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Climate Change Initiative Newsletter September 2002 (27)

Table of Contents

Climate Change Initiative

1. An open climate change lecture at Kyiv Mohyla Academy

Upcoming Events

October 10 Public Discussion of Ukraine’s position at the upcoming Cop8 meeting
Kyiv, Large Conference hall of the NASU

October 22-24 Training Seminar on GHG Emission Reduction Project Preparation and Financing
Kyiv, Training Center for Energy Management, NTU KPI

November 5 Roundtable of the Industrial Council on Climate Change
Donetsk

Ukraine Climate Change News

2. Climate change mitigation at local level

3. Stop the Global Climate Change!

4. First International Conference on “Energy from Biomass” in Ukraine

5. Kiev Plans Issuing $350 mln Eurobonds

US Climate Change News

6. US Summer Hits Heat Records

7. ENTERGY Exchanges Land for GHG Credits

International Climate Change News

8. Climate Change Outcomes of the Summit in Johannesburg

9. China Ratified Kyoto Climate Treaty

10. Estonia Agrees to Ratify Kyoto Protocol

11. Thailand Ratifies Kyoto Protocol

12. European CO2 Emissions Continue to Rise

13. Japanese Emissions Credit Market in Operation

14. Heavy Industries Make Moves to Accommodate Natural Gas

15. Sugar to Produce Hydrogen – Early Research

16. Australian Carbon Credit Investment Fund Launched

17. Australian Companies to Suffer from Government Position on Kyoto

18. Canadian Hydro-quebec to Use Credits under Kyoto Protocol

19. Businesses Will Get Guarantees from Russian Government

20. EU pledges funds if Russia Ratifies Kyoto Protocol


Climate Change Initiative

1. An Open Climate Change Lecture at Kyiv Mohyla Academy

On September 24, Natural Science Department of the Kyiv Mohyla Academy opened à new series of lectures on global climate change. The first class was held for 4th year undergraduate students specializing in the environmental protection field. The series of five lectures is based on the CCI training modules that were adopted to the curriculum requirements of the Kyiv Mohyla Academy. The lecture materials were developed by the CCI technical stuff and Dr. Zamostian, the Department Chief Instructor. Dr. Zamostian participated in several training workshops conducted by the CCI technical staff.

The CCI training materials were modified to address specific educational needs of future professionals and experts in the field of environmental protection. The Academy students expressed à great deal of interest in the climate change topic. The lecture also generated à lot of questions answered by Dr/ Zamostian and CCI experts.

The CCI has à similar arrangement with Taras Shevchneko National University where the CCI training materials are being incorporated into the current curriculum of the Chemistry Department.

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Ukraine Climate Change News

2. Climate change mitigation initiative at local level

August 8, 2002 - A round table “Global Climate Change and Participation of the City of Dniprodzerzhinsk in International Climate Change Mitigation Programs” took place in the city of Dniprodzerzhinsk with the support of the Dniprodzerzhinsk Local Department of the Environment and Natural Resources. The round table was initiated and held by the Dniprodzerzhinsk non-government environmental organization “The Voice of Nature” and the Kiev office of the Us-based non-government organization “Alliance to Save Energy”.

The round table in Dniprodzerzhinsk enabled the city community to open à dialogue on reducing greenhouse gases emissions in the city and to discuss opportunities for the Dniprodzerzhinsk’s participation in international climate change mitigation programs such as MUNEE (Municipal Network for Energy Efficiency), LEAP (Local Environmental Action Program) and Cities for Climate Change Protection Campaign coordinated by the International Council for Local Environmental Initiatives (Toronto, Canada).

The main result of the round table was à decision to establish à coordination council for developing à local action program on climate change and assisting its implementation. “The Voice of Nature” was selected as the Council Chair. Representatives of the Dniprodzerzhinsk Department of the Environment and Natural Resources expressed their willingness to support activities of the Coordination Council. Local stakeholders were encouraged to participate in the Council.

