Current Policy Projections
While Kazakhstan recognises the need to transition to a greener future, currently implemented policies are not yet sufficient to meet its targets and would lead to emissions of 402-414 MtCO2e by 2025 (an increase of 1-4% compared to 1990 levels, excluding LULUCF) and 426-439 MtCO2e by 2030 (an increase of 6-9% compared to 1990 levels). The current policy landscape prioritises energy sector emissions given that energy-related activities accounted for 84% of the country’s annual GHG emissions in 2018 (Republic of Kazakhstan, 2020).
Emissions Trading Scheme
After a temporary suspension, the Emissions Trading Scheme (ETS) restarted operation on 1 January 2018 with new allocation methods and trading procedures for all market participants (International Carbon Action Partnership, 2018). It covers the power sector and centralised heating, extractive industries and manufacturing: oil and gas mining, metallurgy, chemical and processing industry (International Carbon Action Partnership (ICAP), 2019).
The World Bank and the Ministry of Energy of Kazakhstan launched an online platform in February 2018, which allows online transmission and recording of GHG emissions data and trade. An emissions cap has been set for 129 companies for the period 2018–2020, by National Allocation Plan and is set to reduce by 5 percent by 2020 compared to 1990 (World Bank, 2019). Previous phases of the ETS had limited impact, representing either a stabilisation of capped entities’ emissions by 2013 and 2014 (compared to 2010 and 2011 levels) or limited reduction (1.5% by 2015 compared to 2012 levels). Currently covered emissions include close to 50% of total GHG emissions. Kazakhstan should consider increasing the scope of its Emissions Trading Scheme to cover all sectors. It is unknown whether Kazakhstan’s ETS will continue operation after 2020.
Kazakhstan’s economy is heavily reliant on fossil fuels – in 2018 around 16% of Kazakhstan’s GDP came from oil revenues and in 2019, around 67% of merchandised exports were fuels (World Bank, 2020a, 2020b). Kazakhstan belongs to the top 14 countries endowed with large natural gas reserves (Central Intelligence Agency, 2019). Natural gas production increased twofold between 2013 and 2016. In 2019, 90% of electricity was generated from fossil fuels; with coal accounting for 70% of electricity generation, and natural gas for 20% (IEA, 2020).
These sources for electricity generation are complemented by hydro energy, which accounted for roughly 9% of electricity generation in 2019 (IEA, 2020). Other renewables have started to make a contribution in recent years - in 2018, the share of renewable sources in primary energy supply was almost 1.3% - predominantly based on hydro sources with 1.2% of the total energy supply (IEA, 2020). Despite the recent increases in renewable electricity generation, the amount of electricity generated by renewable sources and share of renewables in the electricity mix declined in 2019 for the first time since 2011 – mainly due to a drop in hydro electricity generation.
In addition to efforts to transform its energy mix, Kazakhstan recognises the need for energy efficiency. Kazakhstan included energy efficiency-related targets in its 2013 “Concept for Kazakhstan’s Transition to Green Economy” to decrease the energy intensity of GDP by 25% by 2020, 30% by 2030 and 50% by 2050 below 2008 levels (Republic of Kazakhstan, 2015, 2019a). These targets are cross-sectoral in nature and range from initiatives for district heating to thermal renovation of houses, to various energy standards and energy efficiency categories for buildings and household appliances (Republic of Kazakhstan, 2015). The results of initial analyses show that the 2020 target will not be reached, but this heavily depends on the COVID-19 impacts on emissions and GDP. On the other hand, Kazakhstan is on track to meet its emissions intensity target for 2030 based on pre-COVID-19 projections of GDP and emissions, although the different growth rate assumptions make this uncertain (see the section “COVID-19 impact”).
Kazakhstan’s “Green Economy Concept” also sets the target of providing 30% of electricity generation from alternative and renewable energy sources (including nuclear) by 2030 and 50% by 2050, and reducing current CO2 emissions in electricity production by 40% by 2050, while also increasing the share of gas power plants to reach 30% by 2050 (Republic of Kazakhstan, 2015).
Along with the Action Plan for the Development of Alternative and Renewable Energy for 2013 to 2020, adopted in 2013, to generate 31 renewable energy projects with a combined capacity of 1,040 MW (IEA, 2015), the government announced target indicators for the development of the renewable energy sector in November 2016. These targets include renewable energy contributing 3% to total electricity production by 2020; and total installed capacity of renewable energy of 1,700 MW by 2020 being made up of wind power (933 MW), solar power plant PV (467 MW), hydroelectricity power plants (290 MW) and biogas plants (10 MW) (Republic of Kazakhstan, 2016b). However, based on the minor share of renewable energy in the current primary energy supply, it is unlikely that Kazakhstan will reach these targets by the end of 2020.
