Who gains from saving nature
Ledger 1 : 33 — For each dollar financing nature-based solutions in 2023, about $33 financed activities harmful to nature. (UNEP)
Cases / Carbon credits · Russia · 2009–2015

Russian Joint Implementation credits under the Kyoto Protocol, 2009–2012

Nature's voice · report
According to a 2015 SEI estimate covering all Joint Implementation host countries, my atmosphere may have received about 600 million tonnes of CO2 equivalent more than if countries had met their targets domestically.
Did nature suffer? Yes. Harm is on record. Disputed
Recorded
What the record lacks: 6 none on record · 1 not disclosed · 2 insufficient · 4 disputed See the gaps
Accounts of the harm differ
Whether the APG utilisation at ten TNK-BP fields (RU1000353) was additional

Russia approved 108 Joint Implementation projects through tenders run by the state bank Sberbank, and 98 registered projects received about 266 million emission reduction units, according to Sberbank figures cited by the Stockholm Environment Institute. A 2015 SEI study found significant environmental integrity concerns for more than 80% of Russian and Ukrainian units.

266 millionEmission reduction units issued to registered Russian projects
98 registered projects, per Sberbank data cited by SEI. ERU prices fell from more than EUR 12 in 2010 to less than EUR 0.10 in early 2013.

Status Latest source is the August 2015 SEI study; Russian JI issuance belongs to the first Kyoto commitment period, and no court ruling or prosecution is on record.

What?
Russia issued about 266 million Joint Implementation emission reduction units to 98 registered projects in the first Kyoto commitment period. SEI found significant environmental integrity concerns for more than 80% of Russian and Ukrainian units. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
Where?
Russian Federation, nationwide; project RU1000353 at ten oil fields in Khanty-Mansi Autonomous Okrug. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
When?
Procedures replaced in 2009; Letters of Approval from 2010; 210 million ERUs issued in 2012; SEI study published August 2015. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
Who?
Gained
Lost
Harmed
Why?
SEI attributed the issuance of units from projects with limited environmental integrity to Russia's large expected AAU surplus of about 5.7 billion units. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
How?
Sberbank ran tenders and rated projects, the Designated Focal Point approved the lists, and nearly all projects were registered under Track 1 without international review. Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
6 of 6 questions answered from the record

What happened

The record, in order.

Joint Implementation (JI) is the mechanism under Article 6 of the Kyoto Protocol through which projects in a host country earn Emission Reduction Units (ERUs) that buyers can use for compliance. Russian JI procedures adopted in 2007 never became operational and were replaced in 2009. The Ministry for Economic Development and Trade acted as Designated Focal Point (DFP), and the state-owned Sberbank, the "operator of carbon units", handled project approval, registration and ERU issuance; Sberbank took on the operator role in October 2009. The first Russian Letters of Approval were issued in 2010. Russia did not join the second Kyoto commitment period and therefore cannot host JI projects in it.

Projects were approved through tenders held by Sberbank rather than case by case. Sberbank rated each project; an expert council nominated by Sberbank and approved by the DFP made recommendations, and the DFP approved the project lists. Cumulative reductions approved in each tender were initially capped at 30 million tCO2e and total Russian ERU approvals at 300 million; both limits were later removed. The third tender ran from 12 August to 5 September 2011: Sberbank received 70 applications totalling 106.58 million tCO2e, against sector limits of 30 million tonnes each for energy and industrial processes and 10 million tonnes for waste. The two earlier tenders had approved 33 projects. To receive ERUs, the project owner and the buyer needed Sberbank's approval of their Emission Reduction Purchase Agreement, and Sberbank charged issuance fees.

According to Sberbank, as cited by SEI, the government approved 108 projects with total projected reductions of around 309 million tCO2e; 98 were registered and received 266 million ERUs. SEI described Russia as the second-largest JI host, with 31% of all ERUs issued (another passage of the same paper gives 30% of ERUs in the first commitment period). All Russian projects except two, accounting for 99.8% of ERUs issued, were registered under Track 1, the host-country-controlled track without international review. In 2012, the last year of the first commitment period, Russia approved 72 projects (67% of its approved projects) and issued 210 million ERUs (79% of the issued volume). SEI's Table 19, based on UNEP Risoe data, lists 97 registered projects and 265,053 thousand ERUs, of which associated petroleum gas (APG) utilisation accounted for 22 projects and 116,840 thousand ERUs and HFC and SF6 projects for 3 projects and 53,347 thousand. Thirty-nine Russian projects (41%) were credited retroactively for more than four years and delivered 165 million ERUs, 62% of Russian ERUs.

