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 month 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 PowerPoint 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.
For two days I listened to speakers probe the dry nexus between development finance, commodity trading, and environmental policy. It didn't keep me on the edge of my seat, but it did 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 continue with business as usual while claiming to address the climate crisis. Because most industrialized Kyoto signatories won't sacrifice short-term economic growth to cut emissions at home -- best accomplished by mandatory absolute cuts accompanied by a draconian carbon tax -- 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. Targets that they are in reality missing, in some cases by a wide margin.
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 Tamil Nadu 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 miasma of environmental credibility, which suited the Russian president like a negligee on Andre the Giant.
Russia's signing onto Kyoto didn't signify any real interest in climate change. The only cost to the Kremlin was a bit of pride, as Russia received the sweetest Kyoto deal of all. Because the benchmark year for measuring reductions was set at 1990, the collapse of Russian industry after Perestroika guaranteed that Russia would not be close to that level by 2012, Kyoto's deadline. Depending on the breaks, Russia may not approach 1990 levels for another 20 years. Thus not only does Russia not have to make any cuts in its emissions during the next four years, but it was handed thousands of Kyoto-stamped "emission reduction credits" -- basically carbon stock that can be sold on the international market or saved for an unseasonably rainy day. Europe was so desperate for Putin's signature it also gave Russia millions of "carbon sink" credits for its vast tracts of virgin forests.
Far from the "economic Auschwitz" former Putin advisor Andrei Illiaronov claimed Kyoto would be for Russia, it turned out to be an economic pinata. Russia hasn't seen this many gift certificates since the last time the World Bank was in town.
Incidentally, several people told me during the course of researching this article that it was widely suspected during Illiaronov's time at the Kremlin that he was on the payroll of ExxonMobil to keep Russia out of Kyoto. He has since moved on to become senior fellow at the Cato Institute, the libertarian D.C. think tank founded by oil magnate Charles Koch. ExxonMobil is a major Cato funder.
* * *
It is a high irony of history that Russia played Zorro in a global environmental drama. Ever since the West's postwar awakening to environmental issues, Russia and her former Soviet satellites have provided an even more polluted counterpoint to capitalist consumer society. Shrouded in secrecy and smog, the eastern bloc was imagined as a vast and poisoned totalitarian wasteland frozen in a 19th-century vision of smokestack progress, drenched in acid rain and dotted with toxic weapons-testing ranges and dumps. The most famous Soviet disasters of the last century -- Chernobyl, the Aral Sea -- became powerful symbols of ecocide. When the Iron Curtain was lifted, the scene turned out to be even worse than imagined.
In some ways not much has changed from Soviet times. Russian industry is still dirty as hell. And to the dismay of energy analysts and climate activists, the country has no official conservation strategy; in 2000, Putin abolished the federal conservation body created under Yeltsin in the early 90s. Despite suffering ongoing economic losses as a result, Russia has shown little interest in modernizing its hugely inefficient pipelines, power plants, and transmission lines. According to observers of Russian energy policy, it is as if there is no one at the controls.
"There is a 40 percent potential for efficiency gains in Russia," says Vladimir Chuprov, chief energy researcher for Greenpeace Russia. "But the government acts as if gas and oil reserves are endless and we'll always be able to meet domestic needs and export demand. It refuses to think 20 years ahead. The environment doesn't figure in at all."
According to Chuprov, almost every second ton of carbon emissions in Russia represents wasted energy. This waste is created down the line, from archaic technology in generators to unregulated full-blast heating in apartment buildings all across the country. Even in the energy-conscious Greenpeace offices, employees are often forced to open all of the windows to counteract a constant and unwanted flow of heat.
This waste means that Russia's total emissions -- still third highest in the world, trailing only the U.S. and China -- are way out of line with its rump industrial base and shrinking population of 140 million. The waste is truly staggering: While Russia emits 11 tons of carbon per person per year, the average in OECD countries is two; the world average is four.
It's bad enough that the Kremlin is failing to tap its swollen "Stabilization Fund" -- basically a state savings account for the foreign currency windfall made possible by high energy prices -- for efficiency upgrades. But it's also dragging feet on Kyoto-related projects, which amount to free or heavily financed upgrades. Even though European countries and firms are lining up to invest in Russia's leaking energy infrastructure (and thus earn Kyoto carbon credits) the Kremlin has yet to issue official guidelines for dozens of proposals. Some of those waiting for the legislation suspect that excessive transparency may be a reason for the lack of official interest. Bilateral deals with well-monitored EU partners just don't offer much scope for corruption. Others point to traditional paranoia that the west must have something up its sleeve in toying with Russian industry.
