REEEP backs efforts to secure carbon credit for Russian Far East communities to convert district heating plants to forest biomass.

The Renewable Energy and Energy Efficiency Partnership (REEEP) will finance the development of a funding mechanism to enable communities in the Russian Far East to obtain municipal heat and power from biomass rather than coal. The carbon credits produced by converting inefficient, coal-powered heating plants to forestry biomass will provide security for loans to finance the installation of new equipment. 

Communities in Russia's Far East are anxious to convert their district power and heating plants to burn biomass derived from surrounding forests, including timber industry residues and wastes. Existing plants operate on 50-year-old coal-burning technology that is high in moisture and ash content. Biomass-fuelled community heat and power systems will improve energy security for large numbers of people while dramatically reducing emissions of sulphur and nitrogen oxides, carbon monoxide, fly ash, soot and other harmful chemicals, as well as CO₂. However, the municipal authorities that run the existing plants cannot access the finance necessary to make investments in cleaner, more efficient equipment. REEEP is working with Winrock International to establish a funding mechanism that uses carbon credits based on future emissions savings as security for loans to finance the investment. Winrock has been working for several years to develop biomass energy in the Russian Far East through the USAID-funded Forest Resources and Technology Project. REEEP is to provide ?80,000, two-thirds of the total cost, to establish the financing mechanism. 

Winrock are now in discussions with Russian partner banks, Vneshtorgbank and Sberbank, to provide loans for ten biomass-fuelled district heating projects, supplying some 20 communities in the areas of Irkutsk Oblast and Khabarovsk Khai. Revenues flows from future carbon credits, securitised by international financial institutions, are expected to provide more than sufficient funds to cover the loans.

"This sort of project has a double benefit in terms of greenhouse gas emissions reductions," say Dr. Marianne Osterkorn, international director of the REEEP. "By replacing coal with cleaner biomass, we can make finance available through carbon credits for modernising the energy infrastructure. More efficient systems mean less demand for fuel, regardless of fuel type."

"There has been much comment about how the decline of much Russian heavy industry in the 1990s has left the country with an actual level of emissions well below its Kyoto allocation, enabling the surplus carbon credits to be sold to Europe, Canada or Japan," says John Kadyszewski of Winrock. "Given recent growth in Russia, the size of this surplus of ‘hot air' is probably exaggerated. But these credits from the Russian Far East are real and deliver lower emissions and greater energy efficiency."