Project RU1000353 covered APG utilisation at ten oil fields in Khanty-Mansi Autonomous Okrug, operated by four companies owned by TNK-BP. According to the project design document as summarised by SEI, the APG decision was made in 2003, construction ran from 2004 to 2012, the Letter of Approval came in May 2012 and the first issuance was on 30 August 2012; all ERUs were issued retroactively, more than 77 million. The 22 Russian APG JI projects generated 117 million ERUs, 14% of all ERUs in the first commitment period. SEI concluded that "it is not plausible that the project is additional". After 2007 Russian law required 95% APG utilisation and set penalties for flaring more than 5%; SEI reported that operators perceived the risk of penalties as limited.

The 2015 SEI working paper reviewed a random sample of 60 projects and the six largest project types, applied to the 642 projects registered as of March 2014. In the sample, additionality claims were not plausible for 73% of ERUs issued and questionable for another 12%. SEI estimated that Russia's expected surplus of about 5.7 billion Assigned Amount Units (34% of its assigned amount) let it issue ERUs from projects with limited environmental integrity. Buyers used more than 560 million ERUs from all host countries in the EU Emissions Trading System by April 2015. Commission Regulation (EU) No 550/2011 barred credits from HFC-23 destruction and adipic-acid N2O projects from the EU system from 1 January 2013.

  1. 2007Initial Russian JI procedures adopted; they never became operational
  2. 2009Revised procedures replace the 2007 ones; Sberbank becomes operator of carbon units (October)
  3. 2010First Russian Letters of Approval issued
  4. 2011Commission Regulation (EU) No 550/2011 adopted (7 June); third Sberbank tender open 12 August–5 September, 70 applications
  5. 2012Russia approves 72 projects and issues 210 million ERUs; first issuance for RU1000353 on 30 August
  6. 2013ERU prices below EUR 0.10 in early 2013; Russia stays outside the second Kyoto commitment period
  7. 2015SEI Working Paper 2015-07 published (August)

What was said

Claims, in the words of those who made them.

“about three-quarters of JI offsets are unlikely to represent additional emissions reductions”

“significant environmental integrity concerns for more than 80% of ERUs from Russia and Ukraine”

“Like Ukraine, Russia could afford to issue large numbers of ERUs from projects with very limited environmental integrity because of its large expected AAU surplus”

“a subjective judgment of the authors based on the limited information publicly available”

“makes it impossible to check whether substantial changes were made e.g. to the monitoring plans”

“it is not plausible that the project is additional”

“considerable transaction costs”

Where accounts differ

Each party's account, side by side, with its source. The record does not settle these points; it shows them.

Whether pre-2011 contracts selling ERUs to foreign companies were valid
Government and regulators
Ministry of Economic Development (Oleg Pluzhnikov)

Earlier contracts had no legal force because the units are state property; adapting them was Sberbank's problem.

Kommersant
Company or project
Baker & McKenzie lawyer (Sergei Sitnikov)

Disagreed that the earlier contracts lacked legal force and warned that a 'special path' could harm the market.

Kommersant
Company or project
Investors (anonymous)

The new decree gave buyers an option to cancel ERU purchase contracts, which they said undermined earlier deals.

Kommersant
Whether the APG utilisation at ten TNK-BP fields (RU1000353) was additional
Company or project
Project design document (TNK-BP companies)

Baseline assumed that all utilised APG would otherwise have been flared; TNK-BP decided against a full design document in 2007 because of considerable transaction costs.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
Researchers
Stockholm Environment Institute

The baseline assumption is contradictory and it is not plausible that the project is additional.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
Russia's share and number of issued ERUs
Researchers
SEI, p. 24

Russia generated 30% of all ERUs in the first commitment period.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
Researchers
SEI, p. 80

98 registered projects and more than 266 million ERUs, 31% of all ERUs issued.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)
Researchers
SEI Table 19 (UNEP Risoe 2014)

97 registered projects and 265,053 thousand ERUs.

Stockholm Environment Institute (Kollmuss, Schneider, Zhezherin)

How it looked

What was shown, beside what was recorded.

Shown

  • Sberbank head German Gref promised in 2011 to place about EUR 600 million of potential Kyoto money from Russian projects quickly, plus EUR 1.4–1.9 billion in 2012; Kommersant described these as forecasts.
    Kommersant, 6 October 2011 · Kommersant
  • Having entered the Kyoto Protocol, Russia should get some investment out of it.
    President Dmitry Medvedev, June 2011, as quoted by Kommersant · Kommersant
  • Success of third-tender applications would depend on the quality of documents, not on the tender quota.
    Sberbank (Vsevolod Gavrilov, head of energy-saving and environmental projects), September 2011 · PRIME (citing RIA Novosti)

Recorded

Who gained

Money that reached nature, beside money that stayed elsewhere.