Meanwhile, on Russia's renewable energy front...well, Russia doesn't have a renewable energy front. As countries around the world increase their investments in alts and renewables -- including its fellow petro states in the Persian Gulf -- Russia has no program to speak of. According to Greenpeace's Chuprov, the Kremlin has shown no interest in Russia's enormous renewable energy potential, even though biomass, small-scale hydro and wind could one day contribute as much as a third to Russia's energy mix.
Instead, Putin has announced a $25 billion investment in Russia's nuclear industry. It's the same approach preferred by Putin's peers in the climate clown club, John Howard and George Bush. As those two lame ducks wind down their time in office, to be followed by less benighted politicians, Putin's successor looks set to become the world's last remaining climate clown in charge of a major industrialized country.
* * *
But what if Russia has no reason to fear climate change or the dwindling of its energy reserves? What if Russia's brightest days lie ahead, with or without European help in cleaning up its act? This is a serious and happy prospect, according to Gregg Easterbrook in an April cover story for The Atlantic, in which he pronounces Russia the likely winner of the climate change sweepstakes.
Anyone who has followed the climate change debate over the last couple of decades has learned to be wary of Easterbrook. As an editor at the New Republic, Easterbrook played the role of liberal climate skeptic for much of the 1990s -- a moderate voice untainted by oil connections urging caution, not action. In article after article, he tried to prick holes in the hardening scientific consensus that we were heating the earth. When the debate shifted in the late 90s, this tack became professionally embarrassing, and Easterbook morphed into a planetary Pollyanna, admitting that while warming was in fact real, carbon sequestration and assorted technological fixes would take care of everything, again making drastic social change unnecessary. The problem with Easterbook's opinions was that he didn't know what he was talking about. Developments have so far proved him wrong at every turn, and a reviewer in Natural History wrote that Easterbook's 1995 book Moment of Earth "contains some of the most egregious cases of misunderstood, misstated, misinterpreted, and plainly incorrect 'science' writing I've ever encountered."
Easterbrook is as brazen and nuts as ever in his ongoing hunt for the lighter side of global heating. In his Atlantic cover story, one the most despicable pieces of climate journalism ever published, Easterbrook casts climate change as a zero-sum game with "winners and losers." Along with asking how climate change will impact geopolitics and agriculture, Easterbrook muses how possible climate catastrophe might influence the stock portfolios and values of Atlantic subscribers' second homes. In a typical passage, the author says that among the losers will be refugees fleeing newly uninhabitable parts of the third world. And the winners? Why, smart investors who snap up this evacuated land "at Filene's Basement prices" and plant leucaena trees. Why leucaena trees? Because the rights to the carbon they absorb can be sold to guilt-ridden Americans seeking "carbon neutrality". It's practically win-win. Except for all those refugees.
In Easterbrook's crack pipe analysis, the biggest winner of all is Russia. Ever the spaz, Easterbrook can barely contain his excitement:
And Russia! Climate change could place Russia in possession of the largest new region of pristine, exploitable land since the sailing ships of Europe first spied...North America. What's more, the land beneath Siberia's snow could hold vast deposits of fossil fuels. Why did the Moscow government drag its feet when considering ratification of the Kyoto Protocol? Perhaps because Russia might be much better off in a warming world.
You read that right. "Pristine, exploitable land [and] vast deposits of fossil fuels." Global warming will be good for Russia because it will unearth more fossil fuels, which can then be burned, leading to accelerated warming, unearthing more fossil fuels, which can then be burned...
The thing is, Gregg, that's not just "snow" out there in the frozen Eurasian expanse. It's permafrost. Millions and millions of acres of it. And when it thaws it will release Doomsday amounts of the potent heat-trapping gas methane, long before the fossil fuels underneath can be tapped and burned to fuel the lifestyles of middle-class carbon offsetters.
Another obvious downside to Russia's great thaw is the havoc it will wreak on transcontinental infrastructure, including oil and gas pipelines. Already, settlements dotting the tundra and taiga are feeling the effects of shifting foundations. Buildings and homes situated on melting permafrost are developing cracks that grow every year. It's possible that by 2100 few houses will be left standing in great swaths of the country's far east and north. According to some estimates based on current rates of warming, Russia and Canada could lose up to half of their habitats by 2100.
If Easterbrook's Panglossian argument that climate change will be good for Russia sounds familiar, it's because Vladimir Putin has said the same thing. In 2003, he joked that global warming would benefit Russians because it would save them money on fur hats in the coming century. True. But accompanying the collapse of the fur hat industry will be an increasing number of mass murderous heat waves. If an elderly Easterbrook and Putin succumb to one of these, someone make sure to plant leucaena saplings on their graves.
