Kazakhstan Aims to Enhance Carbon Trading Market in Line with Global Emission Trading System's Advancement
Kazakhstan, a country in Central Asia, has taken a significant step towards combating climate change by launching its Emissions Trading System (ETS) in 2013, making it the first in the Commonwealth of Independent States. This market-based mechanism, also known as a cap-and-trade program, aims to reduce greenhouse gas emissions.
The ETS in Kazakhstan covers more than 200 companies and around 50% of the country's total emissions, primarily from the energy and industrial sectors. However, the current allocation of allowances results in a low carbon price of approximately $1 per unit.
To achieve carbon neutrality by 2060, Kazakhstan is taking a multifaceted approach to improve its ETS. One of the key strategies is integrating Carbon Capture, Utilization, and Storage (CCUS), a technology essential for Kazakhstan’s heavily industrial and fossil-fuel-dependent economy.
Another strategy involves introducing paid allocations and expanding market platforms, which can improve ETS efficiency and revenues. Allowing trading on multiple platforms increases liquidity and market participation. Broadening sector coverage ensures wider emission reductions and stimulates innovation in less regulated areas.
A dedicated carbon fund can pool resources to support decarbonization projects, innovation, and assist vulnerable industries or regions. Learning from global best practices, Kazakhstan is implementing a gradually decreasing emissions cap with strict reduction targets and a credible carbon price floor, similar to the European Union ETS.
China, another major player in the carbon trading market, demonstrates a more mature, comprehensive approach in using its ETS for global positioning and industrial modernization. China's national ETS, launched in 2021, covers around 40% of emissions from the power sector alone. In 2023, China expanded its ETS to include the steel, cement, and aluminum smelter sectors, bringing an additional 1,500 companies under the system.
China's national digital platform for managing its ETS uses big data and artificial intelligence technologies for real-time data collection, processing, anomaly detection, and automatic verification. These systems collectively cover 23% of global greenhouse gas emissions.
The global momentum for emissions trading continues, with emerging economies leading the wave. Kazakhstan's ETS, while advancing towards global climate goals, still lags in speed, scale, and maturity compared with leading systems, including those of its neighbors. To address this, Kazakhstan is enhancing transparency and market oversight, with clear rules, robust monitoring, reporting, and verification systems, and prevention of market manipulation.
Experts suggest that an effective low-carbon project drive requires a carbon price of at least $20 per ton of CO2. As of now, the price of one ton of CO2 in China is above $10, with forecasts suggesting it could reach $30-50 by 2030. Kazakhstan's commitment to carbon neutrality by 2060, a key part of which is a well-developed ETS for quotas and carbon units, is a significant step towards a sustainable future.
The Astana International Financial Centre plays an important role in promoting sustainable finance initiatives and the development of a national registry of carbon units in Kazakhstan. With countries around the world racing to reach carbon neutrality goals, a mature carbon trading market is essential in unlocking this objective. Kazakhstan, with its strategic location and resources, is well-positioned to play a significant role in the global carbon market.
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