Reached nature or the ground

Not published
No figure published.

Gained elsewhere

Not totalled
Kyoto-rules market to 2012 (Kommersant estimate: 300 million t state quota at roughly EUR 8/t) estimate≈ €2.5bn
Russian JI reductions transferred by October 2011 (about 20 million t; Kommersant: at most about) estimate€200m
Sberbank forecast of potential Kyoto money for Russian projects to be placed quickly (Gref) estimate≈ €600m
A forecast; a further EUR 1.4–1.9 billion was forecast for 2012.
Currency: EUR · Window: 2010–2013. All figures cover the same period. * Estimate built from cited figures.

Responses on record

  • Sberbank (September 2011): Third-tender applications would be reviewed under a new, simplified procedure; success would depend on the quality of documents, not on the tender quota (Vsevolod Gavrilov). · PRIME (citing RIA Novosti)
  • Ministry of Economic Development (January 2011): Unit prices should be close to European secondary-market prices with some discount; earlier contracts transferring ERUs to foreign companies had no legal force because the units are state property (Oleg Pluzhnikov). · Kommersant
  • VTB (2011): Lobbied to end Sberbank's exclusive operator status and described this as normal competition (Andrey Kostin). · Kommersant

In court and with insurers

Every proceeding and every insurer decision on record.

Lawsuits and rulings

No court case on record. No court has ruled on this case.

Insurers

No insurer decision on record.

What nature saw

Outcomes measured on the ground, and nature's note.

Nature's report opens this page. Below: further outcomes measured on the ground.

ERUs issued
266 million
98 registered projects (Sberbank figures cited by SEI)
Integrity concerns
> 80%
Share of ERUs from Russia and Ukraine (SEI)
EU ETS target
≈ 400 million tCO2
Estimated undermining from all JI use (SEI)
ERU price
EUR 12 to < 0.10
2010 to early 2013

What we don't know

Undisclosed, unproven, untried: recorded as data.
No court caseKey earnings undisclosed

Nature

  • Disputed Whether the APG utilisation at ten TNK-BP fields (RU1000353) was additional

Court

Accounts

  • Disputed Whether pre-2011 contracts selling ERUs to foreign companies were valid
  • Disputed Russia's share and number of issued ERUs

Record

  • None on record None on record: total revenue earned by Russian project owners or total fees collected by Sberbank.
  • Not disclosed Not disclosed: a breakdown of which EU ETS operators surrendered Russian ERUs; the European Commission states that phase-three use per compliance year cannot be traced.
  • Insufficient Insufficient: the Russian registry website kept only the latest versions of documents, some verification and monitoring reports were unavailable and many documents were only in Russian; holding and transaction data could not be queried as Decision 13/CMP.1 requires (SEI).
  • None on record None on record: Letters of Endorsement; Russia did not issue them, which SEI says makes timeline-based additionality checks harder.
  • Disputed Figures differ: SEI gives Russia's share of ERUs as 30% (p. 24) and 31% (p. 80), and issued units as 265 million (UNEP Risoe table) and 266 million (Sberbank and UNFCCC data).
  • None on record None on record: a response from the Russian government to the SEI findings.
  • None on record None on record: a company response from TNK-BP to the SEI assessment of RU1000353.
  • Insufficient Insufficient: the design document for RU1000353 gives limited information, and bundling ten fields makes additionality assessment of each field impossible (SEI).
  • None on record None on record: a court ruling or prosecution concerning Russian JI.

Did the harm stop?

Russia did not join the second Kyoto commitment period and cannot host JI projects in it (SEI).

Who paid?

None on record.

Sources

Voices on record: — Company or project✓ Government and regulators— Courts✓ Press and investigations— Communities and civil society✓ Researchers

Government and regulators

  1. Commission Regulation (EU) No 550/2011
    European Union · 2011-06-07

Press and investigations

Researchers

Connected cases

Related matters, and cases linked to this one through the same organisations, with the role each played in both.
Terms used on this page

Carbon and conservation finance

Baseline
The projected scenario of what would have happened without a project, such as an expected rate of deforestation. Credits are issued for the difference between the baseline and what actually happened, so an inflated baseline produces more credits.
Offset
Using carbon credits to balance emissions released elsewhere, so that a buyer can claim lower or zero net emissions.
Standard-setter and registry
An organisation that writes the rules for carbon credits, approves projects, and records when credits are issued and retired. Such bodies typically charge fees per credit.