Minsk Expects Big Profit from Kyoto Protocol

UNCLAS MINSK 001323

SIPDIS

SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: SENV ENRG ETRD ECON PGOV BO
SUBJECT: Minsk Expects Big Profit from Kyoto Protocol



1. (U) Summary: On September 23, Econoff met with Deputy Minister
of Natural Resources Aleksandr Apatskiy to discuss Belarus' plans
after acceding to the Kyoto Protocol, and its plans in general to
reduce greenhouse gas emissions. President Lukashenko signed the
Kyoto Protocol into law in August, to take effect November 24.
Minsk hopes to profit from the sale of pollution rights as its
industrial production and greenhouse gas emissions plummeted after
the USSR collapsed. Apatskiy also described Belarus' early efforts
to promote alternative fuels, particularly peat, firewood and wind.
End summary.


2. (SBU) On August 15, President Lukashenko signed a decree for
Belarus to join the Kyoto Protocol, effective November 24.
According to Apatskiy, in 1990 Belarus emitted 112 million tons of
greenhouse gases. By 2004 this had been cut in half to 56 million
tons. Apatskiy claimed this drastic reduction was due to GOB
programs to modernize industry and reduce pollution. [Comment:
While there may be some truth to that, Belarus has been modernizing
some of its obsolete early Soviet-era power plants and factories,
most of this decrease is due to a drop in industrial production
since the end of the Soviet Union.] In October a group of
"international experts" were due in Belarus to confirm this level
of emissions. The Ministry of Natural Resources hopes the first
Kyoto Protocol conference will confirm Belarus' drop in emissions,
opening the door to the sale of pollution rights.


3. (U) The GOB hopes to profit from selling pollution rights. GOB
officials told the press the country could earn from USD 375
million to USD 1.5 billion annually. Apatskiy was a little less
optimistic in person. His ministry estimates Belarus could sell
emission rights for between USD 50 and 300 per ton for a five-year
period. Belarus would need to adopt new legislation to allow this
sale, which he thought could happen quickly. However, he admitted
there is no international mechanism in place for trading emission
rights, either bilaterally or in a Kyoto Protocol pool. Apatskiy
said Belarus will soon propose a trading system under the Kyoto
Protocol for selling pollution rights, hopefully to be operating
place by May 2006.


Falling Population Good for Carbon Sequestration
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4. (SBU) The GOB is also interested in the possibility of making
money by selling carbon sequestration rights, although it was clear
the Ministry of Natural Resources had not spent much time
considering this topic. Apatskiy stated that 38 percent of Belarus
is covered by forests, and that this had grown by three percent in
the last decade. He added that Belarus' bogs are also growing, and
they are believed to draw more carbon from the atmosphere per
hectare than do trees. [Comment: Belarus has a falling population,
which is increasingly moving to the cities. For this reason
farmland has been reverting to forest for several years. President
Lukashenko is trying to reverse this trend, but it is too soon to
know how successfully.]


Belarus Beginning to Look into Alternative Energy
-------------- --------------


5. (U) Driven by its overwhelming dependence on Russia for energy
(as much as 93 percent of Belarusian energy is imported from
Russia),Belarus is starting to look into alternate sources of
fuel. The GOB is converting some factories and heating plants to
use domestically available peat and firewood. Apatskiy said
Belarus is currently only using three to five percent of available
hydropower, and is looking to greatly expand the use of wind power.
Belarus has windmills at two test sites, a 600 kilowatt windmill
complex at Narach and a 250 kw complex near Dzerzhinsk. The
Ministry of Natural Resources expects to receive money in 2006 and
2007 to expand wind power, and Apatskiy claimed Belarus has 1,840
potential sites where the average wind speed is between two and six
meters per second. His ministry is also looking into using biomass
(mainly chicken and cow dung) to produce methane. The ministry is
currently drafting legislation that would offer tax breaks for use
of alternate energy sources. Apatskiy expected this would be
considered in parliament in 2006.


6. (U) However, recent Belarusian legislation has allowed a
loosening of some environmental protections. Apatskiy admitted
that previously Belarus had a law that limited the growth in
greenhouse gas emissions to 0.14 percent for every percent increase
in GDP. Recently the GOB raised the limit to allow emissions to
grow 0.2 percent for every point of GDP growth.


7. (SBU) Comment: Apatskiy and his ministry seem unduly optimistic
that Belarus can cash in on the Kyoto Protocol. Signing the
protocol was painless for Minsk given its drop in greenhouse
emissions after the fall of the USSR, and likely won the country
some international goodwill. However, with no mechanism in place
to regulate the trade in pollution rights, Belarus is unlikely to
benefit from its earlier economic collapse any time soon.

KROL