Green Investment Schemes as a Way of Promoting Environmentally Sound Cooperation among Russia, Canada, Japan and Other Nations under the Kyoto Protocol

By Alexey Kokorin, World Wide Fund for Nature (WWF), Russian Climate Change Programme

A Green Investment Scheme (GIS) is a way to use revenues from greenhouse gas emission quota trading under the Kyoto Protocol, for environmental purposes. The main original proponents of a Russian GIS were international NGOs, Russian ecologists and the governments of the EU, Canada and Japan. After the withdrawal of the U.S. from the Kyoto Protocol (KP), Russia lost the main potential buyer of its quotas, but at the same time acquired an effective power of veto over the KP's entry into force. In these new circumstances, the GIS has become a powerful and environmentally-sound argument in favour of Russian participation in the Protocol. The GIS idea is officially supported by progressive Russian officials.

The GIS could finance activities ranging from capacity building to large emission reduction projects. We analyzed two approaches to GIS design: a program approach, where a number of smaller projects are bundled together; and a project approach, where each project is treated individually. We also considered two types of benefits of GIS: quantifiable and non-quantifiable. The former relates to strict verification of GIS projects, while the latter allows investors to decide on financing of other activities—capacity building, for example—with the aim of obtaining quantifiable results in future.

The approaches and expectations of Canada, the EU and Japan are briefly discussed and recommendations for a robust GIS and necessary Russian institutional arrangements are made. These recommendations will be useful for the preparation of bilateral agreements in the near future. Although potential investors may consider not only quantifiable projects, but also non-quantifiable ones, it is expected that they will focus primarily on energy projects with strict verification, which do not require any changes in Russian legislation for their implementation.

Currently, the proposed creation of a GIS provides a strong argument for Russian ratification of the KP because it clearly demonstrates the possible co-benefits of its implementation in Russia. The GIS was developed for the Russian context, but it could also be applied in other countries with transitional economies.

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