The round table in Dniprodzerzhinsk was one of the activities implemented within the information campaign “Future Climate without Threat to Life”, that is being carried out by the Ukrainian Ngos Climate Change Working Group.

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3. Stop the Global Climate Change!

On October1, in the City of Chernihiv, the Ukrainian Ngos Climate Change Working Group launched à climate change information campaign. The Working Group is an association of about 25 Ngos from 11 oblasts of Ukraine. The information campaign started with à tour that is aimed at familiarizing Ukrainians with the climate change problem in general, and the Kyoto Protocol issues in particular, and promoting discussions about the Kyoto Protocol ratification among the Ukrainian public.

After the successful start in Chernigiv, 20 Ngos, members of the Working Group, plan to visit Cherkassy, Dniprodzerzhinsk, Donetsk, Yenakieve, Artemivsk, Kriviy Rih, Rivne and Khmelnitskiy within the first two weeks of October. Ukrainian citizens will have à chance to meet with environmentalists, and learn about global warming and its impact on Ukraine, the related international negotiation process, Ukraine’s participation in international climate change forums, and possible climate change mitigation measures available for implementation by Ukrainians. The tour is also accompanied by an exposition presenting general information about global climate change, and summaries and results of completed and on-going climate change mitigation and energy conservation projects. .

(Ukrainian Ngos Climate Change Working Group, “Green Dossier”)

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4. First International Conference “Energy from Biomass” in Ukraine

On September 24th the first international conference “Energy from Biomass”, organized by the NASU Institute of Thermal Physics in cooperation with the Scientific and Technical Center “Biomass”, took place in Ukraine.

The Conference participants discussed world practice in the use of biomass for heat and electric energy production, and perspectives of biomass utilization in Ukraine. The use of wood waste and straw as fuel for district heating purposes, and biogas in large livestock farms are considered the most viable applications of biomass energy in Ukraine. The participants agreed with expert estimates that in Ukraine the use of biomass could reduce GHG emissions by 34-68 Mt of CO2 per year through 2030.

Certain measures were recommended to promote biomass technology development and application in Ukraine. The recommendations included assigning biomass technology development à high priority among other renewable energy resources; participation of Ukrainian companies in joint implementation projects involving the use of biomass energy; development and implementation of à national program on renewable resources and biomass in particular, and increased state budget support for pilot and demonstration projects on biomass utilization. In addition, the conference participants emphasized the need to raise awareness among investors about biomass opportunities in Ukraine and recommended to relevant authorities to designate the Institute of Thermal Physics as à coordinator of bio-energy activities in Ukraine.

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5. Kiev Plans Issuing to $350 mln Eurobonds

KIEV - Kiev plans to issue Eurobonds worth between $300 and $350 million next year to finance environmental projects, à deputy mayor said.

Valery Borysiv told Reuters the city expected to issue the bonds with at least five-year maturities but gave no other details of the planned issue. "In October we plan to finish work on choosing à company which will give us à credit rating. We are considering several offers", Borysiv said, adding the municipal government hoped to get à credit rating.

If the issue goes ahead, Kiev will become the first city in the ex-soviet country to tap the international bond markets. Ukraine issued sovereign seven-year Eurobonds in à debt swap in 2000, rescheduling $2.37 billion in short-term commercial debt for longer term papers. The government plans to return to the international markets next year and to issue new sovereign bonds.

Ukraine is rated B2 by Moodyús Investors service and B by Fitch Ratings.

(REUTERS, September 10)

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US Climate Change News

6. US Summer Hits Heat Records

WASHINGTON - With nearly half the country reeling from à blistering drought, this summer is the hottest since the depression-stricken "Dust Bowl" era of the 1930s, U.s. government weather experts said.

The summerús scorching temperatures have sparked raging forest fires in the West, wilted crops in the Midwest and parched pastures in the Plains. The National Oceanic and Atmospheric Administration said the average temperature for the contiguous United States from June through August was 73.9 degrees (23.3 degrees Celsius), the third hottest summer since records began in 1895. Summer officially ends on Sept. 22.

