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. Last Updated: 07/27/2016

Italy Offers Russia Kyoto Carrots

MTAndrei Illarionov
MILAN, Italy -- Italy plans to help finance projects in Russia to reduce greenhouse gases and to demonstrate to President Vladimir Putin the economic benefits of ratifying the Kyoto Protocol, an international accord to combat global warming.

This week Italy will announce its intention to invest in a fund for Russian projects, regardless of whether Russia ratifies the accord, Corrado Clini, director general of Italy's Environment Ministry said at the United Nations convention on climate change in Milan. If Russia were to ratify Kyoto, the projects would help Italy meet its emission-reduction goals.

Implementation of Kyoto hinges on Russian approval. Andrei Illarionov, Putin's economic adviser, on Tuesday said Russia would not ratify the treaty because it would slow economic growth. A day later, Deputy Economic and Trade Development Minister Muhammad Tsikhanov said Russia was moving toward ratification.

"Italy understands that without Russia the Kyoto Protocol is a useless piece of paper to throw in the rubbish bin," said Sergei Roginko, a Russian government official overseeing Kyoto-related investments. Roginko said he is trying to persuade Russia to ratify the treaty with backing from companies, regional leaders and countries such as Italy and Germany.

The Kyoto Protocol allows developed countries to earn credits for funding projects in areas such as Eastern Europe and Latin America. Countries like Italy can use the credits to help meet 2010 emissions targets, instead of paying for more costly measures at home or buying credits through an emissions-trading system. They also encourage investment in emerging economies.

Russia needs to invest between $3 billion and $4 billion per year on energy efficiency, according to its Energy Ministry,

"We believe that there are good economic reasons to ratify the Kyoto Protocol," said Artur Runge-Metzger of the European Commission's climate change unit.

Companies such as BP, Europe's biggest oil company, and Tokyo Electric Power Co., Asia's largest power company, are already backing a World Bank carbon fund that has invested $180 million in projects such as a hydroelectric power station in Chile and the conversion of a coal-fired power plant in Hungary so it can burn cleaner fuels.

The 120 nations that have ratified the Kyoto Protocol since it was drawn up in 1997 are counting on Russia's support because it accounts for 17 percent of greenhouse gas emissions at 1990 levels. The protocol must be ratified by industrial nations that produce 55 percent of greenhouse gases for it to take effect. The United States, the world's biggest producer of such pollution with 36 percent of 1990 emissions, has rejected the treaty.

In October, the European Commission published draft legislation that would allow credits earned in developing countries to be used in its emissions-trading market, due to start in 2005.

Such trading may encourage companies to invest in projects because the credits could be sold for cash, improving returns, officials said. The rules for such a transfer may be agreed upon as early as April because the system is supported by all the EU member states and the European Parliament, said Jurgen Salay of the commission's climate change unit.

Without Russian ratification, however, such mechanisms and Italy's proposed investment will lose value.

Linking projects in emerging markets to the European emissions-trading system "would make ratification more possible, but it's not the only reason for doing so," said Oleg Pluzhnikov, deputy chief of the ecological department of Russia's Energy Ministry. "Joint initiatives could become a very good mechanism to attract a significant amount of the funds" to upgrade Russia's energy industry.

National delegates and observers at the Milan convention said they expect Russia to ratify the Kyoto Protocol, probably after presidential elections in March.