An Emissions Trading Scheme?
Russia’s decision to drop out of the Kyoto Protocol’s second commitment period has also stirred domestic discussions about the future of carbon market mechanisms in the country. Immediate concerns have been raised about the future of Joint Implementation projects.
Even though the process to set up the domestic approval system for Joint Implementation was prolonged, the mechanism is delivering results quickly. In May 2012, the Russian government had officially approved 108 projects that cumulatively account for 311.6 million tons of emission reductions; half of these projects were approved in the spring of 2012.23 Russian stakeholders in Joint Implementation projects are eager to see their country join Kyoto’s second commitment period in order to tap into the hundreds of tradable megatons of emissions allowances waiting in the Russian pipeline. However, potential benefits related to Joint Implementation alone are unlikely to prompt the Russian leaders to change their minds for a number of reasons. First, the opposition of the Russian leadership and many experts is linked to the fundamental question of the protocol’s insignificant contribution to limiting climate change. Second, the demand for credits generated by Joint Implementation is likely to dry up after the so called true-up period of the Kyoto first commitment phase, in 2013–2014, due to the loose emission reduction targets set by a limited number of participants in Kyoto’s second phase.
The European Union’s focus on Clean Development Mechanism projects in the least-developed countries to satisfy its limited demand for external credits is a cause for additional concern in Russia since this reduces demand for credits generated by Joint Implementation.24 Even if Russia would reconsider joining Kyoto’s second commitment period, the absence of other major players—such as the United States, Japan, and Canada—means that benefits will be limited to extending investment flows through Joint Implementation a bit longer.