% and has already allocated over a half of these funds to finance environmental projects. Meanwhile, Russia continues to lose opportunities to invest in climate projects.

The Green Investment Scheme (GIS) is one of the additional opportunities to attract investments for implementation of climate projects. This mechanism has been proposed by the Russian delegation in 2000 at the Sixth Conference of the Parties to the Framework Convention on Climate Change (UN FCCC) in The Hague. The GIS is an innovative financial mechanism based on voluntary commitment to reinvest the incomes from the sale of the surplus of the national quota in projects to improve energy efficiency of production and consumption, and develop renewable energy sources. The heart of GIS is a "hybrid" between the Joint Implementation (JI) projects and emissions trading. The scheme allows to minimize the bureaucratic formalities specific to JI, and to conclude contacts by countries on a bilateral basis. For example, Poland has projects within this scheme with Ireland, Czech Republic - with the World Bank.

The GIS mechanism allows a project to have a status of a Kyoto Protocol project, which significantly reduces investment risks and helps to find funding. The procedures are much freer than in the JI projects. In addition, this scheme allows to direct funds to social and educational goals, health and nature conservation.

Mikhail Yulkin, the head of the climate change working group within the Committee on industrial technologies and environmental safety of the Russian Union of Industrialists and Entrepreneurs, says: "A valuable advantage of the "green scheme" is that its implementation does not require special legislation. In fact, Russia gets emission quotas according to the Kyoto Protocol, and has the right to sell units of this quota on the basis of the same document. Incomes from sale of quotas come to the Russian budget and, based on the Russian legislation, can be passed to Russian companies as targeted funding or as targeted investments."

The Czech Republic leads in using GIS and finances in this way renewable energy projects for heat production, energy conservation projects in buildings (partial or complete insulation) and projects on construction passive houses. Funding under the scheme of green investment can be transferred to individual citizens, condominiums, housing cooperatives, cities and municipalities, as well as private companies. The administrator of the program funding is the State Environmental Fund of the Czech Republic in cooperation with five banks selected by a tender. By the end of 2011, the Czech Republic managed to find funding under this scheme for more than 50,000 projects worth 424 million euros. Thus, a small European country completed by more than 80% its plan to attract environmental investments and has already used more than half of the raised funds to finance environmental projects.

So far, Russia with its huge number of free quotas has made extremely inexpressive print on the "Kyoto" market. The leaders of this process now are the Czech Republic, Estonia and Ukraine. The turnover in the global carbon market has already exceeded 150 billion U.S. dollars per year (excluding the adjacent markets of technologies, services, etc.), and Russia's share there is less than 0.1%.

The strangeness of the situation with the GIS in Russia is that this tool was supported by the Russian authorities. In June last year, German Gref, the head of Sberbank, informed the Russian President about opportunities of GIS at the Meeting of the Commission on modernization and technological development. Then, Medvedev gave instructions to the Government for speedy assistance for promotion of these projects. A year ago, the World Bank (MB) has allocated 725,000 dollars for introduction of Green Investment Scheme in Russia.

However, Russia still has not given "green light" to introduction of green investment schemes. The World Bank activities in this direction have been suspended. Currently, the World Bank is studying introduction of the Green Investment Scheme in several other countries in Central and Eastern Europe, including the Czech Republic and Ukraine.

Chances to introduce the green investment scheme in Russia are running out, although introduction of these tools could help to create legal and economic mechanisms that allow the country to move to a new type of energy. Resource consumption and waste production can be dramatically reduced through combination of new technologies that can be implemented using the international climate mechanisms. However, Russia continues to deny its "carbon potential".