As is well known, the initiative of President Kassym-Jomart Tokayev to establish a UN Regional Center for the Sustainable Development Goals of Central Asia and Afghanistan was supported on March 4 at the UN General Assembly. The activities of this center will focus on addressing pressing environmental, social, and economic challenges, primarily in the Central Asian region, which today has vast natural and socio-economic potential for achieving sustainable development.
One of the most critical factors in sustainable development is combating climate change. The importance of this effort for our region’s sustainability cannot be overstated: annual floods, glacier melting, droughts, and forest fires have unfortunately become frequent occurrences, harming the economy and people’s livelihoods.
Bakhyt Yessekina.
Kazakhstan’s National Strategy for Achieving Carbon Neutrality, approved by presidential decree in February 2024, was the first of its kind in the region and has become a high-level document in Kazakhstan’s strategic planning system. However, achieving the key indicators of this strategy in the face of evolving geopolitical conditions requires careful selection of directions for the implementation roadmap, currently being developed by the Ministry of National Economy. This document must consider new trends in the national energy sector development. A major risk to achieving carbon neutrality at the national and regional levels is the investment deficit for decarbonizing the economy. According to GIZ estimates, achieving carbon neutrality in Kazakhstan by 2060 will require $660 billion.
The global experience of countries with high carbon footprints, such as the United States, Norway, Canada, and China, demonstrates that participation in international carbon trading, specifically in greenhouse gas emissions trading, is an effective means of attracting carbon investments.
According to the UN Framework Convention on Climate Change (UNFCCC), Singapore is actively developing a carbon credit market, with projections showing an increase from $14.5 million in 2023 to $55.14 million by 2030, reflecting a 21% annual growth rate. The primary drivers are government regulations on emission reductions and corporate sustainability initiatives. The European Union Emissions Trading System (EU ETS) has been operational since 2005, covering over 11,000 facilities across 31 countries. It is the world’s largest carbon credit market, helping the EU meet its target of reducing greenhouse gas emissions by 40% by 2030 compared to 1990 levels.
India actively participates in the international carbon credit market by selling surplus credits to developed countries, as its greenhouse gas emissions remain below the set limit. This fosters investment in emission reduction projects and sustainable energy development. Japan introduced a pilot emissions trading system in 2023. The Tokyo Stock Exchange launched a carbon unit market, known as J-Credits, allowing trading of CO2 emission quotas. Kazakhstan joined Japan’s Low-Carbon Development Committee in October 2023.
Kazakhstan’s emissions trading system (ETS), established in 2013 based on the European model and relaunched in 2018, covers over 220 industrial facilities across six key economic sectors, such as mining, metallurgy, fuel and energy, chemicals, and construction. These facilities emit over 20,000 tons of CO2 equivalent per year.
The average cost of a carbon unit in Kazakhstan is $1 per ton of CO2, whereas in the EU, it reaches up to 80 euros (US$91) per ton.
Currently, the Ministry of Ecology and Natural Resources is implementing the 5th National Plan for Greenhouse Gas Emission Quotas for 2022–2025. However, the free allocation of quotas, low carbon unit prices, and the limited scope of sectors covered make the system ineffective and necessitate major reforms to align it with international standards.
Substantial potential for international carbon trading
The 2024 emissions inventory by the ministry indicates that Kazakhstan has significant economic and infrastructure potential for participating in international carbon trading.
Key factors include:
High Emission Levels: Kazakhstan ranks among the top 20 CO2 emitters per capita due to coal, oil, and gas use, creating a substantial potential for emissions reduction through energy modernization and decarbonization. In 2024, greenhouse gas emissions reached 349 million tons, or 17.5 tons per capita annually, three times higher than in OECD countries.
Renewable Energy Potential: Kazakhstan has vast solar, wind, and geothermal energy potential. The strategy sets renewable energy targets of 15% by 2030 and 50% by 2050, with plans of the Ministry of Energy aiming for 15% by 2030. Expanding renewables can generate additional carbon credits and enable green energy exports.
Low-Carbon Fuel Use: Hydrogen, biofuels, and synthetic fuels present opportunities. Kazakhstan has methane utilization potential, which could incentivize emission reductions among large emitters. According to the IEA, methane emissions from Kazakhstan’s energy sector total 3.7 million tons, 74% of the country’s total methane emissions.
Carbon Sequestration: Reforestation, sustainable agriculture, and ecosystem restoration projects can generate carbon credits. President Tokayev highlighted this at COP29 in Baku.
