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. Last Updated: 07/27/2016

Carbon Trading Gets Fradkov's Approval

Prime Minister Mikhail Fradkov has given a surprise green light to carbon trading under the Kyoto Protocol to cut greenhouse gas emissions, but the government needs to start approving actual projects to unlock a multibillion-dollar market.

"This is the big one. It's what everyone's been waiting for over a year and a half," said Abyd Karmali, a climate change consultant at ICF International.

Fradkov signed a government decree on Monday defining guidelines.

"If there were 50 steps, we're at step 49," said Arthur Houston, a Russia manager at London-listed carbon project developer Camco. "Now we need to know the final text of the decree, on how to apply. We're expecting that to be posted on the Economic Development and Trade Ministry web site over the next week."

The final text will be released by Friday, said Leonid Yaskin, general director of Bureau Veritas, a leading certifier of carbon reduction projects.

Russia is the world's third-biggest emitter of greenhouse gases. China is the biggest, followed by the United States.

As a big player in both energy and climate change, Russia is well-placed to cash in on the sale of emissions cuts, or carbon credits, to other industrialized countries, but has long delayed implementing the necessary rules.

Kyoto allows rich countries to meet caps on greenhouse gas emissions by investing in emissions-cutting projects in other countries, part of a $30 billion global carbon market.

Russia could be a cheap source of credits, for example by simply plugging holes in its vast network of gas pipelines, which currently leaks methane.

Russia could sell up to 500 million tons of emissions cuts in carbon dioxide equivalent by 2012, estimated Karmali, which would value the market at $5 billion, assuming current prices.

The main window for participating in this market runs from 2008 until 2012, and the timing of this decision leaves just over six months to sort out the final approval mechanisms. "They really waited until the last minute, but six months should be enough time," Yaskin said.

The Russian Carbon Fund, a carbon project developer, put the market size at up to 350 million tons, and underlined the need for further details and operation in practice.

"This is an important step. It's something the market's been waiting for for some time, but one should not be fooled that it takes care of everything," said Morten Prehn Sorensen, chief climate change officer at the Russian Carbon Fund. "Details need to be fleshed out, like where applications should be submitted. Markets will want to see it in operation and issued approvals."

Russia also needs UN approval to trade carbon -- expected by early next year -- and has already ordered from French firm Seringas the necessary registry software to log transactions, Sorensen said.

Unified Energy Systems said Wednesday that it would now move forward with about 40 carbon projects stalled in anticipation of state approval, some for more than two years. UES said reducing emissions from electricity and selling the resulting carbon credits could earn more than $940 million toward repairing the country's antiquated electricity system.

Reuters, MT