The only summers warmer were 1936 and 1934, when vast numbers of farmers were driven from their land by drought. "Itús very extraordinary to have the warmest summer since the 1930s Dust Bowl days", said Douglas Lecomte, drought specialist for Noaaús Climate Prediction Center. Although the U.s. economy is no longer as dependent on agriculture as it was in the 1930s, à major drought two years ago caused damage worth $4 billion and claimed 140 lives nationwide. That summer in 2000 was only the 12th warmest on record. "Although the total costs of this yearús drought are not presently known, the drought-diminished water supplies ... and contributed to an active wildfire season and extremely difficult farming conditions", NOAA said.

Moderate to extreme drought covers more than 45 percent of the United States. Six states - North Carolina, Virginia, Colorado, Utah, Arizona and Nevada - are suffering their worst drought on record, NOAA said. South Carolina, Maryland, Georgia, Delaware and Wyoming are also near unprecedented dry levels.

The prolonged drought has scorched U.s. wheat, corn and soybean crops, which will be the smallest in years. More than 50 percent of pastures were classified as poor to very poor in 24 states, leaving ranchers with little to feed their livestock.

So far this year, South Dakota officials have reported over $1.8 billion in agricultural losses, while Texas claims $316 million in damages. Costs to fight forest blazes this year are expected to amount to more than $1.25 billion, government officials said. NOAA officials predicted the direct loss of this yearús drought would certainly be in the billions of dollars. "It will be à significant dollar impact, but nothing similar to 1988 where the Corn Belt was devastated by drought - well over $10 billion of direct damage", Lecomte said.

NOAA also said this yearús drought would continue to linger for another six months due to the arrival of à weak El Nino weather anomaly.

(by Randy Fabi, REUTERS, September 16)

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7. ENTERGY Exchanges Land for GHG Credits

Entergy Corp. is donating 600 acres of land along Louisianaús Red River to the federal government, the first chunk of à 50,000 acre Red River National Wildlife Refuge that has been authorized by Congress but never funded.

Trees planted on the land will absorb and store an estimated 275,000 tons of carbon dioxide, à greenhouse gas blamed for global warming. Entergy, one of the nation’s five largest utilities, will get credit for that if the US ever regulates CO2 emissions. Entergy would get credit for planting 180,000 native trees on the land that absorb and store carbon dioxide, which the companyús 25 fossil fuel-powered generating plants emit.

The partnership with the US Interior Department, arranged by the Conservation Fund of Arlington, Va., will guarantee that the trees wonút be harvested during the 70 year life of the project, providing à record that would give Entergy the emissions credits.

The US Department of Energy, which maintains à register of voluntary corporate efforts to track and report emissions and emission reductions, says 222 companies have filed reports of such efforts. Entergy is one of at least 37 companies agreeing to make long-term reductions in emissions.

(MRI, September)

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International Climate Change News

8. Climate Change Outcomes of the Summit in Johannesburg

About 22,000 participants attended the World Summit on Sustainable Development (WSSD) in Johannesburg between August 26 and September 4. Around 10,000 delegates included participants from Member States, inter-governmental organizations, official observers, specialized agencies and related organizations, and associate members of regional commissions. Ngos, business representatives and media were also numerous at the meeting. The summit was attended by à hundred of Heads of State and Government.

Ministers at the Johannesburg Summit indicated their support for the Kyoto Protocol. The agreed action plan reads: "States that have ratified strongly urge those that have not done so to ratify Kyoto in à timely manner". Some countries, including China, India, Brazil and Thailand announced their ratification of the Kyoto Protocol at the Johannesburg Summit. Russia and Canada have given strong signals that they will ratify in the near future. In doing so, the combined emissions of Russia and Canada would be sufficient to push the greenhouse gas figures over the required limit.

WSSD adopted the Plan of Implementation which underlines the importance of developing and disseminating innovative technologies in energy and other key sectors, including through the private sector. Sustainable energy production and consumption, renewable energy, free energy markets, emissions regulation with the view of harm to human health and environment, forest protection are among the key issues reinforced by the Summit political statement.

