Leveraging private resources through targeted public support: Designing Green Public Investment Programme in Kazakhstan

1. LEVERAGING PRIVATE RESOURCES THROUGH
TARGETED PUBLIC SUPPORT: DESIGNING GREEN
PUBLIC INVESTMENT PROGRAMME IN
KAZAKHSTAN
Bakhyt Bayanova
Center for Trade Policy Development, Kazakhstan
Rafal Stanek
Kommunalkredit Public Consulting
29 – 30 June 2017, Brussels

2. • Starting point:
 High air pollution in Kazakh cities; transport not a major polluter but
makes significant contribution
 Very old bus fleet in the cities (most buses more than 15 years old and
often more than 25 years)
 Public transport provided by small private operators (except in the cities
of Astana and Almaty)
 Relatively low tariff, problems to increase tariffs – private operators
alone not willing to make investments in clean transport and fuel
• Programme objective and focus: Reduce air pollution from urban
public transport sector by replacing old bus fleet in urban centres with
modern buses powered by clean fuels such as:
 Compressed Natural Gas (CNG), where available
 Liquefied Petroleum Gas (LPG) in other cities
 Alternatively, diesel but considering the import of EURO6 fuel
Programme objectives and focus of the clean
urban transport programme in Kazakhstan

3. • The Programme is envisaged to be implemented in two
phases:
 Phase 1 (Pilot phase) – covers the cities of Kostanay and Shymeknt
 Phase 2: the Programme is extended to cover all major urban centres in
Kazakhstan
• Two scenarios for Phase 2 of the Programme were
costed:
 Scenario 1 – covers buses older than 15 years
 Scenario 2 – includes also buses older than 10 years
• Programme timeframe
Scope of the investment programme
1 2 3 4 5 6 7
Programme
preparation
Implementation
in 2 cities
Implementation of the second phase
Evaluation of
the pilot
phase
Continuous monitoring and evaluation of the Programme
Setting and operation of the Implementation Unit
Programme marketing

4. • reduce GHG emissions in Kazakhstan from public
transport by 47,829 (68,367 in Scenario 2) CO2
t/year
• reduce pollutants of particulate matter from public
transport by 33,827 (50,169 in Scenario 2) kg/year
• replace 1,827 (2,783 in Scenario 2) outdated buses
fuelled by diesel with the same number of buses
fuelled by CNG or LPG
• increase domestic production of LPG and CNG
buses by 300 annually
Specific programme targets

5. • Main financing sources:
–own financial sources of private operators
–public co-financing of investments to be
provided from a mix of public sources,
including state budget and international
support
• Public support can be provided as:
–Grant co-funding
–Equity co-financing
Sources of programme financing and
financial instruments

6. Excel-based model developed to support programme
design:
• Calculates optimal level of subsidy for bus replacement to
incentivise investment by a typical private operator of public
transport in Kazakhstan
– Uses assumptions on average passenger-km, investment and operating costs
of new, clean buses and old buses
– Takes into account the existing bus fleet in Kazakhstan
• Calculates costs and emission reductions (CO2, CO, NOx, PM,
SO2) per dollar spent
• Users may define target parameters to optimise the programme,
including programme budget and emission reduction targets (only
one emission reduction parameter at a time can be set as a target:
CO2, CO, NOx, PM, SO2)
Modelling the costs and the environmental
effects of the two scenarios

7. Optimal level of subsidy

8. Two scenarios of programme implementation
proposed and costed
– Scenario 1 – the replacement of 1,827 buses more
than 15 years old will cost USD 178 mln, of which
USD 88 mln is public co-financing
– Scenario 2 - replacement of all buses older than 10
years. This would involve the replacement of
2,783 buses with modern vehicles powered with
clean fuels and will cost USD 274 mln, of which
USD 135 mln is public co-financing
Programme costs

9. Programme costs
City
Investme
nt costs
(including
loans)
Public co-financing
Total
Year
1 2 3 4 5 6 7
million USD
Scenario 1
Preparation costs (including
fundraising)
0,03 0,03 0,03
Pilot phase 29 14 14
Implementing Unit (operating
costs)
0,22 0,22 0,04 0,04 0,04 0,04 0,04
Programme promotion 0,09 0,09 0,03 0,03 0,01 0,01
Second phase 149 74 15 15 15 15 15
Total scenario 1 178 88 0 14 15 15 15 15 15
Scenario 2
Preparation costs (including
fundraising)
0,03 0,03 0,03
Pilot phase 29 14 14
Implementing Unit (operating
costs)
0,22 0,22 0,04 0,04 0,04 0,04 0,04
Programme promotion 0,09 0,09 0,03 0,03 0,03 0,03 0,00
Second phase 244 121 24 24 24 24 24
Total scenario 2 274 135 0 14 24 24 24 24 24

10. New buses Emission reduction per year
Diesel CNG LPG
CO2
(t)
CO (kg) NOx (kg)
PM 2.5
(kg)
SO2
(kg)
Pilot phase 0 100 200 7 840 35 250 190 164 5 507 4 363
Scenario 1 0 369 1 441 47 301 189 851 1 122 519 33 512 25 582
Scenario 2 0 928 1 830 67 648 314 901 1 705 288 49 717 39 300
Results of modelling

11.  Data collection
• Most important data are not centralised
Data on urban buses age and fuel type on local level only
• No clear accent on monitoring of fuel quality and air
pollution from mobile sources (transport)
No data available on ecological class of transport and ecological
class of fuel
Main challenges to project
implementation
 Need for co-operation between different government
bodies
in transport, ecology, internal affairs, finance, economy &
Akimats (locals)
because Clean transport - Cross-cutting topic: Air pollution+Transport

12. Good co-operation with project stakeholders:
• Pilot local authorities - Kostanay (and Shymkent)
Akimats. High interest.
• Local bus producers
Product line – buses incl, running on gas, electric cars
• KZ national gas operator KazTransGaz. Implementing
entity for the NAMA project “Fostering Use of Natural
Gas in the Transport Sector”
Opportunities for project
implementation

13. KZ has adopted a Concept of transition to green economy in 2013
Examples of “green” state programmes in KZ:
• Development of engineering and communication infrastructure
Aim - Reduction of depreciation of heat, water and wastewater systems, as
well as repair and replacement of heat producing capacities
• Modernization of housing stock (thermomodernization)
Aim – Increasing energy-efficiency of housing and communal infrastructure
by thermomodernization of buildings through capital repairs, installation of
automated systems for regulating heat consumption and common heat
meters
• No state programne on Clean transport
There are some projects on purchase of buses running on gas in some big
cities (Almaty, Shymkent) at the expense of private operators
Other budget programmes
CPT – will be first programme on clean transport on the state level
incorporating competition and public subsidy elements based on a
model calculating expected results in reducing air pollution and CO2

14. Good future (Strategically)
Clean transport is among government priorities
- Concept of Transition to Green Economy;
- Commitment to reduce GHG emissions by 15% by 2030
comparing to the base year 1990 (UNFCC);
- EXPO “Future Energy”.
Necessary Conditions (Tactics):
– motivate private investors;
– improve transport tariff system;
– find other (than budget) public sources.
Future of the Programme