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Russia: Making greenbacks from going green

Cynics might argue that the US and Russia are leading villains in the global warming piece. But financial Realpolitik suggests that the world’s biggest polluter and Europe’s most polluted country have key roles to play in the fight to cut greenhouse gas emissions.

Certainly Merrill Lynch’s recent decision to plough an estimated $200 million into the Russian Carbon Fund (RCF) indicates that the development of a carbon-trading market in emerging Europe is beginning to gain real momentum. Under the terms of the Kyoto Protocol Joint Implementation directive, rich developed economies that face cuts in greenhouse gas emissions for the period 2008-12 can meet those targets by funding reductions elsewhere – essentially emerging economies such as Russia. With its vast oil and gas industries, Russia is seen as a particularly attractive carbon trading market, as analysts believe there is massive scope to slash emissions. Energy use in Russia is two-and-a-half times less efficient than that in western Europe, according to a recent UN report.

Under its strategic alliance with RCF, Merrill Lynch is taking a minority equity stake in the company, providing it with loan financing and purchasing a large volume of carbon credits.

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