Russia’s Sberbank is moving to encourage the country’s industrial companies to go green, opening up a third round of selling carbon credits worth around 630 million euros.
The country’s central bank has called on Russia’s environmentally-friendly organizations to put up bids for 70 million tons of carbon credits.
The companies will be rewarded for implementing greener initiatives. Thirty million tons will be allocated for energy projects, another 30 million for industrial ones, while the remaining 10 million will go to projects dealing with waste control. This is the first time in Russian history that the quotas will be distributed in such a way.
The bids will be accepted until September 5, 2011. The total worth of the quotas is estimated at over $910 million.
“There are certain risks connected with this initiative,” said Vsevolod Gavrilov, head of carbon projects at Sberbank. “For example, all our investors say the revenues they get are going to be spent on further emission trade-related projects. But with fluctuations in the world economy such as the one that we’ve just been witnessing, companies may change their mind and spend their profits on covering losses. However, they need to understand that the scheme that we are putting forward is an essential financial instrument of modernization.”
Carbon trading was one of the key elements for reducing greenhouse gas emissions agreed upon in the Kyoto Protocol. Russia was the last to ratify the protocol, which came into effect in 2005.
Under the trading system, a government issue permits companies to emit a certain volume of greenhouse gas. If a company then wants to emit more carbon dioxide equivalent, then it can buy the right from another company that emits less.
One carbon credit could be resold to a foreign company, most likely in the EU. The prices for Russia’s carbon credits in the EU market, however, have recently fallen to nine euros per credit (from 11-13 euros in 2010).
This system also works between countries. For example, Ukraine’s National Environmental Investment Agency expressed an interest in creating a joint carbon trading platform between Russia, Kazakhstan and Belarus.
The first domestic carbon trading proposal was made by Russia’s largest bank, Sberbank, in 2010. The two previous tenders had a ceiling of 30 million carbon credit each.
So far very little money has been made from carbon trading in Russia, and the private sector is hesitant about making long-term investment in carbon trading, as the Kyoto Protocol expires in 2012 and its successor has not yet been agreed upon.
Investors, meanwhile, have expressed discontent with Sberbank’s role in the carbon credit trade. President Dmitry Medvedev in June ordered the government to streamline the procedure.