Rachel Morarjee in Moscow -

When Kevin James at Climate Change Capital moved to Moscow in 2005, he hoped that his company would be in the vanguard of a movement to make money out of cleaning up the country's Soviet-era factories. Instead, the company pulled out of the country four years later, frustrated by bureaucratic infighting between Russian government ministries over whether the country should sell any of its carbon credits in return for reducing emissions.

"We tried to pull off three or four environmentally-friendly projects in Russia, but there was a policy morass at a national level which held us up," he tells bne.

But now, after years of delay, the country's carbon trading market is finally starting to move.

Earlier this year, Russia gave the green light to 15 projects aimed at cutting emissions in sectors ranging from paper factories to chemicals and power generation. The projects' 30m tonnes of carbon credits could raise as much as $300m on the open market. Carbon credits, in essence, put a monetary value on emissions. Another group of projects is currently awaiting government approval.

Russia's ratification of the Kyoto Protocol in 2004 put the UN treaty into force, binding member states to reduce their emissions of greenhouse gases. The programme allows developed countries to invest in reducing emissions in other developed countries, as a cheaper alternative to fulfilling Kyoto targets at home.

Due to the collapse of the Soviet Union, Russia's carbon emissions were already at 1990 levels and many local officials felt that the carbon credits granted to the country should be used to allow future growth rather than sold to investors in return for emissions cuts. Furthermore, the cowboy capitalism that Russia experienced in the 1990s left officials wary of selling state assets to benefit the private sector, bankers and Russian officials say.

Before the global economic crisis in 2008, many Russian officials couldn't see the value in raising money through emissions cuts because the country was awash with cash, says James. That attitude has changed as money has got tighter.

Bankers say the first tender earlier this year was a test run and if it goes well, Russia will issue more. But early hopes for the country to issue 300m tonnes of carbon credits and generate a market worth as much as $3bn have faded. "The clear advantage of the carbon market and joint implementation in particular is that it would provide additional financing for energy efficiency," says a banker working in the sector who asked not to be indentified.

"Kyoto ends in 2012 so there is limited time for additional projects, but there is still the chance to use the additional investment for key priority areas in Russia. " he adds.