Central Asia and Kazakhstan’s carbon credit market: Challenges, forecasts, and opportunities
According to a report published by the Astana International Financial Center (AIFC), the voluntary carbon market (VCM) in Kazakhstan and Central Asia has substantial potential but needs additional development, Kazinfrom News Agency reports.
Although Kazakhstan is anticipated to have a carbon credit volume of 43 million by 2030, other countries in the region are anticipated to meet even higher figures.
As emphasized in the "Emissions Trading Systems and the Voluntary Carbon Market: Global Review and Prospects for Kazakhstan" report, VCM is essential for the attraction of private capital for projects that are designed to reduce greenhouse gas emissions.
"Companies and investors have been purchasing carbon credits to offset their carbon emissions or support mitigation efforts beyond their value chains. Lately, there has been a push for corporate responsibility and pressure from investors and consumers to produce sustainable products/services," the report notes.
According to the forecasts, Kyrgyzstan is expected to lead the region with approximately 143 million carbon credits by 2030, followed by Uzbekistan with 128 million. Turkmenistan and Tajikistan are projected to develop 1.84 million carbon credits by the same period. The development of VCM in these countries is closely linked to the dynamics of renewable energy sources.
Despite the growing global interest in carbon credits, the AIFC states that the VCM market in Kazakhstan and Central Asia is still in the stabilization phase. The key factors necessary for its further development include job creation, improved regulation, and the expansion of expert capacity.
The AIFC identifies several barriers to the development of Kazakhstan’s VCM: “The main reason for the relatively low level of development of the VCM market in Kazakhstan is the absence of an enabling environment for the market to operate, and the factors are broadly: sufficient demand and supply of carbon credits, clear rules and signals and supporting service and infrastructure.”
One critical issue is the lack of accredited local bodies for the validation and verification of VCM projects in Kazakhstan. As a result, international verifiers are invited to carry out these functions. However, in contrast to the slow development of VCM, the market for renewable energy certificates in Kazakhstan is expanding rapidly.
Kazakhstan has already registered several renewable energy projects under international standards such as Verra and Gold Standard. These projects primarily involve solar and wind power plants, although carbon credits have not yet been issued for them.
However, the country has set ambitious climate goals: “Kazakhstan in its NDC, has pledged to unconditionally reduce emissions by 15% from the 1990 baseline by 2030, with a separate conditional target to reduce emissions by 25% in the same timeframe. There is also an existing operational ETS. These two key climate change policies form the basis for driving the demand for ETS offsets and VCM carbon credits. It is important to note that carbon credit projects implemented in the country indirectly contribute towards climate mitigation in the country and towards Kazakhstan’s NDC,” the AIFC states.
The report also highlights the rapid expansion of renewable energy certificates (I-REC) in Kazakhstan. “Kazakhstan’s total installed capacity of renewable energy sources accounts for 2 903,7 MW121 (as of the end of the first half of 2024). Based on this data, 12.45% of Kazakhstan’s renewable energy capacity is registered within I-REC. Hence, there is a potential to expand the coverage to the remaining existing renewable energy capacity,” the report concludes.
According to the AIFC, this positive trend could serve as a foundation for further development of the carbon market. The report suggests that creating favorable conditions could lead to an increase in carbon projects and higher volumes of carbon credit trading.
