Russia has agreed to ratify the Kyoto Protocol in exchange for EU support for Russian WTO membership

Alexander Koksharov

On the last day of September, the Russian government recommended that the Duma ratify the Kyoto Protocol to limit greenhouse gas emissions. President Putin insisted on ratification, thus putting an end to years of discussion about whether the Protocol would help or hurt Russia. Supporters of the Kyoto Protocol made frightening climactic forecasts and painted apocalyptic scenes. Opponents claimed that the cost of sticking to the Protocol would be too high for Russia and would stop economic growth. Both sides held conferences and sent voluminous reports to the government. However, the final decision seems to have been made not for economic and not for environmental reasons. According to the majority of observers, the ratification of the Kyoto Protocol was a political move.

Saving a drowning man

Russian ratification will practically save the Protocol from failure. It was signed in 1997 by developed countries that resolved to limit carbon dioxide emissions because according to the project’s architects this gas is the main culprit behind global warming and climate change. The Protocol had a target: developed countries were to reduce emissions by 6-8% from their 1990 level. In order to reach this goal, the Protocol sets up an emissions regulation system and an international market where emissions quotas can be bought and sold.
Russia signed the Kyoto Protocol in 1999 under fairly good conditions. Russia must not exceed 1990 emissions levels. The Protocol will go into effect when at least 50% of the participant countries producing at least 55% of emissions ratify it. The EU and Japan were first to ratify. Their economies are more energy efficient. In the EU, energy use and CO2 emissions are half the US rate. By ratifying the Kyoto Protocol, these countries were hoping to make some money trading in quotas. Back in the late 1990s, experts estimated that the global “air market” could total $200-300 billion a year. However, in March 2001, the US, producing a forth of the world’s carbon dioxide (and 36% of emissions among signing countries), decided to back out of the Kyoto system. Washington’s position makes sense. Were the US to join the Protocol, it would have to cough up a large amount of money or invest in new energy efficient technologies reducing CO2 emissions or buy quotas on the international market.
The Kyoto Protocol has already been ratified by 106 countries but after departure of the US, it could only be put into effect if Russia ratified. Without Russia, it would have been impossible to get the necessary 55%. Supporters of the Protocol began to bow to Moscow from all sides. Their main argument is that the Protocol’s current conditions are favorable to Russia, because in 1990 emissions were 60% higher than in the late 1990s and because Russia has a large quota of 17%. An unprecedented amount of pressure regarding the Kyoto issue also came from the EU.

Breaking protocol

Many a sword has been shattered in the debates pro and contra ratification. The main argument against ratification is that the Protocol is actually economically unfavorable for Russia. The most passionate opponent of ratification was presidential economic advisor Andrei Illarionov. In Illarionov’s opinion, by limiting industrial emissions at Russian companies, the document will hinder economic growth and prevent Russia from doubling its GDP. Illarionov assumes that Russia will not be able to change over to non-fossil-fuel-based sectors of the economy in the near future. According to Illarionov’s estimates, the potential damage the Protocol could do to the Russian economy runs from $400 billion to $1 trillion.
The Russian Academy of Sciences also came out against the Protocol. In their reports, RAS institutes noted the Protocol’s debatable scientific logic. Scientists believed that a strong tie between the current cycle of global warming and greenhouse gasses has yet to be proven.
At a cabinet meeting dedicated to the Protocol, Yuri Izrael, an RAS academic and the Director of the Institute for Global Climate and Ecology, stated that Russia will earn only an insignificant amount from trading in quotas. Due to the withdrawal of the main buyer, the US, prices will be ridiculously low, $5 a ton. According to Izrael, in 2008-2012, Russia will only be able to earn $250-350 million from quotas, an insignificant amount for the Russian economy. There are even doubts as to whether Russia will be able to sell its quotas to EU countries at all, as they are planning to organize an “internal market” for quotas. If some EU country needs quotas, it will likely buy them from another EU country or from one of the EU candidate countries. Russia is at the back of the line.
Another argument against ratification is the future of the Kyoto process itself. In the next couple years, countries that have signed and ratified the document will begin new negotiations regarding measures for coming decades. The main risk here is that the basis year will be reviewed and new demands will be made of participant governments. If 1997 becomes the new benchmark (when Russian industrial production reached its lowest level) or even 2004, Russia will have substantially lower emissions quotas. In addition, the EU and Japan, which have already invested significant amounts of state funds in energy conservation, could demand more radical quota reductions from other countries.
Another argument against Kyoto is the limited nature of the Kyoto system. At the moment, the US, the biggest emissions producer, is not participating, nor is China, India, or other developing countries where manufacturing is increasing rapidly. According to a variety of experts, this will make the EU and Japan’s attempts to reduce worldwide levels futile.

Possible plusses

Though ratification will not bring Russia any immediate benefits (as was hoped in the late 1990s due to the billion-dollar quota market), supporters believe that the Protocol will also not do any harm.
First of all, it is not necessarily the case that rapid industrial growth in Russia will mean higher emissions. “The Russian economy is not growing the way it grew in the 1950s and 60s. The main source of growth is the service sector and industries that do not create significant amounts of emissions,” argues Benito Muller, an expert at the Oxford Institute for Energy Studies. Thus, doubling the GDP will not mean Russia will eat up its quota based on 1990. According to the Ministry of Economic Development, at current growth rates, by 2012 Russia will have a 20-percent reserve of quotas it can sell on the market.
“The Kyoto Protocol mechanism could actually speed up growth in Russia, as it will help many Russian companies attract investment,” believes Daphne Ter-Sakarian at the Economist Intelligence Unit.
Finally, in the long-term perspective, ratification could increase the energy efficiency (and thus the competitiveness) of the Russian economy. As Vladimir Danilov-Danilyan, an RAS academic, stated at a recent forum on climate change held in Moscow, “The Kyoto Protocol will actively encourage the adoption of scientific and technological measures that will reduce Russia’s dependence on the world raw commodities market and turn Russia into a post-industrial power with an up-to-date, highly intellectual economy.” The Russian government and the president have stated on several occasions that they are interested in diversifying the Russian economy and reducing the role of natural resources. Participation in Kyoto could help do just that.
The political dividends Russia stands to gain from signing were far from the last concern on officials’ minds. For the Western world, this step on the part of the Russian government is a guarantee that the Russian government will keep its promises. According to OECD representatives, Western entrepreneurs see Russia’s desire to join the WTO and the Kyoto Agreement was a clear sign that Russia differs significantly in practice from the marginal country figuring in many portrayals by the Western media. With Western concerns about Russia’s possible return to authoritarianism and repression of basic freedoms abounding recently, membership in the WTO or the Kyoto system significantly improves its reputation in the eyes of Western investors. They feel more secure in Russia and make investment decision more easily.
By ratifying the document, Russia itself will have more weight to throw around in the next stage of negotiations coming in the next couple years. It will be easier for Russia to insist on its interests from inside as opposed to outside the Kyoto system. As a member of the club, you can help make the rules. Russia’s experience in WTO negotiations has already proven this fact.

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