Gerard Wynn writes from London and James Kilner from Moscow, May 31, 2007,  for Reuters, that - “Russia Takes First Step Into Global Carbon Market.”

Russia this week gave a surprise green light to carbon trading under the Kyoto Protocol to cut greenhouse gas emissions, but needs to start approving actual projects to unlock a multi-billion dollar market.

“Russia is the single largest supplier of oil and gas to the European Union and also the world’s third biggest emitter of greenhouse gases behind the United States and China. As a big player in both energy and climate change, it is well-placed to cash in on the sale of emissions cuts, or carbon credits, to other industrialised countries, but has long delayed implementing the necessary rules.”

Prime Minister Mikhail Fradkov signed a government decree on Monday defining guidelines - we need now to know the final text of the decree, on how to apply. “We’re expecting that to be posted on the Ministry of Economic Development and Trade website over the next week.”

“This is the big one, it’s what everyone’s been waiting for for over a year and a half,” said Abyd Karmali, a climate change consultant at ICF International.

Kyoto allows rich countries to meet caps on greenhouse gas emissions by investing in emissions-cutting projects in other countries, part of a US$30 billion global carbon market.

That market is meant to target cheapest emissions cuts and so cut the cost of fighting climate change.

Russia could be a cheap source of credits for example by simply plugging holes in its vast network of gas pipelines, which currently leaks a potent greenhouse gas, methane.

Russia could sell up to 500 million tonnes of emissions cuts in carbon dioxide equivalent by 2012, estimated Karmali, which would value the market at US$5 billion, assuming current prices.

Carbon project developer the Russian Carbon Fund put the market size at up to 350 million tonnes, and underlined the need for further details and operation in practice.

“Details needs to be fleshed out, like where applications should be submitted. Markets will want to see it in operation and issued approvals.”

Russia also needs UN approval to trade carbon, expected by early next year, and has already ordered from French firm Seringas the necessary registry software to log transactions, Sorensen said. But the carbon market needed to know when that registry would be up and running, said Shell’s Garth Edward.

“The government decision is the first step, now they need to operationalise that. The time frame for turning around applications is unclear,” Edward added.

Under the Kyoto Protocol industrialised countries can either buy carbon credits from developing countries, under the pact’s Clean Development Mechanism, or else from each other under Joint Implementation, as in the case of Russia.