korppoo

JI Projects in Russian Energy Sector: 

JI Projects in Russian Energy Sector Anna Korppoo Imperial College London St Petersburg, 30 September 2005

Contents of the presentation: 

Contents of the presentation Joint Implementation Potential energy related projects Current and future developments Potential problems / Lessons learnt Conclusion

I. Joint Implementation: 

I. Joint Implementation

What Joint Implementation (JI) is?: 

What Joint Implementation (JI) is? Article 6 of the Kyoto Protocol, Marrakech Accords, begins 2008 one of the three Kyoto mechanisms between Annex I (industrialised) countries – in practice mostly Western investments to economies in transition project-based mechanism – direct linkage to emission reductions But no Executive Board so far

The Additionality Rule: 

The Additionality Rule ‘Any such project provides a reduction…that is additional to any that would otherwise occur’ (the Kyoto Protocol) Baseline study: presents planned emission reduction as a comparison to business-as-usual emission scenario JI projects should not be profitable without the ERUs (business-as-usual) but BECOME profitable based on their value  Difficult to decide on additionality in practice

Track 1 and Track 2 JI: 

Track 1 and Track 2 JI Track 1 JI: Full compliance by investor and host Independent project approval between investor and host  additionality more flexible Track 2 JI: Partly compliance by host Project approval dependent on executive board  stricter additionality than under Track 1? Track 1 is more attractive to investors due to smaller transaction costs, but more difficult for host to achieve

Compliance requirements: 

Compliance requirements a. Party to the Kyoto Protocol b. Assigned amount calculated c. National (inventory) system in place for estimating emissions/removals d. National registry in place for tracking assigned amount e. Submission of most recent required emissions inventory f. Accurate accounting of assigned amount and submission of information  Track 2: only a, b and d required

II. Potential Energy Related Projects: 

II. Potential Energy Related Projects

Energy sector investment needs: 

Energy sector investment needs Source: Pluzhnikov (2003).

Project types: energy sector: 

Project types: energy sector Source: Based on Mielke et al. (2004).

Energy projects on other sectors: 

Energy projects on other sectors Source: Based on Mielke et al. (2004).

Potential issues: 

Potential issues Fuel switching: Availability of alternative fuel Renewable energy: availability of renewables energy sources and high costs. Small size of biomass projects? Gas pipelines: Project partner? Residential / public buildings: complex? Small emission reduction? But possible to replicate Additionality: Which projects would have happened anyway? Does it matter that a project seems profitable from Western prospective if it does not happen in practice?

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III. Current and future developments : 

III. Current and future developments

Current status of project approval: 

Current status of project approval No JI projects approved so far No JI focal point problem because unclear to foreign investors who to contact Lack of clarity who is responsible for signing off ERUs no point in projects if ERUs cannot be transferred BUT some project hosts continue their efforts to prepare and offer projects to international bids

Project developers / hosts: 

Project developers / hosts RAO UES Energy Carbon Fund: Expertise, projects on electricity sector Center for Environmental Investments: project preparation, baseline studies, GHG inventories National Carbon Sequestration Foundation: focus on Russian regions Manufacturing industries: pulp and paper sector been active Archangelsk oblast: Preparation to be a pilot region Gasprom? No marketing activities so far Russian government / ministries? JI Committee???

Future prospects: 

Future prospects Russian government in the process of establishing responsibilities between actors National Action Plan approved later 2004 BUT Russia is not in compliance with the institutional requirements of Kyoto  May be able to host Track 2 projects only

IV. Potential problems / Lessons learnt: 

IV. Potential problems / Lessons learnt

Problems with compliance: inventories: 

Problems with compliance: inventories 1990-1999 inventories only– lagging behind Methodologies inconsistent with IPCC guidelines Failed to submit annually and in correct format Based on federal level data which is too aggregated – data poor quality and some is missing

Problems: federal administration: 

Problems: federal administration No national institutional system to support JI projects Struggles between agencies causing delays and lack of clarity No role for regions or businesses confirmed so far Lack of high level leadership

Lessons from AIJ pilot projects: 

Lessons from AIJ pilot projects Institutional problems: lack of clear responsibility between agencies, corruption in project approval process, struggles between agencies Implementation problems: local partners, lack of technical expertise and infrastructure Funding problems: Lack of local funding, high transaction costs, unfavourable investment climate

V. Conclusion: 

V. Conclusion

Positive conclusion: 

Positive conclusion JI project potential in the Russian energy sector is significant There is a range of projects available Preparedness of Russian projects hosts quite good Russian government is working on the project approval system

Negative conclusions: 

Negative conclusions Russia struggling to achieve full compliance: may not be able to manage projects independently (Track 1) Additionality may cause problems especially under Track 2 Chaos in federal administration: lack of national approval system of projects  No JI activities approved so far

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ADVERTISEMENT Korppoo, Karas andamp; Grubb (eds). Russia and the Kyoto Protocol: Opportunities and Challenges. RIIA, November 2005 OUT IN COP/MOP!!!

Thank you for your attention!!!: 

Thank you for your attention!!!