Adrenaline Russia

From working for change:

Ever since the erroneous assertion that Russia had rejected the Kyoto Protocol was corrected last week, the climate change talks in Milan have been abuzz with chatter about how best to cajole Russia on board. In a bid to demonstrate to President Vladimir Putin the economic benefits of ratifying the treaty, Italy, the host nation, announced plans to help finance projects to reduce greenhouse gas emissions from its Russia-based factories.

This, of course, means very little to Russia. Even if it signs on to Kyoto, the country doesn't need to worry about reducing emissions at its factories. In fact, Russia doesn't need to make any emissions cuts at all. On the contrary, if it ratifies Kyoto, the nation will have loads of emissions credits to sell. The reductions Kyoto requires of each country are based on that nation's 1990 emissions, and Russia's economy has shrunk so much in the last 13 years that its emissions have dropped by 26 percent. Kyoto, in fact, could buoy Russia's flagging economy with credit revenues, which is why the treaty has always been perceived as a sweetheart deal for the country. But now, the question is: how sweet?

When the protocol was crafted in 1997, it was assumed that the single largest market for the extra Russian credits would be the United States, the biggest greenhouse-gas emitter in the world. So when the U.S. pulled out of Kyoto, the market for Russia's credits shrunk dramatically. With U.S. involvement, Russian economists figured the country could sell between $1 billion and $2 billion worth of credits per year. Now, the potential sales have dwindled to between $100 million and $200 million.

The big question for Russia, therefore, is where it can find a decent market for its credits. "The public campaign last week that convinced the world that Russia was waffling was in all likelihood designed to send a very clear message to the E.U. and Japan, saying they'd better step up to the plate to buy Russian credits," said Phil Clapp, president of the National Environmental Trust. "The way they said it publicly was, 'We're not sure it's an advantage to our economy at all,' but that was just diplomatic doublespeak. They're just dickering for more money."

But it's not just Russia calling the shots. Currently, Russia has far stronger economic ties to Europe than it does to the U.S., and the importance of the E.U. as a Russian trading partner is only set to increase. That gives the Europeans an edge in the negotiations. In particular, Russia wants to channel its very large reserves of natural gas to central and western Europe. "Building these natural gas pipelines is an extremely high economic priority for the Russian government," said Clapp, "so Europe can say, 'If you want us to buy, you've got to cooperate [on Kyoto].'"

Another major economic goal for the Russians is membership in the World Trade Organization -- and Europe has made it very clear that it will not support Russian entry unless the country ratifies the climate change protocol. Add to that the ongoing pressure from other principal trading partners -- namely, Canada and Japan -- to jump aboard the Kyoto bandwagon, and U.S. pressure on Russia to resist begins to seem less and less formidable.