In September 2019, the Government of Kazakhstan announced that the country had 900 MW of installed capacity in renewable energy and reaffirmed the 50% target of alternative and renewable energy share in electricity by 2050 (The Astana Times, 2019a). That same month, the Italian oil and gas company Eni was awarded the third renewable energy auction being held in Kazakhstan (following the first two auctions held in 2018) to build a 48 MW wind power plant in the Northern Zone and expected to be finalised by 2022 (Eni, 2019). In November 2020, a contract for the construction of a 100 MW wind farm in southern Kazakhstan was signed (Konstantiov, 2020). Other renewable energy projects are also being introduced and developed, of which the contracts amount up to 3,000 MW of additional renewable energy capacity (PrimeMinister.kz, 2019).
Public finance flows for renewable energy have been increasing significantly in the past years, growing from USD 1.33 million in 2010 to USD 145.93 million in 2018 (IRENA, 2019), and the European Bank for Reconstruction and Development (EBRD) recently approved a EUR 300 million extension of Kazakhstan Renewables Framework to support solar, wind, hydro, biogas, distribution and transmissions projects. The first phase had supported the creation of 262 MW of renewable power-generation capacity across the country (EBRD, 2019).
By growing its clean energy portfolio, Kazakhstan is tapping into its abundant renewable potential, estimated at more than 1,000 TWh per year (IEA, 2015). Yet, as a country richly endowed with fossil fuels, the transition has been slow in the past, and more stringent efforts are needed in order for Kazakhstan to achieve its climate targets.
Plans to expand coal and oil production increase Kazakhstan’s dependence on fossil fuels. The volume of coal production amounted to 52 million tonnes and the volume of oil and condensate increased to 45.2 million tonnes by June 2018, a 5.1% and 6.2% increase relative to the same period in 2017 respectively, reaching a record level compared to the past 10 years (Refineries in Kazakhstan Increasing Production Volumes, 2018) (Kazenergy - Kazakhstan Association of oil; gas and energy sector, 2019). These trends are likely to continue, with ministerial statements indicating a potential increase of oil production to more than 100 million tonnes in 2025 and a target for higher exports as part of the COVID-19 recovery package (PrimeMinister.kz, 2020c; The Times of Central Asia, 2018).
The government also plans to expand the energy sector to include coalbed methane exploration and production in the Karaganda region (kazinform, 2018) and in July 2019 signed a 15 year extension to the production sharing agreement of the Dunga fields, from 2024 to 2039, which will allow the production of an additional nine millions tons of oil (The Astana Times, 2019b).
These steps towards further exploitation of fossil resources fail to acknowledge the short-term steps necessary to keep the window open for a 1.5°C-consistent GHG emissions pathway. For Eastern Europe and the former Soviet Union, coal power generation should be phased out by 2030, and globally by 2040 at the latest (Climate Analytics, 2019). Prioritising the modernisation of existing coal plants, as well as plans to replace coal with natural gas is short-sighted, considering that gas is not a long-term solution for the deep decarbonisation needed (Climate Action Tracker, 2017).
The Kazakh Government estimates that the transition to a green economy will be accompanied by substantial economic and societal benefits. By 2050, the transition is expected to create more than 500,000 jobs, develop new industries and improve quality of life (Ministry of Energy of the Republic of Kazakhstan, 2017; Republic of Kazakhstan, 2015). The costs are estimated at USD 3-4 billion or about 1% of GDP per year (IEA, 2015).
To achieve its long-term targets, Kazakhstan will also need to become an attractive investment option for private investors. To this end, Kazakhstan already reformed its energy tariffs, which have been regarded as one of the key reasons for underinvestment (International Crisis Group, 2011). In January 2019, a capacity market was launched by the government with a feed-in tariff divided into two parts, including an electricity tariff (variable) and capacity tariff (fixed) (Mondaq, 2019).
The Government has also launched the Solar Resources Atlas, a website mapping Kazakhstan’s solar energy potential for the public to view in order to help with investment decisions (AtlasSolar, 2017). A handful of large-scale projects have been announced, suggesting that these policies have had some impact. However, most investments are through development finance institutions.