Government to Begin Taking Carbon-Trading Applications

The government on Tuesday opened the door to applications from entrepreneurs and big polluters to profit from greenhouse gas emissions cuts by selling them to Western countries.

The United Nations' Kyoto Protocol puts limits on greenhouse gases from 36 rich nations but softens the restrictions by allowing governments to fund emissions-cutting projects in poor and former communist countries and count the cuts as their own.

Legal doubts have paralyzed such sales of carbon offsets from Russia, which has the potential to account for about one-tenth of total emissions cuts under carbon trading through 2012.

Western intermediaries and speculators have already plowed millions into the country's market -- five times more than local investors, Economic Development and Trade Ministry officials say -- in anticipation of a potential 3 billion euro ($4.4 billion) market.

On Tuesday, the government said project developers could now submit applications, after the Justice Ministry passed the necessary procedures for the Economic Development and Trade Ministry to approve projects.

"In terms of documentation this is it. This opens the application window," said Morten Prehn Sorensen, a director at the Core Carbon Group, in which Merrill Lynch took a stake last year.

In the next step, a Russian judging panel will decide which entities can vet projects. Applications will also need approval by the Russian panel and a UN body.

Industrial giants such as Gazprom, Unified Energy System and United Company RusAl have all announced plans to cooperate on projects.