Priorities of transition of Kazakhstan’s economy to low carbon development

A new climate treaty for the countries participating in the process, including for the Republic of Kazakhstan, is a universal strategy in addressing issues in the field of climate change and ensuring the sustainability of the national economy.

The prospect of a new agreement for economically weaker and vulnerable countries is connected to the possibility of obtaining substantial financial support both for adaptation to the negative effects and effects of nature, and for the transition to low-carbon development through the reduction of greenhouse gas emissions and the decarbonisation of national economies.

For the most developed and rich countries, the agreement should allow them to optimise their financial and technological role in global efforts. For less developed countries, but with a large carbon potential, such as China, Brazil, Turkey, the financial component of the agreement is secondary, since international assistance will be relatively small or roughly equal to their assistance to weaker states. These countries depend significantly on the global trend for low-carbon development and, to a large extent, form it, especially China. If we are talking about the countries of the Eastern Europe, Caucasus and Central Asia (EECCA) region, then for the countries of the Caucasus and Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan, the agreement should become a powerful factor of international support, and for Russia, Belarus and Kazakhstan it should help to integrate into global investment processes and stimulate deep modernisation of the structure of the economy.

First, the planning of the development of energy and economy, taking into account the likely changes of 2020-2040. In many cases, this leads to a wait-and-see attitude in approving international and national projects, which, if the current situation continues, would be profitable.

Secondly, the implementation of the “price of carbon” (fees for emissions of greenhouse gases in either a stimulant or a burden) that is carried out or expected in the future, which shifts the competitiveness of various projects and trade flows. This is clearly demonstrated by the results of bilateral meetings of major emitters (China, the United States, the European Union and India).

Thirdly, a total trend on the choice of low-carbon solutions, if planning for 20-30 years of profitability, they are equal or not significantly more expensive than traditional ones. This is clearly confirmed when concluding partnerships and choosing investment options in almost all countries of the world, in public and private companies, in all sectors of the economy.

As already noted, at COP-21, each country presented its national commitments, which are a kind of launch in the policy of transition to low-carbon development and decarbonisation of the economy. At the Paris summit, the government delegation voiced Kazakhstan’s contribution to the retention of the growth rates of global climate change – reducing greenhouse gas emissions by 2030 in the amount of 15 percent of the 1990 level as unconditional and 25 percent as a conditional target.

To achieve these goals in the field of reducing greenhouse gas emissions, the government has to carry out systematic work on deep modernisation of the industrial sector and adaptation of all sectors of the economy, including energy, mining, forestry, housing, utilities, transport, construction and other sectors, to the existing climate change.

Without implementation of pilot projects to develop breakthrough low-carbon technologies in the next decade, it will be virtually impossible to contain the growth of the global average temperature by more than 20 °C. Today, a wide range of technologies exist in the world that successfully use a wide range of technologies to ensure economic growth while reducing emissions and improving the quality of the environment.

According to calculations carried out by international and national experts in substantiating Intended Nationally Determined Contributions (INDCs), Kazakhstan has sufficient potential for introducing new technologies in the field of emission reduction. First, it is about human capital: an able-bodied, educated population (according to the latest UN report, 70percent of the total number). Secondly, the developed scientific and technical potential. Thirdly, alternative energy is actively developing in the country.

The potential of non-traditional renewable energy sources (RES) in Kazakhstan is 2 trillion KWh/year. Technically possible for use in the production of electricity, the potential is significantly higher than electricity consumption in the country and is about 337 billion kWh/year. Meanwhile, wind energy accounts for 322 billion kWh/year, solar energy – 4 billion kWh/year, small hydropower plants – 11 billion kWh/year. The technical potential of wind power alone in Kazakhstan exceeds by many times the consumption of all fuel and energy resources of the country.

The implementation of projects on the development of renewable energy will lead to a decrease in the volume of construction of new generating capacities using coal with a capacity of about 200 MW, and, accordingly, to a decrease in the prospect for CO2 emissions by at least one million tonnes per year. Here it should be noted that the main factor in the transition to a low-carbon economy is a reduction in the consumption/combustion of mineral fuel containing carbon. Based on the analysis of expert forecasts, it is revealed that dependence on mineral fuels (especially long-term contracts) will decrease significantly in the next 10-15 years; oil, gas, coal prices will be low and will not provide recovery of many energy projects, meanwhile the activity of companies supplying renewable energy technologies will increase dramatically.

Thus, the development of generating capacities based on renewable energy sources can be the most effective measure to reduce CO2 emissions in the electricity sector. This is one of the effective mechanisms for the transition to a green low-carbon economy in Kazakhstan.

The priority direction of achieving national INDCs is also the development of carbon trading. The practice of developed countries shows that the economic effect of carbon regulation reaches today hundreds of billions of U.S. dollars, including saving on the administration of the environmental system, energy saving, employment, improvement of quality of the environment and, in general, ensuring the sustainability of the national economy. This is an effective mechanism to stimulate measures to reduce emissions and attract green investment.

Kazakhstan has a significant carbon potential, which must be used in accordance with international standards for carbon financing. In 2013, the national carbon market was created. Today, the Ministry of Energy and the Parliament of the Republic of Kazakhstan are working to improve the regulatory acts governing the national market for trade in greenhouse gas emissions. Meanwhile, there is still a lot of expert work to determine the economic effect of the functioning of the national system of trade in quotas and the transition to the benchmark method in the quota process.

