Putin Moves To Back Kyoto Protocol

At the Russia-European Union (EU) summit on May 21, President Putin surprised observers by promising to move ahead with ratification of the Kyoto Protocol, the 1997 treaty under which developed nations pledge to bring their greenhouse gas emissions below the 1990 level by 2012.

In return, the EU said it will help Russia overcome the remaining obstacles in its bid to enter the 147-nation World Trade Organization. Last October, the EU laid down six conditions for Russian entry to the WTO, all pertaining to the liberalization of Russia’s energy market. The EU’s major complaint is that cheap natural gas gives an unfair advantage to Russian exports of metals and chemicals. Most of those conditions have now been dropped. On Friday, Putin promised to raise domestic natural gas prices for industrial users from US$27 per 1,000 cubic meters to US$49-57 by 2010. (Note the six- year delay, and that residential customers are exempt.)

In fact, Russia initialed the Kyoto accord in 1999. But most observers were expecting Putin to disregard the agreement, due to a strident anti-Kyoto campaign waged curiously enough by Putin’s own economics advisor Andrei Illarionov. Illarionov’s omnipresence in Western media reports on Kyoto shows how easy it is for one man to monopolize the spotlight, especially if he speaks English and has the ability to turn a phrase. In recent weeks Illarionov described the Kyoto accord as “totalitarian,” the “gulag” and a “global Auschwitz.” (RBC, May 19, Reuters, May 17). However, it now seems that Illarionov was not speaking for Putin after all.

Although 121 nations have ratified the Kyoto accord, those countries do not represent the 55% of greenhouse emissions which the treaty requires to go into effect. Russia produced 17% of global emissions in 1990, and given the US refusal to sign Kyoto in 2001, Russia is needed to reach the 55% threshold. Given the post-Soviet economic collapse, Russia’s emissions have fallen 30% below the 1990 level. The Kyoto accord will allow Russia to trade its unused emissions to polluters in other countries, something that could bring Russia billions of dollars.

Illarionov attacked Kyoto on three grounds. First, with the US rejecting the treaty, there will be no buyers for Russia’s hot air. Second, the treaty exempts India and China, giving their manufacturers an unfair edge. China now generates 13% of global emissions, while Russia produces 6%.

Illarionov said that as the Russian economy continues to grow, it will soon reach its emissions limit. Most experts disagree, arguing that energy-efficient investment will allow Russia to grow without more carbon emissions, as has the UK for the past 30 years.

Third, Illarionov suggested that global warming will benefit Russia. And last week, a team from the Russian Academy of Science issued a report concluding that, “The Kyoto Protocol has no scientific foundation.” (Reuters, 17 May). Russian scientists are only too willing to disagree with their pampered Western counterparts. Most Western experts believe that global warming is real, and will be disastrous even for Russia, since it will mean greater frequency of floods and droughts.

There were also many opponents of Kyoto in the State Duma, which made it risky for Putin to send the treaty for ratification prior to the parliamentary election last December. Nationalist politicians denounced the idea of Russia “selling our clean air,” while deputies sympathetic to Russian metals exporters and oil companies, such as Yukos, lobbied hard against Kyoto. But with the electoral victory in the Duma of Putin’s United Russia party, ratification will not present a problem.

Many Russian companies actually stand to profit from Kyoto. Opponents focus the debate on emission trading. But in reality, the main benefit for Russia will come from joint projects where European firms invest in the introduction of cleaner technologies in Russian power plants. This idea is strongly supported by the power giants United Energy System and Gazprom, and by regional governors, some of whom have already inked plans with European investors. Even some oil companies, such as Lukoil, are keen to promote a “greener” corporate image and are willing to work within Kyoto.

There was some complex bureaucratic maneuvering behind the Russian debate over Kyoto. Aleksei Kokorin of the World Wildlife Fund explained that while the energy ministry favored ratification, German Gref’s Ministry of Economic Trade and Development wanted to use Kyoto as a bargaining chip to speed up Russia’s WTO application. This strategy seems to have paid off.

Kyoto is undoubtedly a flawed treaty. But the Europeans need Kyoto to demonstrate that multi-lateralism is still an option. Putin seems to have shrewdly calculated that Europe wanted the treaty more than he did. So he was able to wring substantial concessions from Brussels in return for backing a treaty that he favored anyway.