Finances for the Kyoto Protocol: Action Program

20 february 2007 года

Rossiiskaya Gazeta, February 20, 2007

Climate change is a FACT that can’t be ignored any longer, especially in the view of projections about future climatic changes and their adverse consequences that have been causing mounting concern recently. VEB Deputy Chairman Alexei Smirnov told Rossiiskaya Gazeta about Vnesheconombank’s participation in implementing the Kyoto Protocol.

Rossiiskaya Gazeta (RG) Alexei, how is Vnesheconombank participating in this world project?

 Alexei Smirnov| In fact, the problem of global warming has become increasingly urgent lately. And it was no accident that it was discussed separately at the Davos Forum this year. We all witnessed the abnormally warm winter in Russia and various natural cataclysms throughout the world. The fact of ice sheet depletion in the Arctic Regions, Greenland and Antarctica has been established. Scientists are warning about catastrophic impacts of intensive ice thawing in these regions. These changes are directly linked to the build-up of greenhouse gases in the atmosphere as a result of human industrial activities.

To meet this challenge, the world community made a decision to commit itself to reducing carbon dioxide atmospheric emissions and this was stipulated in the Kyoto Protocol to the United Nations Framework Convention on Climate Change of December 11, 1997. The Protocol was signed by Russia on March 11, 1997 and ratified by the Russian Federation on November 4, 2004.

In 2006, the Government of the Russian Federation made a number of decisions to establish a register of carbon units and a system for the estimation of anthropogenic emissions from sources and absorption by absorbers of greenhouse gases. We have yet to adopt a number of regulatory and legislative acts related to the system of national inventory of general emissions register and to the procedure for a country of destination to approve projects carried out jointly with an investor country. Considering that full-scale emissions quota trading will start in 2008, we have to finish preparing legislative and regulatory network for Russia to participate in this trading.

RG | Why did Vnesheconombank undertake initiative to establish a mechanism to finance the Kyoto Protocol on the part of Russia?

Smirnov| This is one of Vnesheconombank’s toppriority tasks because it is of national interest to create an environment-friendly economy.

In our opinion, the right to trade quotas on greenhouse gases emissions should be exercised by the state. In this case, we’ll have to establish a financial mechanism and appoint a financial institution responsible for managing payments between sellers and buyers.

Judging objectively, Vnesheconombank is best suited for the said purposes; it is an agent for the Russian government in managing foreign debt and foreign financial assets. VEB is also a state trust management company responsible for managing pension savings funds.

Being aware of our responsibility, we got down to working out mechanisms for implementing the Kyoto Protocol even before it was ratified by the Russian Federation. We are working in close contact with specialists from such key ministries and departments as the Russian Ministry of Trade and Economic Development, the Russian Finance Ministry, Rosgidromet, the Russian Ministry of Industry and Energy and the Natural Resources Ministry.

Drawing on its multiyear experience of operating in the international market and its well-established ties with the largest western financial institutions, Vnesheconombank is studying thoroughly best practices of its partners in this line of banking business and taking practical steps to establish business contacts to implement mechanisms provided for by the Kyoto Protocol

In 2005, Vnesheconombank held a workshop for Russian and Austrian business circles within the framework of the financial and banking subgroup of the Russian-Austrian Intergovernmental Commission. The participants discussed a wide range of issues related to carrying out joint projects and reached a number of preliminary agreements. The workshop was praised highly by both the business community and government institutions of the two countries. 

Vnesheconombank also maintains business contacts with other countries keen on getting the Kyoto Protocol to function efficiently.

For example, KfW Bank, Germany’s largest state-run financial institution, is our reliable partner. The Carbon Fund was established on its basis and it is designed to encourage investment in projects to reduce CO2 emissions and promote the transfer of modern climate protection technologies.

KfW acts solely as a trust fund manager. The Bank makes in its own name and at the expense of companies and institutions incorporated in the Fund long-term agreements with sellers on purchasing emissions reductions units, with these units being purchased with respect to particular projects and for particular purchasers.

At present, we are preparing an agreement with KfW to jointly select projects that can be carried out within the Kyoto Protocol

RG|   And what about the situation in other countries?

Smirnov | The situation in France is somewhat different.  There, the Bank Caisse des Depots is formulating a concept of establishing a Carbon Fund for the French government. This concept provides for making a trading space available to conduct transactions including arbitration operations.

As we can see, there are different approaches and each country goes its own way and in our opinion we should explore practices of other countries adopt the best of them and work out an optimal option. It should be fully functional and efficient.

RG| Is it economically profitable for Russia, are we going to spend or manage to earn some money?

Smirnov Russia is sure to be a net-exporter of quotas as the Kyoto Protocol established acceptable emissions quotas at 1990 levels, and at the moment they are even much lower. On World Bank projections, reduction quota price for 1 ton of carbon dioxide may amount to 50 US dollars by 2020 and according to Russian independent experts’ estimates, volumes of emissions reductions and increased absorption of the greenhouse gases could amount to 30 to 100 million tons.

  RG|  We know that the US and Australia signed the Protocol but refused to ratify it.

Smirnov| The Americans have boycotted it so far. But there’s a hope that with Democrats in power, Washington will change its attitude to the Protocol. Natural disasters caused by the greenhouse effect affected the US territory very much. California’s agriculture alone has lost more than a billion dollars due to freak weather.

RG| What are your projections for the future?

Smirnovl There are some good prospects associated with the decision made by the President and the Russian government to establish a development institution in Russia. The draft law on establishing a development bank has been already submitted to the State Duma and our hope is that it would be passed in he first half of this year.

The Bank with an authorized capital of 70 billion rubles will finance Russian top-priority economic projects including environment protection and energy saving projects. At the moment Vnesheconombank has a portfolio of projects that can be authorized to be carried out using mechanisms provided for by the Kyoto Protocol.

Naturally, this portfolio will be transferred to the new bank, as well as its team of highly qualified specialists capable of evaluating these projects’ economic feasibility and assessing potential risks.

Thus, to our mind, the Bank for Foreign Economic Affairs and Development is best suited for implementing the Kyoto Protocol.

The Bank’s expertise in this banking sector, wide-ranging international ties, a great number of partner customers in the country, highly qualified personnel, and finally, its solid resource base demonstrate that it is best equipped to achieve the above mentioned purposes.

Interviewed by Vladimir Bogdanov

Assets of Development Bank Being Established Are Estimated at 700 Billion Rubles Says VEB Chairman

16 february 2007 года

KRASNOYARSK, February 16, 2007-RIA Novosti. Assets of a Development Bank being established on the basis of Vnesheconombank (VEB), the Russian Development Bank, and Roseximbank are now estimated at 700 billion rubles, VEB Chairman Vladimir Dmitriev said on Friday.

Speaking at the Krasnoyarsk Economic Forum Dmitriev said that the Development Bank’s capital would amount to no less than 70 billion rubles without borrowed funds.

According to him, the Bank will be engaged in financing major investment projects in the regions.

RIA Novosti, 2007


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