Greenhouse gas emissions, particularly CO2, decreased sharply in CEE and NIS countries beginning in 1990. Industry-led recession and the process of economic restructuring were the primary causes of emission reductions during the years to follow. As commitments in the Protocol are designated as percentage decreases in emissions compared to a national reference year, generally 1990, these autonomous decreases have left many countries in the region well below targeted emission levels.
Comparatively high energy intensities per unit of production and resumed economic growth, however, threaten to erase both environmental improvements and potential economic profits from reduced emission levels. Domestic action to reduce emissions will clearly maximize the ability of CEE and NIS countries to participate in emission trading schemes, and in some cases may be necessary only to reach Kyoto targets. The key factors influencing future emission trends will include GDP growth, the level of domestic economic restructuring, and the development of the energy demand and supply sectors.
A number of countries are increasingly addressing climate change through domestic economic instruments. In 1997, Slovenia introduced a CO2 Tax on liquid fuels which will be expanded to include coal used for electricity generation in 2004. Estonia has included CO2 among its chargeable pollutants in its pollution charge system. A number of countries, Czech Republic, Latvia, Lithuania and Poland, are also reviewing the possibilities to introduce domestic pollution trading schemes which would serve to acquire experience with such mechanisms should a tradable permit system develop for carbon emissions.
A recent study conducted by the World Bank and Swiss and Finnish governments has reviewed the potential for GHG trading within the Czech Republic, Slovakia, the Russian Federation and Uzbekistan. National studies first prepared CO2 projections based on factors such as GDP growth, energy consumption and economic restructuring. A team of consultants then reviewed the national assessments and prepared a "Synthesis Study of the National AIJ/JI/CDM Strategies Studies Program:" (1999). The authors (Klarer, Swisher and Kolejmainen) found the following:
"In "business as usual" scenarios with high economic growth, the Kyoto QELRCs will be reached or exceeded in 2008-2012 in the Czech Republic, the Slovak Republic and Russia (these are all Annex I countries qualifying for JI and IET). In Uzbekistan which qualifies as a CDM country (non-Annex I), there will be steep emission growth if no measures are taken. In "business as usual" scenarios with lower economic growth assumptions, CO2 emissions in 2010 will be 5-8% below the Kyoto QELRCs in Slovakia, Czech Republic and Russian Federation and in Uzbekistan, CO2 emissions are estimated to be 20% above 1990 levels in 2010. These "business as usual" projections suggest a modest amount of emission allowance trading may be possible, based on the 2008-2012 emissions falling short of the QELRC levels. However, the volume of emission reduction units available for trade can be significantly increased through implementation of domestic reduction measures and participating in the JI or CDM mechanisms: the national-level emission-mitigation scenarios for the Czech Republic, Slovakia and Russia suggest reductions of up to 10-15% from the baseline scenario emissions (in Uzbekistan up to 25%) in 2010, based on a variety of mitigation measures such as increased energy prices/taxes and subsidy removal, the introduction of a CO2 tax, as well as specific technology measures in the energy and agriculture sector (e.g., fuel switch, energy efficiency, renewable energy, afforestation etc.)."
Klarer, Swisher, and Kolehmainen. "Synthesis Study of the National AIJ/JI/CDM Strategy Studies Program" World Bank, Swiss AIJ Pilot Program, and Ministry of Environment of Finland, 1999.
Klarer, Francis and McNicholas. "Improving Environment and Economy: The Potential of Economic Incentives for Environmental Improvements and Sustainable Development in Countries with Economies in Transition." REC, 1999.