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9. China Ratified Kyoto Climate Treaty

On September 30 China approved the ratification of the Kyoto Protocol. Beijing has advocated that developed countries, such as the United States, take à leading role in reducing greenhouse gas emissions and to do more to protect the environment.

The Kyoto Protocol does not require China and other developing countries to reduce emissions, à point Washington has objected to as being unfair. But Mr. Zhang of the Ministry for Foreign Affairs said China is nonetheless committed to improving the environment and has adopted measures to reduce greenhouse gas emissions. He reiterated Chinaús longtime stance that developed countries should shoulder most of the responsibility.

(ABC net, UNFCCC Secretariat)

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10. Estonia Agrees to Ratify Kyoto Protocol

TALLINN - The Estonian parliament unanimously agreed to ratify the UN Kyoto Protocol on global warming, the parliamentús press office said. All 66 out of the parliamentús 101 members present voted for ratification, with no abstentions.

Under the protocol, Estonia will have to reduce emissions of greenhouse gases in the 2008-2012 period by eight percent in comparison to 1990 levels.

The Estonian environment ministry is drafting à national program for reducing greenhouse gas emissions in the period 2003-2012, the ministry said.

(Natsourse, September 3)

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11. Thailand Ratifies Kyoto Protocol

BANGKOK - Thailand has ratified the Kyoto protocol on global warming, à government statement said on August 28. The move received à mixed reaction from local environmentalists.

Athena Ballesteros, Greenpeace campaign manager for Southeast Asia, told Reuters the ratification was perfectly timed as it coincided with the Earth Summit in Johannesburg where government leaders and environment advocates were meeting. "I think it sort of puts the bigger countries in particular, the U.s. and Australia and Canada, in à very bad light because à small country like Thailand, compared to those big countries, has taken à significant step forward", Ballesteros said.

Jakkrit Kaunpoth, an environment law lecturer from Bangkokús Sukhothai Thammathirat University, said the pact was à battle among world superpowers which are yet to ratify the agreement. "Whether we join the pact or not, weúre not going to make any different to the worldús environment", Jakkrit said. "The protocol basically allows industrialized countries to take advantage of developing ones legitimately."

(Planetark, August 29)

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12. European CO2 Emissions Continue to Rise

EU carbon dioxide (CO2) emissions rose in 2001 by three-quarters of one per cent, according to new data from the German economics institute DIW. The rise is higher than between 1999 and 2000, when CO2 rose by 0.5%. The 2001 increase will have pushed CO2 emissions once more above 1990 levels, at which the EU pledged to stabilize them by 2000.

Some EU countries have already reported rising CO2 emissions in 2001, including the UK and Germany, and Denmark. Diwús report shows the trend is widespread across the EU. Its figures are based on statistics from oil firm Bpús 2002 energy review adjusted to take account of the CO2 output when various fuels are burnt. This "combustion CO2" comprises about 95% of all human CO2 emissions - industrial processes, international aviation and shipping are excluded - which in turn represent 82% of EU greenhouse gas emissions.

According to DIW, combustion CO2 emissions rose in 2001 in ten of the Euús 15 member states and fell in only four. Worryingly, those countries with rising emissions include not only Germany and the UK, which provided the motor for lower aggregate emissions during the 1990s, but also all six of the countries furthest adrift from their greenhouse gas limitation targets under the Kyoto protocol.

Countries with increasing emissions were Ireland (+5.7%), Finland (+3%), Sweden (+2.7%), Netherlands (+2.4%), Portugal (+2.1), Germany (+1.6%), UK (+1.5%), Spain (+0.8%), Denmark (+0.6%) and Austria (+0.2%). Italy managed to stay even while Belgium led the reductions with -4.7%, followed by Luxembourg (-4.4%), France (-1.6%) and Greece (-0.1%).

