The global environmental community is preparing for the 29th Conference of the Parties to the United Nations Framework Convention on Climate Change (UNFCCC), which will take place in Baku this November.

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As a responsible actor in the global fight against climate change, Kazakhstan is also preparing for this important event, during which several agreements, including on climate financing, are expected to be signed. The country intends to actively engage in all conference activities. In his speech, President Kassym-Jomart Tokayev identified climate change as one of the main global challenges and called on businesses to adopt cutting-edge technologies in this area and establish a modern emissions monitoring system.

Bakhyt Yessekina.

Since ratifying the Paris Agreement in 2016, Kazakhstan has adapted advanced international practices in the fight against climate change. In 2023, a presidential decree approved a strategy to achieve carbon neutrality by 2060, setting priorities for the transition to a low-carbon development model. In addition, a government resolution approved the Nationally Determined Contribution (NDC), which targets an unconditional reduction of greenhouse gas emissions by 15%, and 25% with international support, by 2030 compared to 1990 levels. These documents establish the legal framework for Kazakhstan’s current climate policy.

Kazakhstan’s main legislative document for achieving climate goals and implementing environmental policies is the Environmental Code, which was revised in 2021. The new edition introduces innovative mechanisms for making the economy green, such as strategic environmental assessments (SEA) for development programs, the adoption of Best Available Techniques (BAT) and other measures inspired by the practices of the Organization for Economic Co-operation and Development (OECD). However, certain provisions, notably those concerning CO2 emissions, still need to be improved. This includes modernizing the quota system, implementing offset projects and improving the Emissions Trading System (ETS), in place since 2013.

Article 20 of the Environmental Code identifies the economic sectors subject to quotas, including the electricity, oil and gas, mining, metallurgy, chemical and, in part, sectors manufacturers. These regulated sectors are the main beneficiaries of improved climate legislation, particularly regarding free allowances and participation in national carbon trading. On the other hand, European countries emphasize a fundamental principle of carbon trading: incentivizing companies to reduce their emissions and making emissions reduction projects profitable. Unfortunately, Kazakhstan’s emissions trading system, which covers only six major sectors and has a surplus of free allowances, does not provide sufficient incentives for companies to reduce their emissions. At the same time, sectors such as agriculture, transport and construction, which account for more than 60% of emissions, are not included in the national carbon unit plan and do not participate in Kazakhstan’s ETS.

Additionally, Kazakhstan’s approach to calculating quotas is not optimal compared to OECD countries. In Kazakhstan, quotas are based on limits acceptable for the entire country, which are gradually reduced each year. Quotas are then allocated to companies emitting more than 20,000 tonnes of CO2 equivalent per year. This approach draws on historical data, as OECD countries set quotas based on best available techniques (BAT), incentivizing companies to improve their production processes instead of simply penalizing excessive emissions. Although Kazakh legislation includes BAT principles, they have not yet been fully implemented. If the new measures of the Environmental Code are put into practice, they could significantly improve the quota system and the ETS.

Kazakhstan’s approach to liability for environmental violations also differs from OECD standards. The Environmental Code provides for sanctions based on exceeding emission limits, regardless of the actual harm caused, while OECD countries calculate fines based on environmental damage inflicted, requiring more substantial evidence of the harm. Thus, a more rigorous evidence base for corporate harm is needed, and the predetermined standard ceases to be the only benchmark for companies likely to pollute the environment.

A similar principle applies to emissions trading, where ETS revenues are generally directed to the state budget. The OECD, however, recommends reinvesting these funds directly in reducing and preventing emissions, thus ensuring that the initial objective of the system is maintained.

Other aspects of Kazakhstan’s ETS could also benefit from legislative improvements, such as expanding the coverage of regulated sectors. Currently, less than half of emissions are included in the ETS, which is significantly lower than the scope of the European system. The ETS also requires stricter regulation and greater transparency to facilitate oversight and attract investors.

Another way to expand the Emissions Trading System and realize its full potential is to include methane emissions, which have been increasing steadily since 1999. This would establish a market-based approach to regulating methane emissions and would encourage major emitters to reduce them.

This area is particularly relevant following Kazakhstan’s recent membership of the Global Mthane Pledge, which aims to set specific targets for reducing methane emissions. International experience in regulating the methane market outside of EU initiatives is limited, which provides Kazakhstan with the opportunity to become a leader in implementing this approach.

Offset projects offer a promising route to reducing overall emissions by offsetting them with additional greenhouse gas absorption. Kazakhstan, like OECD countries, uses this concept to attract investment in environmental projects, allowing the sale of offset units on the market via the ETS while reducing overall emissions. However, compensation faces common challenges, such as verifying the quality of compensation units. Standards need to be strengthened to ensure compliance with the principle of additionality, meaning that offsets should result from intentional absorptive actions rather than existing activities. There are also issues such as double counting, inaccuracies in calculating absorption due to complex methodologies, and the inability to use certain absorption sources, such as pastures, for offset projects.

However, meeting these challenges requires the development and implementation of new standards, including qualification requirements for validation and verification experts. A project has already been developed by experts from the Green Academy, with the support of the EBRD, and is awaiting approval from the relevant government authorities.

The author is Dr. Bakhyt Yessekina, Member of the Green Economy Council under the President of the Republic of Kazakhstan and Director of the Green Academy Scientific and Educational Center.