Nothing drove home Russia's place in the growing pollution-trading business better than what one carbon finance guy told me at a conference last week sponsored by Gazprom and the World Bank. We were on drink number three or four at the reception when he dropped the green pretense and came clean.
"I don't know if climate change is caused by burning coal or sun flares or what," said the Moscow-based carbon cowboy. "And I don't really give a shit. Russia is the most energy inefficient country around, and carbon is the most volatile market ever. There's a lot of opportunity to make money."
This is what all the Power Point arrows and boxes had been spelling out in bureaucratese during the conference entitled "Kyoto: Carbon Market Opportunities for Russian Enterprises," but it was nice to hear it in plain English. I toasted the fellow's honesty and promised not to use his name. Some of his colleagues, he explained, were "first generation" carbon finance types. More idealistic, they don't appreciate the crass cash take on the business.
Listening to speakers probe the dry nexus between development finance and environmental policy won't keep you on the edge of your seat, but it does open a window into how the architects of Kyoto imagined Russia's role in the treaty. Boiled down to its essence, they scripted Russia as a poor dirty whore in need of a shower and some nice new clothes. These were treats European governments, financiers, and carbon traders could provide, in exchange for a little something.
The purpose of the Gazprom/World Bank event was to introduce Russia to these Kyoto-era carbon suitors, and to educate local industry about how best to profit from the growing trade in carbon credits. Because what's climate change about if not profit? The global market for carbon reduction credits is worth more than $20 billion and booming. The business bustles at the heart of "market-friendly" Kyoto.
Carbon trading is basically a loophole - a "flexible mechanism" in Kyoto-speak - that allows developed nations to continue with business as usual while claiming to address the climate crisis. Because most industrialized Kyoto signatories won't risk short-term economic growth to cut emissions at home, Kyoto lets them instead make efficiency investments in places like Russia and China, where it's cheaper to reduce CO2 and where there's plenty of low-hanging fruit. How many tons of CO2 countries save abroad equals how many carbon credits they get toward meeting their own national targets.
The idea is similar to the one behind the trendy personal "carbon offset" industry, but transferred to the international level. Just as Brad Pitt and Al Gore can invest in some reforestation project in India and then declare themselves "carbon neutral" without changing their carbon-intensive lives, so too can France invest in Russia and claim Kyoto success without cutting its domestic CO2 output. Critics of personal offsets and Kyoto's credit scheme have compared them to the medieval Church practice of selling Indulgences to sinners. It's a good analogy. Kyoto's carbon-trading game allows signatory nations to think they're going to heaven while we continue slouching toward likely global warming hell.
With Kyoto driving carbon's growth as a hot commodity, and with negotiations on Kyoto II slated to start later this year, it can be easy to forget that just a few years ago the treaty was headed for the dustbin. With Washington on the sidelines, the principal nations fell short of representing the 55 percent of global emissions needed for Kyoto's activation. For seven years the treaty languished. When Bush was reelected in 2004, the coffin and nails came out.
And then Vladimir Putin, of all people, saved the day. After years of playing behind-the-scenes hardball with Europe, Putin agreed to suppress his visceral hatred for a global environmental treaty perceived as limiting Russia's sovereignty. It was a clean trade: He would sign Kyoto in exchange for favorable treaty terms and strong European support for Russia's entry into the WTO. As a bonus, Putin also received a tiara of environmental credibility, which suited the Russian president like a negligee on Andre the Giant.