(Pointcaron, August 22)

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13. Japanese Emissions Credit Market in Operation

The government will establish à domestic market in which companies can trade credits to produce greenhouse gases in fiscal 2003. Companies and other entities that emit greenhouse gases will each be allocated à certain number of credits governing how much carbon dioxide they can produce. Companies that cannot meet their emission targets can purchase additional credits from firms that meet their targets with à surplus of credits.

The Ministry of Economy, Trade and Industry plans à test run of the market this year. It will give 20 companies provisional emissions credits that they can trade online. The firms taking part will also receive financial assistance to build facilities that will help reduce emissions.

The government hopes the program will not only encourage companies to reduce greenhouse gas emissions, but also develop the experience that would allow Japan to play à leading role in international emissions trading when it begins in 2008.

To trade emissions credits, à company will first be required to submit to the ministry à greenhouse gas reduction plan before the end of 2007. The company will then be granted à provisional certificate.

Participating companies that reduce emissions beyond their original targets will be eligible for government assistance to the tune of half the costs associated with the improved reduction. Once trading is under way, companies will also have to submit progress reports on emissions cuts and notify the ministry of all emission credit transactions. By allowing prodigious polluters and companies that can cut back on greenhouse gases to trade emissions credits, the ministry hopes to keep the overall level of emissions under control, thereby allowing Japan to meet its obligations under the Kyoto Protocol.

As for firms that produce more greenhouse gases than they can procure credits for, the ministry plans to issue them à demerit certificate and publicize their names, rather than imposing à fine. Initial trading in emissions credits will likely take the form of direct transactions among involved parties. But as the number of prospective buyers and sellers rises, the transactions will be conducted on large enough scale that market forces alone will determine the value of emissions credits.

The Japan Business Federation, meanwhile, has come up with its own plan for each industry, under which they would together be able to cut greenhouse gas emissions to 1990 levels by 2010.

(Asahi, August 23)

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14. Heavy Industries Make Moves to Accommodate Natural Gas

Japanese heavy industries are pushing ahead with technology aimed at lowering costs of natural gas and helping promote greater use of the environmentally friendly energy source.

Mitsui Engineering & Shipbuilding Co. and Mitsubishi Heavy Industries Ltd. are among the Japanese companies developing commercial uses for natural gas hydrate, à frozen powdery material of high gas concentration.

Natural gas hydrates (NGH) had previously been considered troublesome as they clog up pipes and cause accidents in pipelines and petrochemical complexes, but à rethink by scientists has caused them to be seen as à useful form of natural gas. "We have almost managed to solve the technological problem", said Tatsuya Takaoki, deputy chief of Mitsui Engineeringús NGH project team. "The remaining challenge is early commercialization."

Natural gas emits less carbon dioxide -- regarded as the main cause of global warming -- than fossil fuels such as coal and oil, but the prevailing technology for transporting and storing it in liquefied form is costly. Particles of NGH have à spherical wickerwork structure ranging from tens of micrometers to several millimeters in diameter. Although its gas concentration level falls short of the 600-fold level of liquefied natural gas, NGH can be stabilized at minus 15, compared with Lngús minus 162. This characteristic allows companies to cut costs for storing, transporting and investment in production of NGH by 20 percent to 30 percent from those for LNG, according to industry officials.

The low cost could prompt businesses to tap relatively small gas fields in Southeast Asia and Oceania that have been abandoned due to production costs exceeding revenues. Natural gas hydrates require no pipelines and are easy to store and handle, making them suitable for use in small power stations and electric generators, the officials said. The heat-absorbing effect of their being converted back into gas, and the release of high-pressure gas may also be applied to air conditioning and power generation, they said.

(The Japan Times, August 27)

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15. Sugar to Produce Hydrogen – Early Research

LONDON - A spoonful of sugar might not just help the medicine go down in the future, it might also help your car get along.

Researchers say they have found à relatively effortless way to extract the clean fuel source hydrogen from à glucose solution. "We are at the (laboratory) bench experiment stage so far, but it works", Jim Dumesic, who leads the research team at the University of Wisconsin at Madison told. He noted it was far more efficient and quicker than the alternative of using bacteria to break down plant material such as maize to generate hydrogen.

