Lessons from JI and GIS for post-2012 carbon finance mechanisms in Russia and Ukraine

The main incentives for Russia's and Ukraine's participation in the first commitment period of the Kyoto Protocol were its mechanisms. The opportunities that the anticipated post-2012 mechanisms will offer Russia and Ukraine are explored in light of the lessons from Joint Implementation (JI) and the Green Investment Scheme (GIS) during this first period. Four key factors that explain the success of these mechanisms are identified: the design of the mechanisms, the role of the private sector in their implementation, the coordination required, and the political will gained. Even though a weak rule of law, problems with policy implementation, and the ambiguous role of private-sector actors are not 'make or break' issues, they are likely to defer future mechanisms. Success and failure will, rather, hinge on the priority these factors are accorded by the top leadership. It is likely that simple mechanisms that only involve a few actors will be less complicated to set up and run than, for instance, emissions trading schemes (which require domestic burden sharing). Project-based options in which domestic actors have gained experience may be better suited. However, any lessons prior to the new mechanisms taking a clearer shape must be considered as preliminary. Policy relevance The Kyoto Protocol mechanisms, despite their problems, provided Russia and Ukraine with their main incentives for participation in the Protocol's first commitment period. As the chances that these countries will participate in the second commitment period seem slim, the opportunities that the anticipated post-2012 mechanisms will offer Russia and Ukraine are explored in light of the lessons from JI and GIS. The key factors that have determined the success and failure of these mechanisms are likely to be of relevance to future mechanisms. It is argued that - of the post-2012 options available - simple mechanisms with few actors involved should be chosen. Project-based options rather than emissions trading schemes may be more likely to succeed due to experience gained by domestic actors.