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. Last Updated: 07/27/2016

Ambitious $4Bln Sale Is Up in the Air

As a global debate heats up over slashing harmful greenhouse gases, Russia is readying to pull billions of dollars out of, well, thin air.

Under government plans — and with a little bit of luck — the country could earn up to $4 billion from 2008 to 2012 by selling off part of the emissions quota it got in the Kyoto Protocol. The 1997 agreement, signed by 84 countries in Kyoto, Japan, aims to cut greenhouse gas emissions to 10-year lows.

For Russia, whose industrial output and energy consumption have shrunk dramatically since 1990, the treaty offers a chance to capitalize on the gap between its emissions and the higher levels it would be granted under the pact. The Kyoto Protocol is set to kick in for the period of 2008 to 2012.

"Speaking optimistically, Russia could gain as much as $4 billion by selling emission quotas to other countries," said Oleg Pluzhnikov, an Energy Ministry strategist.

The Energy Ministry oversees Russia's greenhouse gas emissions and is a major force behind the government push to sell off part of the country's quota.

Carbon dioxide, or CO2, makes up up to 80 percent of all such emissions and is a byproduct of burning fuel. Power plants and factories are the main polluters.

In Russia, the fuel and energy sector is responsible for 70 percent of the carbon dioxide output, according to the World Wildlife Fund.

Pluzhnikov said the fuel and energy sector could have about 2 billion tons in unused carbon dioxide emission quotas available for sale.

The $4 billion could be fetched if Russia manages to sell 10 percent or more of the 2 billion tons for about $20 per ton of carbon dioxide, Pluzhnikov said.

The Energy Ministry estimates that even if the economy grows as planned — and thus bumps up emissions — Russia should end up with 300 million to 400 million tons a year in unused quotas by 2008.

Russia emitted about 3 billion tons of carbon dioxide in 1990, according to WWF. In 1999, the latest figure available, emissions had dropped by about 25 percent.

But there are some big ifs to Russia's plan to sell rights to emissions.

One of the biggest hurdles is that the Kyoto treaty has not yet won enough ratifications from its 84 signatory nations to go into force. Only 33 of the 55 countries needed for a quorum have agreed to cut emissions by 2008 by an overall 5 percent from 1990 levels. Those 55 countries must account for 55 percent of global carbon dioxide emissions.

Reduction levels differ from country to country, with the more industrialized United States, Japan and the members of the European Union aiming at cutting down greenhouse gas emissions by an average of 7.6 percent to 8 percent.

U.S. President George W. Bush dealt a major blow to the Kyoto treaty in March by declaring that the United States saw the agreement as harmful to its economy and would not ratify it.

Other Kyoto signatories including Russia condemned the decision, saying Washington was putting the fight against global warming on the line.

Russia also hasn't ratified the treaty. Parliament is expected to take up the issue in late June.

The United States emits 35 percent of the world's carbon dioxide pollution, according to United Nations backers of the Kyoto pact. Russia comes in second with 17 percent.

If the Kyoto Protocol wins enough ratifications, Russia will have to draw up a way to sell its emissions rights.

But the country is not entering unchartered territory. The notion of selling the air has been vigorously developing in recent years. Quotas already can be traded on the stock market, but prices so far are way below Russia's expectations. The Chicago Stock Exchange trades paper for 10 cents to 20 cents per ton of carbon dioxide.

A World Bank project to reduce emissions offers a more lucrative $1 per ton, but the bank only grants funds for each ton of carbon dioxide cut through new technologies.

Russia is also working on alternative proposals, such as allowing foreign investors to win emissions rights in exchange for supplying Russia with emission-reducing technologies.

Alexei Kokorin, the coordinator of the World Wildlife Fund climate program, said the price of a quota paid in real money can differ drastically from the price of a ton in projects where the trade-off involves emission-reducing technologies.

"I can see a ton being priced at $20 when it comes to paying in equipment, but not $20 in cash," Kokorin said.

Kokorin said Russia could earn no more than $2 billion over the five-year period. But it could easily get $500 million by exerting minimal effort.

Pluzhnikov said there would never be enough buyers to purchase all the leftover air Russia could offer. "For the countries, particularly members of the European Union, purchasing more quotas does not seem to be a priority. Their economic growth is not tied in with the growth in the demand for energy."