Under Articles 6.4-6.8 of the Paris Agreement, a country can attract investments through market mechanisms – carbon credits and technologies. In this area, the Ministry of Ecology and Natural Resources, with the Ministry of Foreign Affairs, is already working with Japanese companies as well as non-market mechanisms, such as the development of standards, regulatory improvements, tax introduction, and others.
The potential for increasing the energy efficiency of enterprises, which, according to calculations by the Chamber of Energy Auditors of Kazakhstan, could enable the fulfillment of nationally determined contributions (NDC).
Barriers to participation in carbon trading
The country’s economy heavily relies on coal and oil exports, creating resistance to transitioning to a low-carbon economy. This remains a challenge despite the adoption of the strategy and the necessity of updating national contributions under the Paris Agreement this year. Currently, no region has developed a regional zero-emissions strategy, while greenhouse gas emissions continue to rise, negatively affecting sustainable regional development.
There is a lack of knowledge, qualifications, and experts. The country lacks specialists and technologies to implement complex carbon projects. Domestic universities almost entirely lack specialized programs and courses in sustainable development, such as sustainable energy, climate economics, green finance, green technologies, and climate diplomacy.
A limited legislative framework is also a barrier. Kazakhstan has committed to reducing greenhouse gas emissions by 15% by 2030 and achieving carbon neutrality by 2060, according to the strategy. In 2021, the Law on the Reduction of Greenhouse Gas Emissions was signed, providing for the creation of quota trading mechanisms. However, the Environmental Code lacks requirements for the participation of the country as a whole and enterprises in market and non-market mechanisms under Article 6, which involves the certification (verification) of carbon projects in accordance with international standards.
There is also a lack of awareness and business incentives. Companies do not always understand how they can participate in carbon markets and what economic benefits this can bring, especially in the absence of incentive mechanisms, despite the adoption of the Green Taxonomy and the availability of green finance in the country.
Many climate initiatives require significant financial investments, yet the existing support from the government and development institutions remains insufficient. Meanwhile, the decarbonization of production should be synchronized with plans for modernizing the production capacity of enterprises, possibly within the framework of the recently approved National Infrastructure Plan of Kazakhstan until 2029.
Although Kazakhstan is considering participation in the CORSIA mechanism (carbon offsetting in aviation), there are still no full-fledged bilateral agreements with major carbon markets such as the EU and China. Additionally, the transport and agriculture sectors are not yet included in the ETS.
Tasks ahead
In connection with the instruction given by Tokayev at the EU-Central Asia Forum in Samarkand regarding the attraction and support of climate investments, we consider it appropriate to assign a number of tasks to the responsible state bodies.
First of all, the development and expansion of the national ETS: increasing transparency in carbon quota trading and integrating new sectors, such as agriculture, transport, and aviation, into the national ETS, while extending Kazakhstan’s experience to other Central Asian countries. In this regard, it is necessary to initiate negotiations on connecting Central Asian countries to Kazakhstan’s ETS.
Secondly, strengthening legislative regulation: introducing relevant amendments regarding carbon certification and participation in Article 6 mechanisms into the current version of Kazakhstan’s Environmental Code, developing national carbon unit certification standards for key industries in accordance with international requirements (ISO, IAF).
Development of green finance and attraction of international investors. Projects in renewable energy, hydrogen energy, and carbon farms may attract major companies and funds. In 2021, Kazakhstan issued its first green bonds to finance environmental projects, but this process needs to be scaled up at the National Bank level with the support of the Oil Fund and the Damu Fund. The European Union is actively developing carbon markets and can provide technology and financing. China, as a major player in the carbon markets, could become a key partner in transitioning the country’s regions to renewable energy. The World Bank and UN agencies are also ready to provide assistance through grant programs, including under Article 6.
Incorporate decarbonization measures for the real sector into the draft roadmap for the strategy to achieve carbon neutrality by 2060, including modernization of production infrastructure.
Include measures for introducing new academic programs in sustainability and climate, as well as public awareness initiatives, in the draft roadmap for the strategy to achieve carbon neutrality by 2060.
Overall, a comprehensive and systematic effort is needed to improve the Monitoring-Reporting-Verification (MRV) system and Kazakhstan’s participation in international carbon trading. This can be achieved by establishing an Emission Certification Agency (ECA) under the government. This agency would facilitate Kazakhstan’s integration into the EU and Asia-Pacific greenhouse gas markets and enhance participation in the Article 6 mechanisms of the Paris Agreement.
These issues were comprehensively discussed and approved during working and expert meetings, including in the Committee on International Affairs, Defense and Security of the Senate of the Parliament of Kazakhstan.
The author is Professor Dr. Bakhyt Yessekina, the member of the Green Council under the President of Kazakhstan. Yessekina is the head of the Green Academy Scientific Research and Education Center.
