Fortum, TGK-1 Sign Emissions Deal

HELSINKI -- Finnish utility Fortum has signed a pioneering deal to buy more than 5 million carbon dioxide emissions credits from electricity producer TGK-1, Fortum said Wednesday.

After two years of delays, the government last month put in place the legal mechanisms for companies to create carbon credits in Russia, which has the potential to become the second biggest source of the credits after China.

Fortum's deal with TGK-1 is the first to take advantage of these mechanisms.

The market value of the credits -- to be created under the Kyoto Protocol's Joint Implementation scheme -- is about 70 million euros ($103 million), making it the largest such deal in Russia, Fortum said in a statement.

Fortum said the deal covered around half of its annual emissions of the greenhouse gas carbon dioxide. Fortum owns around one-fourth of TGK-1.

Under the Protocol's JI and Clean Development Mechanism programs to fight climate change, those in rich countries can invest in emissions-cutting projects in developing and former Communist nations and count the cuts as their own.

TGK-1 will reconstruct hydropower plants, expand and renew its combined heat and power-generation plants and improve the efficiency of its district heating network.

"We are talking about massive reductions in greenhouse gases, during the Kyoto period of 2008-12, we estimate reductions of 5 million tons of CO2," Tapio Kuula, senior vice president at Fortum, said in a statement.

"These reductions will not end after that period, but will continue at 1.6 million tons annually."