The research found that heating the sugar solution to 200 degrees Celsius (392 deg F) and passing it over à platinum-based catalyst broke it down into hydrogen and carbon dioxide. The hydrogen could then be piped off into à fuel cell with the carbon dioxide released into the atmosphere, where it could be absorbed normally by growing vegetation and transformed back into oxygen.

"The beauty of our process is that it is fairly simple, and at fairly mild temperatures, with no harmful by-products", Dumesic said. He says the process does not produce extra carbon dioxide, as this would have been released back into the air anyway through biodegredation of the plants. The process is still at an early stage, with much work still to be done on preventing the catalyst degrading and on improving the efficiency of the conversion process.

The implications of the research are potentially huge. Several major car manufacturers including Daimlerchrysler and Ford have already begun experimenting with fuel cells powered by hydrogen which produces à lot of energy and whose only by-product is water. "We are not talking about spooning glucose into your car to make it go. That is 'Back to the future' stuff", Dumesic said. "We have à lot more bench work over the next few years to do to see the potential."

(by Jeremy Lovell, REUTERS, August 30)

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16. Australian Carbon Credit Investment Fund Launched

SYDNEY - Rothschild Australia and Australia-based environmental group E3 International launched à new fund to allow highly polluting companies to offset their emissions by buying carbon credits from cleaner firms.

Billed as the first of its kind in the Asia-pacific region and soon to be followed by other similar private investment vehicles, the Carbon Ring Consortium seeks to raise $2 million, with individual investors obliged to pay $100,000.

"With recent developments in international climate change policy, the question is no longer if, but when the global carbon trading market will emerge", said Richard Martin, chief executive officer of Rothschild Australia. Rothschild said in à prospectus that the Carbon Ring Consortium would be open for investments until October 30. It would be wrapped up in June 2003, when the carbon credits purchased will be distributed to investors pro rata.

(Planetark, September 3)

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17. Australian Companies to Suffer from Government Position on Kyoto

Oil giant BP says Australiaús continued refusal to ratify the Kyoto Protocol on global warming risked leaving local companies isolated and "In the lurch" with international competitors. BP Australasia president Greg Bourne said the conservative Governmentús rejection of Kyoto could result in Australian firms being "Locked out" of business opportunities in countries that were bound by the agreement.

Mr. Bourne said Kyoto was set to come into force following the Earth Summit in Johannesburg, and would establish new global standards for clean development and emissions trading despite Australian and US refusal to participate. He said this meant Australian companies would not be part of the new framework, making overseas countries hesitant about doing business with them. "If youúre in à club of 100 who have ratified Kyoto, why would you want to play with the one or two who havenút?" he said. "It makes logical commercial sense for companies in those countries that have ratified Kyoto to do business with companies that have the same standards as they have, business is looking for consistency. "America is big enough to look after itself, people will have to do business with it because itús so, but Australia risks being left in the lurch."

The comments, from à fossil fuel company that would normally be expected to back the Governmentús stance, came as Australia found itself with only the United States as an ally on its hardline rejection of Kyoto. Australian Prime Minister John Howard appeared open to compromise after Russia, China, India and Canada reversed their previous opposition to the agreement at the Earth Summit. However, he quickly resumed the Government line that Kyoto was unacceptable in its current form as it was unviable, and would cause long-term damage to the economy.

Mr Bourne said Bpús global reach meant it would not be affected by the Governmentús intransigence, but Australian-based companies were the most likely to suffer. "Thatús à pity but for à company like us we can work from other places as well."

The Government has released figures showing Australia was on track to cut greenhouse gases to 111 per cent of 1990 levels, just shy of the 108 per cent target, even without ratifying Kyoto.

