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Unified Energy System

September 19, 2005

RAO "UES of Russia", AFK "Sistema" send a letter to Russian Government calling for prompt approval of Kyoto Protocol implementing regulations

Moscow, 19 September 2005. Anatoly Chubais, Chairman of the Management Board of RAO "UES of Russia", Vladimir Yevtushenkov, President of AFK "Sistema", have sent an official letter to the Chairman of the Russian Government Mikhail Fradkov requesting him to give instructions to the competent authorities so as to ensure prompt preparation and approval of rules and regulations governing the implementation of the Kyoto Protocol* in Russia.

The letter, among other things, states that the first contract under the Kyoto Protocol entered into by OAO "Orenburgenergo" and OAO "Khabarovskenergo" and the Danish Environmental Protection Agency was in jeopardy as the Russian Government still had not adopted the regulations governing the implementation of Kyoto Protocol in Russia. If the above contract is not approved by the end of October this year, it will be rescinded by the Danish agency, which will undermine foreign investors' confidence in Russia's carbon credits market.

Apart from that, the letter states that one should be aware of the fact that the time available for the implementation of Kyoto Protocol projects is very limited: the period during which carbon credits may be sold on the global markets expires in 2012. The Russian business community is concerned with the slow rate at which the rules and procedures are being developed for such projects, primarily for JI projects pursuant to Article 6 of the Kyoto Protocol, and for the most promising environmental investments under Article 17 of the Kyoto Protocol. Legal analysis suggests that with the current legislative framework and international treaties of Russia, the Russian Government has sufficient powers to ensure fulfilment of the country's international obligations in the social, economic and environmental domains, i.e. to implement the Kyoto Protocol mechanisms.

RAO "UES of Russia" and AFK "Sistema" signed a Cooperation Agreement in August 2005 designed to facilitate the creation of investment and financial mechanisms in Russia aimed at improving energy efficiency using the potential of the Kyoto Protocol. The Agreement was signed by Yakov Urinson, Deputy Chairman of the Management Board of RAO "UES of Russia", and by Sergey Cheremin, Vice President of AFK "Sistema". The companies believe that the sale of Russian carbon credits on the international markets must be made conditional on the corresponding reductions in greenhouse gas emissions through deployment of innovative energy technologies and modernization of power equipment. At the same time, carbon credits are a new resource, a capital that should not stay idle; it should be used wisely to raise energy efficiency, including reductions of greenhouse gas emissions.

* The Kyoto Protocol is an international environmental treaty ratified by 118 countries. The Protocol obliges the industrially developed countries to reduce greenhouse gas emissions in 2008-2012 by 5.2% compared to the level of 1990.




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