The Global Climate Agenda is one of Kazakhstan’s top priorities. Kazakhstan is one of the largest sources of greenhouse gas (GHG) emissions in the world, ranking among the top 30 global GHG emitters.
In 2016, Kazakhstan signed and ratified the Paris Agreement and proposed a Nationally Determined Contribution (NDC) target of a 15% reduction of GHG emissions by 2030. At the 2020 Climate Ambition Summit, Kazakhstan expressed its commitment to become carbon-neutral by 2060. A long-term Carbon Neutral Development Doctrine was published in 2021, including an updated NDC and additional measures needed to achieve carbon neutrality by 2060.
Kazakhstan is revising its environmental legislation to facilitate the transition to a green economy. Its new Environmental Code, adopted in 2021, contributes to this. Chapter 20 of the new Environmental Code lays out the structure of an emissions trading scheme (ETS) called the KAZ ETS, which regulates about half of Kazakhstan’s domestic GHG emissions. The KAZ ETS establishes a cap of carbon credits to be distributed to equipment with annual emissions exceeding 20,000 tonnes of carbon dioxide equivalent (CO2e), termed installations. Mining and metals companies make up some 23% of these installations.
From 2018 to 2020, 485.9 million tonnes CO2e of free carbon credits were allocated. The National Plan for 2021 significantly reduced the free quotas to 159.9 million tonnes CO2e. Any installations that emit more than their free allocations must buy the difference.
The price for Kazakh credits in November 2021 was US$1.12/t CO2e. It is expected to increase to US$16.9/t CO2e in 2023−2025 and up to US$50.8/t CO2e in 2026−2030. In addition, Kazakhstan plans to reduce free quotas by an average of 5.4% per year until 2025.
The KAZ ETS shares many similarities with the EU’s ETS and there are plans to align it even more, especially in light of mechanisms that may add cost to EU imports in high carbon sectors such as the EU’s Green Deal and its Carbon Border Adjustment Mechanism. Additionally, a carbon tax is being considered to cover the industries and emissions not included in the KAZ ETS.
The KAZ ETS and carbon tax will both have material implications on Kazakhstan's mining and metallurgical sector. This example shows the importance of considering these schemes at the start of mine planning and consider their impact on meeting the ‘reasonable prospects for eventual economic extraction' (RPEEE) criterion.
