Status of Joint Implementation in Russia

1. Status of Joint Implementation in Russia Helmut SCHREIBER The World BankEurope and Central Asia RegionInfrastructure and Energy Services Department

2. Russia necessary to reach Kyoto Targets • Ratifying OECD cumulative target reductions will be 5-5.5 billion tons of carbon dioxide below 1990 levels • If half is done domestically the “compliance gap” to be met through Kyoto Mechanisms is 2.5 billion tons • The figures (in million tons of reductions) don’t add up: • Compliance Gap: 2,500 • CDM deals so far: ~ 400 • JI deals so far: ~ 150 • Big volume transactions desperately needed • Russia could (and should be) the biggest source of JI and International Emissions Trading (IET) deals; Assigned Amount Units (AAUs) are of the magnitude of 3 bln. • Time running out as lead times from project idea through construction to implementation and ERs are long • If Kyoto fails, post-Kyoto commitments would be jeopardized

3. “Headroom” of Russia and other JI Countries

4. History of JI work in Russia (1) • September 2004: National Action Plan (NAP) initiated by government decision • October 2004: Ratification of Kyoto Protocol by Russia • November 2004 (starting). Participation of 15 Federal Ministries and Agencies. Agreed by almost all of them. The NAP fixes the distribution of responsibilities among Russian ministries. The NAP • takes into account the provisions of the draft medium-term program of socio-economic development (till 2008); • Draft NAP was presented at the WB workshop in January and with EU in March 2005 • February 2005: The Government agrees on the NAP. • March 2005: Interagency Commission on Kyoto Protocol is formed. The Ministry of Economic Development and Trade is leading institution in this commission

5. History of JI work in Russia (2) • August 2005: Draft of the Regulatory Framework. • September 2005 – March 2006. Different drafts of Regulatory Framework discussed within the Interministerial Committee. • March 2006. Government decision on • National monitoring system of GHG emissions and sinks and on inventories– Roshydromet is in charge; and on • registries – Ministry of Natural Resources is in charge • April 2006 until November 2006: Discussion of drafts of Regulatory Framework. No agreement between Ministry of Economic Development and Trade and Ministry of Foreign Affairs. • December 2006: meeting under the auspices of the Deputy Prime Minister Medvedev envisaged to solve existing conflicts. If meeting will be successful, Regulatory Framework will be prepared; JI could start perhaps in September 2007.

6. JI Approval Mechanism – without State guarantees Representative of the insurer Validator Registry manager Risk insurance of default from obligations under the project according to PDD Conclusion on verification Conclusion on validation Translation of ERUs into the account of the Applicant (on results of verification) JI Committee (forTrack 2) Project sponsor (Applicant) Approval of the project Certificate on modification in the National register The application for final approval: 1) PDD with schedule and design parameters 2) The project 3) Acknowledgement of insurance 4) The conclusion of the Validator Notice on acceptance of the positive decision (Letter of approval) National register Conclusion on verification Correlation Coordination center Focal Point Cadastre Notice on acceptance of the positive decision MoEDT: Ministry of Economic development and Trade

7. JI Approval Mechanism – with State guarantees Validator Representative of the insurer Conclusion on validation Partial insurance of risks on PDD JI in Russia Budgetary credit contract Project budget planning body Project sponsor (Applicant) Collateral, bank guarantee or other security against the budgetary credit The application for final approval: 1) PDD with schedule and design parameters 2) The project 3) Acknowledgement of insurance 4) The conclusion of the Validator Notice on acceptance of the positive decision (Letter of Approval) Coordination center Focal Point

8. JI Projects in Russia: Status • 2004: GGFR identified pilot and demonstration projects for carbon credit financing under JI and started preparation of first projects • By November 2006: WB has received • 30+ projects proposals, • 10+ of them deal with associated gas use, mainly dealing with • Transporting flared gas for gas sales • Use of flared gas for onsite power generation • Total estimated reduction volume from these associated gas projects: 50+million tons of reductions for the period 2008-2012. • Also: reduction of methane in gas distribution network (reducing leakages) and • Other projects like land fill gas projects, fuel switch etc. • 7 projects have been endorsed by the Government; • Special emphasis of Gas Flaring, as these projects can be implemented generally faster than other energy projects; • One PDD has been prepared; should be validated in January/February.

9. Gas flaring in Russia • Flaring is very common in Russia • The very low utilization of associated gas is primarily because of two reasons: • No cost: There are no substantial environmental penalties for gas flaring; there are penalties, but they are either not paid (unreporting) and/or too low; • No gain: Lack of access to the gas transportation system reduces the scope for Russian oil producers to extract value from the associated gas • Russia accounts officially for 15 bcm inofficially for as much as 60bcm

10. Gas Flaring in Russia: Western Siberia (1)

11. Gas Flaring in Russia: Western Siberia (2)