The next direction in achieving national goals to reduce greenhouse gas emissions is to increase energy efficiency and energy saving in all sectors of the national economy. In this direction, it is necessary to improve energy efficiency standards and their implementation and subsidy programmes for enterprises implementing energy-efficient and energy-saving technologies.

The first step is the development of energy efficiency programmes in industrial companies. Activities in this area should include measures to improve the energy efficiency of buildings by electrification of the relevant processes and gasification of the heating system, the transfer of vehicles from internal combustion engines to electric, to encourage the transition from personal to public transport.

Forests of the country have a large potential for reducing the amount of greenhouse gases in the atmosphere. The absorption of CO2 by the forests gives the republic an additional 10 percent for national contributions to reduce emissions. In terms of physical volume, Kazakhstan occupies one of the leading places in the world in terms of forest resources. Meanwhile, relatively low specific volumes allow carrying out measures to increase this volume.

The implementation of national commitments to reduce greenhouse gas emissions requires strengthening and developing cooperation with international organisations and global foundations – the World Bank, the European Union, OSCE, UNDP, Green Climate Fund, among others – to exchange and transfer knowledge, transfer low-carbon technologies and achieve new goals in the joint struggle to mitigate the effects of global climate change.

It is also necessary to develop ties and strengthen cooperation within the framework of regional organisations. In this regard, the potential of cooperation within the framework of the Eurasian Economic Union (EEU) should be used based on the similarity of economic potential and planning systems.

In general, the transition to low-carbon development and decarbonisation of the national economy of Kazakhstan assumes the adoption of cardinal measures in the following areas:

Improving the institutional framework (developing measures and policies for adapting the economic sectors to climate change, improving legislation in the field of greenhouse gas emissions regulation, etc.);
Increasing energy efficiency and introducing new technologies (introduction of low-carbon technologies in all sectors of the national economy, energy efficiency of buildings, transition to energy-saving products, alternative fuels);
Developing renewable energy sources;
Capacity building (enhancing the competencies of national experts and civil society in low-carbon development, developing cooperation with international organisations and global funds).
Today, work is under way to make additions to the approved action plan for limiting/reducing greenhouse gas emissions by 2030, which should essentially become a plan to achieve INDCs.

As noted above, at the end of 2015 Kazakhstan submitted to the UNFCCC Secretariat a commitment to reduce greenhouse gas emissions by 15-25 percent by 2030 from the level of 1990. According to a special study conducted by the Climate Action Tracker (CAT) Consortium, the obligations stated by Kazakhstan can be attributed to a moderate group. (As explained in more detail in the recent book by Green Academy “Strategy of transition of the Republic of Kazakhstan to low carbon development in globalisation”.)

This group includes the obligations of countries such as China, United States, the EU, Brazil, India, Mexico, Norway, Peru, and Switzerland. In accordance with a law on ratification of the Paris Agreement experts and scientists and business structures have started exploring ways of implementing assumed obligations, to overcome possible risks, which, in turn, will require adoption of cardinal measures for the modernisation of all sectors of the national economy.

The fourth meeting of the Council on the transition to a green economy under the President of Kazakhstan, held in July 2016 in Astana with the participation of other government members, scientists, business structures, international organisations and NGOs was devoted to the discussion of these measures and mechanisms for the implementation of the new climate agreement. According to the participants of this meeting, in order to fulfil the declared commitments in the field of greenhouse gas emission reduction, it is necessary to develop an integral strategy for transition to low-carbon development, which provides for comprehensive measures to increase energy efficiency in all sectors of the economy of Kazakhstan, the development of renewable energy sources and the improvement of the national emission trading system (ETS).

Research conducted by Scientific Research and Education Centre Green Academy together with Institute of Economics and Samruk Energy shows that the most effective technological solutions that ensure economic growth and reduce emissions include: transition to low-carbon or carbon-free fuels; decarbonsation of electricity production; electrification of the economy and individual industries (transport, construction); increasing the efficiency of production and consumption of energy; application of technologies for carbon capture and disposal; use of biofuel and other RES. A special role is assigned to the task of preserving and increasing the potential for CO2 absorption in forestry and land use.

Well thought-out ETS, whose action is currently suspended due to the amendments to the environmental code, can also bring significant additional economic and socio-environmental benefits. Among such advantages one can highlight the increase in the efficiency of resource use, clean air, ensuring energy security and creating jobs. Linking of two or more systems, including country, creates a larger carbon market that provides more opportunities (potentially more affordable) to reduce emissions. When ETS are connected, emission permits can be used in both systems.

Currently, there are 19ETS in the world, of which the largest are the U.S., European and South Korean systems. In 2017-2018, the launch of the national ETS of China and the Russian Federation is expected. Already today, countries and regions where emissions trading systems are represented, make up 40 percent of world GDP, which makes emissions trading a key tool in combating climate change.

To summarise, Kazakhstan’s accession to the global climate agreement should be viewed as a new opportunity to modernise and diversify not only the energy sector but also another basic sector of the national economy. Only the transition to low carbon development will allow our country entering the club of competitive countries and ensuring stability and improving the quality of life of present and future generations.

The author is a Member of the Green Council under the President of Kazakhstan and Director of the Green Academy, PhD, Professor of Economics.

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