President Vladimir Putin has recently announced his intentions to have Russia ratify the Kyoto Protocol ("Protocol"), and the State Duma (lower house of parliament) has accepted his proposal. This is a shift from the country's previous opposition to the Protocol, and has been based largely on the substantial concessions offered by leading Protocol member, the European Union (EU). This decision has been regarded by many as a rebirth of the Protocol, whose survival came into question after President Bush rejected it in 2001. It has also marked a triumph for the EU over the United States after a long debate over the Protocol.

Russia's change of stance on the issue of global climate change has taken the Protocol out of a period of hibernation. After the US's rejection of the protocol in 2001, and Japan's and Canada's recent ratifications, Russia remained as the deciding factor to whether it would take effect. The guidelines of the Protocol state that at least 55 countries that represent at least 55 percent of the world's 1990 greenhouse-gas emissions must ratify the protocol in order for it to take effect¹.

Russia accounted for 17 percent of the world's greenhouse-gas emissions in 1990, and its ratification of the protocol would add to the already 44.2 percent of the greenhouse-emissions that have been accounted for by the 126 countries who have ratified the Protocol, therefore reaching the threshold for it to take effect.

The Protocol aims to achieve a 5 percent reduction in greenhouse-gas emissions from 1990 levels by 2012². Organizations such as the International Panel on Climate Change (IPCC) have found significant increases in the world's average temperature over the past century and predict future increases at unprecedented rates. This global climate change has been blamed largely on the "greenhouse effect," where heat is trapped in the atmosphere, and has been closely correlated to the increase in greenhouse-gas emissions (mainly carbon dioxide). The Protocol attempts to reduce emissions by placing quotas on the amount of greenhouse-gases which countries can produce.

The Kremlin had announced in December of 2003 that it would not ratify the Protocol. Andrei Illarionov, a senior adviser to Putin and a major opponent of the Protocol, stated that it "could not be ratified"³ out of concerns for Russia's economy, and the Protocol's fairness credibility.

Bargaining between the EU and Russia has been a decisive factor in the change of Russia's position.

First, Russia has been offered a generous annual emissions quota based on Soviet-Era emission levels—which decreased sharply after the collapse of the Soviet Union. This offer alleviates some of the pressure Russian industries will have to face in reducing emissions and will allow Russia to benefit financially from selling or banking some of its excess carbon allowances.

Second, Russia struck a bilateral market access deal with the EU, moving it closer to accession into the World Trade Organization (WTO). These parallel, technically unrelated WTO talks provided an additional context for EU-Russia exchange of benefits and concessions. Russia's application to the WTO has been pending ever since it applied 11 years ago, and has actively sought to gain access ever since. Russia agreed to reduce import tariff levels on certain goods and services. It has also agreed to deregulate its gas prices for its domestic industry by 2010 to bring prices in line with external market levels and thereby reduce an internal subsidy to Russian industry. Furthermore, Russia agreed to liberalize its telecom industry by 2007 and change its system of charges currently applied to EU airlines overflying Siberia by 2013⁴.

Russia's shift on the Protocol has strengthened the EU role as the global leader in fighting greenhouse-gas emissions. The EU has been an aggressive supporter of the Protocol, deriving support from various green parties within the EU member states. Protocol rules have been incorporated into EU law, exposing offenders to punishment⁵.

To help win support for the treaty, the EU has altered its position on a carbon emission allowance system that depends on market forces. The system allows countries to sell excess or buy needed carbon emission credits in order to meet annual national ceilings for greenhouse-gas levels. Green party hardliners have opposed such a system because they believe free market forces would encourage companies to buy excess allowances rather than focus on cutting emissions.

However, the appeal of this system, whether to European industrialists or newcomers to the Protocol (such as Japan which is very fond of the idea of carbon trading), has overtaken these objections. This has potential benefits for the EU. First, the major legal system of this new and expanding international market will be European-based. Second, the EU is likely to set the global standard of carbon allowance trading with its Emissions Trading Scheme⁶. Third, the fact that the EU has taken significant steps towards reducing carbon emission might have "given its businesses an edge in the race towards clean energy."⁷

The prices of carbon allowance credits in the newly emerging global trading market have been the subject of considerable speculation and concern. Previous predictions of prices above €20-25 per ton have given way to actual prices in the range of €10-15 per ton. Russia's excessive quotas might put downward pressure on prices. However, Russia will have an interest in banking some of these credits to ensure steady prices. Furthermore, it is likely that Russia will join Ukraine and Bulgaria in a carbon allowance cartel⁸.

The US has emerged out of these events with somewhat of a stigma, as the world's largest producer of greenhouse-gas emission and the most steadfast opponent to the Protocol. The US produces 25 percent of the world's greenhouse gas emissions and would be expected to decrease its emissions by 7 percent of 1990 levels by 2012 if it were to join.

The US has based its objections on four reasons:

First, the Bush administration has questioned the scientific basis for calculating current emissions.

Second, it has contested the unfair advantage that developing countries such as China and India would have over it because developing countries are not required to reduce emissions The US has also questioned enforceability in some countries required to make reductions such as Russia.

Third, the US argues that the economic costs of unemployment and price increases would be detrimental to the US economy: ratification would cost the economy 4.9 million jobs and $400 billion according to the Bush administration¹⁰.

Fourth, it argued that there was no way that the Protocol would be ratified by the Senate, as it had been previously rejected it by a vote of 95-0. The Bush administration has proposed to focus on reducing "greenhouse-gas intensity" over 18 years, but this would have the effect of increasing actual emissions by 12 percent over the same period¹¹.

However, the decision of Russia to join the Protocol and the potential inclusion of newcomers has important ramifications for the US. On the up side, US industries might obtain competitive advantages over industries of countries which have ratified the treaty. On the other hand, US multinational companies are very likely to encounter emission restrictions abroad, especially in the EU. Furthermore, if the US decides later on to start enforcing more stringent carbon emission restrictions, it will do so at a disadvantage to other nations who would have had head starts.

The credibility of some US objections to the Protocol has also been challenged. Despite US concern over China not being obliged to reduce emissions, China has already voluntarily started to implement policies to restrict emissions. Furthermore, some industries and states within the US have also begun to comply with the Protocol. Companies such as DuPont and Ford Motor Company have already reduced their carbon emissions. The states of New England are expected to comply with carbon emission reductions on power plants, as proposed by the EPA, by 2012¹². California has passed a law limiting greenhouse-gas emissions from cars.

Russia's accession to the Protocol has revived the issue of global greenhouse-gas emission independent of US support for it. The Bush administration has directed harsh criticism at the Protocol in the past and might even attack new elements, such as Russia's exaggerated quotas based on Soviet Union era production. The Senate also remains strongly opposed to the Protocol. The US has lost much influence on the Kyoto Protocol with Russia's latest decision, but it seems unlikely that the US will change its position now that President Bush has been elected for a second term.