Russia’ refusal to take part in Kyoto-2 and its JI mechs is a huge loss for Russian economy

Russia’s refusal to be part of Kyoto-2 implies a lot of losses for our country – for the federal budget, the society and for the environment. But there is an already existing JI mechanism which might be very successfully integrated into Russia’s climate policy, the emissions regulation system in order to stimulate environmental investments into energy efficiency and resource saving projects.
On December 20 representatives of business, governmental structures dealing with state climate policies and environmental experts gathered in Moscow to discuss the outcomes of COP17 and the future of JI mechanisms. This meeting was organized by “Business Russia” – the union of individual enterprises and their associations.
They all came to the conclusion that the fact that the new global agreement will not come into force before 2020, as well as Russia’s decision not to commit to reducing its emissions will mean the following things for our country:

  • The loss of around 6 billion AAUs which cost over 30 billion Euros (according to the current market rates);
  • The refusal to take part in the development and organizational and methodological improvement of project mechanisms;
  • The abolition of the existing legal framework for maintaining the only active tool to help facilitate emissions reduction projects and to accumulate the results of past projects;
  • The losses for the federal budget including the non-collected taxes and fees that total around 6 billion Euros, over 1 billion for regions and municipalities and 3 billion Euros if we include the non-collected estate tax. As a whole, for the 7 or 8 years of Kyoto-2 direct budget losses of all levels may reach up to 400 billion rubles. Russia’s absence in Kyoto-2 erases an important opportunity to finance the capping of energy tariffs and payments for excess emissions;
  • Social losses in the form of the loss of opportunity to create tens of thousands of new jobs in various fields.

The participants noted that there is a financial instrument created on the basis of JI mechanism in Russia that stimulates the implementation of modernization and energy saving projects in different industries, as well as technical modernization in metallurgy, electrical energy projects and many others. For most of the projects the use of the mechanisms worked as a stimulus to attract and mobilize investments from Russia. For many projects of this kind this instrument is of crucial value as a financial lever and for some others is the only real source of funding.

Russian mechanism of climate project implementation implies re-investment of revenues which gives good perspectives for the broadening of the project base and for the system’s development in order to stimulate energy efficient innovative development with regard to environmental impacts. Russia’s refusal to take part in Kyoto-2 means the abolition of the re-investment potential of the already completed projects, which is around 3 billion Euros worth.

In the case of “no-Kyoto” Russia cannot take part in the existing and future mechanisms of international agreements on emissions reduction, and this makes our country an outsider to any possible emissions regulation system.