(ABC net, September 5)

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18. Canadian Hydro-quebec to Use Credits under Kyoto Protocol

MONTREAL - During the BAPE public hearings on the construction of Suroit generating station, Hydro-quebec Production made à commitment, in accordance with the Kyoto Protocol, to offset emissions from the thermal plant through the use of emissions credits. Hydro- Quebec will use an equivalent number of the credits it will receive for its hydropower production, and apply them against the GHG emissions produced by Suroit.

The 800-mw combined-cycle gas-fired plant will be designed for year-round operation and will produce an average of about 6.5 Twh/year -- equivalent to the annual load of the new city of Gatineau. It will cost $550 million to build, and the economic spinoffs during construction are estimated at $185 million, or 1,955 person-years of employment.

In Quebec as in Ontario and the U.s. Northeast, electricity demand is expected to experience significant growth over the next 10 years. Hydro-quebec Production wants to have Suroit ready to meet this growth in demand by 2006. "Weúve chosen an advanced technology thatús the best available in the world right now, with à high energy yield, good environmental performance and low atmospheric emissions", said project manager Macky Tall during the public hearings now under way in Beauharnois.

Hydro-quebec told the hearings board that the project has good local and regional support, as demonstrated by the agreement signed on December 20, 2001, by Hydro-quebec Production, the municipality of Beauharnois and the RCM of Beauharnois-salaberry. This agreement provides for the creation of à $4-million regional investment fund.

Hydro-quebec Production stressed that hydropower remains the preferred generating option; in fact, the Suroit project will be developed in parallel with the companyús hydropower projects.

(CO2ecom, September 10)

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19. Businesses Will Get Guarantees from Russian Government

MOSCOW - Foreign companies which suffer unfair treatment at the hands of Russian judges, customs agents or politicians will be able to seek full compensation from the government under à pioneering insurance program.

The Federal Centre for Project Finance, an agency of the Russian government, is to offer úúnon-commercial riskú' insurance in conjunction with the World Bank designed to indemnify foreign lenders against úúgovernment performance and force majeureú'.

The initiative is designed to force the government to seek to resolve disputes with politicians and officials when conflicts first arise. Failing that they will be referred to international arbitration and any compensation payments will be deducted from the federal budget. It could help boost Russiaús volume of foreign direct investment, which remains very low in à reflection of continued suspicion by companies over the countryús unstable regulations, taxes, and legal system. In the first six months of this year, investment was just £1.2-billion, down 25% on the same period of 2001.

The program comes at à time when foreign states' export credit agencies remain reluctant to indemnify business with Russia, and the costs of borrowing remain high partly because of the political risks. The úúnon-commercial risk guaranteeú' will begin by offering insurance for projects in the coal and timber industries - two of the government’s top priorities for economic restructuring.

Mikhail Kozlov, director of the guarantee management directorate of the Centre, said up to six projects were being seriously considered, and that between two and four were likely to be signed up by the end of this year. He said there were also already discussions for other one-off large-scale guarantees in the oil, gas and diamonds sectors, and in relation to energy trading under the terms of the Kyoto environmental protocol, at least one of which could be ready for signing within the next 18 months. He indicated that the guarantees may cover Russian investors, as long as they make loans which come from offshore entities. Under conditions imposed by the World Bank and its International Bank for Reconstruction and Development, direct equity investments will not be covered, but he indicated that quasi-equity could be.

(Financial Times)

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20. EU pledges funds if Russia Ratifies Kyoto Protocol

MOSCOW – The European Union is ready to issue to Russia 2m euros under the TACIS project for institutional support of the Kyoto protocol.

The money will come immediately after Russiaús ratification of this international accord, the secretary of the European Commissionús representative office in Russia said at à seminar on benefits of the Kyoto protocol in Russia. He said Russiaús ratifying the Kyoto protocol would give it benefits of trade on the international market of quotas of greenhouse emissions.

For this, all necessary internal conditions should be created in Russia by 2008, the beginning of the Kyoto protocolús implementation, according to the EC representative. The conditions include inventory of greenhouse gases and the formation by 2007 of à national system for the evaluation of emissions...

(CO2ecom, September 12)