Kazakhstan's experience with setting up an Emission Trading Scheme

1. Kazakhstan's
Experience with
Setting up an
Emissions Trading
Scheme
Ministry of Energy
of the Republic of Kazakhstan
29-30 June 2017

2. 4 May 1995
Decree on Ratifying the UNFCCC by the Republic
of Kazakhstan
1990
Adoption of the UN Framework Convention on
Climate Change (UNFCCC)
Involvement in the International Process on Climate Change
2

3. 2009
Ratification of the Kyoto Protocol to the UN Framework
Convention on Climate Change
1999
Signing the Kyoto Protocol to the UN Framework
Convention on Climate Change
Involvement in the International Process on Climate Change
3

4. 4 November 2016
Ratification of the Paris Agreement
2 August 2016
Signing the Paris Agreement
Involvement in the International Process on Climate Change
4

5. Total national greenhouse gas emissions dynamics
by sector in the Republic of Kazakhstan, 1990-2014
5

6. National Contribution of the RoK by 2030
Unconditional target – reduce greenhouse gas emissions by 15%
of the 1990 level
Conditional target – reduce greenhouse gas emissions by 25% of
the 1990 level
6
0
100
200
300
400
1990 2014 2030
389.6
313.8
No
more
than
331.1
mln

7. Allowance allocations for GHG emissions
Trade of carbon units
Market mechanisms to reduce emissions
and absorb GHGs
System of monitoring, reporting, and verification
Administrative control
7
State regulation in the sphere of emissions and
greenhouse gas absorption (Environmental Code
of the Republic of Kazakhstan)

8. National register of
carbon units has been
created
National cadaster of
greenhouse gases
has been created
8
State regulation in the sphere of emissions and
greenhouse gas absorption (Environmental Code
of the Republic of Kazakhstan)

9.  2013 – launch of the national ETS, one-year pilot phase,
implementation of the first National Allocation Plan for
GHG emissions for 2013 (NAP-1)
 2014 – implementation of the second National Allocation
Plan for GHG emissions for 2014-2015, first trades of
allowance units at the “Caspian” Commodity Exchange
 2015 – development of the third National Allocation Plan
for GHG emissions
 2016 – abeyance of the ETS until 1 January 2018
9
National Emissions Trading System
(ETS)

10. ETS Overview
Criteria ETS in Kazakhstan Comments
Sector coverage Oil and gas industry, electric power
industry, mining, metallurgical industry,
chemical industry, manufacturing
related to construction materials
production, such as cement, lime, and
bricks
Effective 2016, agribusiness,
transport, and petrochemical
sectors are excluded.
Covered GHG CO2 only Methane coverage is being
considered.
Number of participants 166 2014–2015 trading period.
Threshold value > 20,000 t CO2/year Companies within the threshold
value are obliged to comply with the
MRV requirements but they have no
emissions reduction obligations.
MRV (monitoring, reporting,
and verification) requirements
Estimate-based approach involving
verification by a third party
MRV is based on the EU
procedures involving submission of
monitoring plans and annual reports
verified by a third party.
Inception and validity of
commitments
Pilot phase: 2013
Second trading period: 2014-2015
2016-2020 NAP has been
suspended. New NAP for 2018-
2020 is expected to be prepared.
10

11. Quantitative limit  155,353,757 t CO2 in 2014
 153,023,450 t CO2 in 2015
1.5% in 2014-2015
Reserve  18,041,046 t CO2 in 2014
 20,509,802 t CO2 in 2015
Reserve purpose determined clearly
since 2016
Allocation process Historical approach in 2014-2015 Benchmarking approach based on
the EU ETS expected effective 2018
Domestic emissions
reduction projects
Domestic CO2 or methane reduction
projects are allowed. No quantitative limits
in place now.
Domestic emissions reduction
projects can only be implemented in
relation to a facility not owned by an
implementing agency.
Non-compliance penalties Operators which fail to provide necessary
number of units are subject to a fine of 5
MSUs (monthly standard units) for each
tonne of exceedance (about USD 40 at
present).
There are also administrative fines,
e.g. for omissions or delay in
emissions reporting.
11
ETS Overview

12. 12
Main Issues of ETS in Kazakhstan
1. Allocation
2. Trading
3. Offsets
4. Other issues

13. 13
Allocation
 In the first two phases,
‘grandfathering’ method of
allocation was used
 Carbon was allocated based on historical approach and amounted
to 100 percent of emissions in reference year (2010) according to
company data.
 2018-2020 phase will use
‘benchmarking’ method
 List of specific ratios has been developed and is being agreed upon.

14. 14
Inflexible Legal Framework
 A set of issues faced by the ETS in Kazakhstan
stems from the weak underlying legal framework.
The ETS in Kazakhstan relies on three different
levels of instruments:
- National laws
- Government resolutions
- Ministerial orders

15. 15
Additional Quotas
 Should an installation’s capacity increase and/or a new
stationary source of GHG emissions be implemented, the
installation operator applies to an authorized environmental
authority for an additional GHG emissions quota.
 Reserve quota allocation scheme is in place
 1) GHG emissions quota allocation for new installations;
2) Allocation of additional quotas;
3) Allocation of GHG emissions quotas for installations of
administered entities becoming those assigned quotas;
 4) Allocation of carbon units to domestic GHG emissions
reduction and/or GHG absorption projects;
5) Auctioning quotas.

16. 16
Domestic GHG Emissions Reduction Projects
 Reduction projects can be implemented in ten
sectors
 Unclear or low carbon unit price makes domestic
projects uneconomical

17. 17
MRV System
 1) Methodology-related issues
 2) No guidance documents
 3) Procedural issues

18. 18
Market Access Issues
 1) Issuance of certificates
 Many companies faced delays and obtained
their certificates at the end of the year which
essentially made it impossible for them to enter
the market for most of the year to fulfill their
obligations
 2) Unlawful quota units
 “Quotas in excess of the allocated amount
obtained as a result of scaling down production
are not subject to trading”

19. 19
Trading Setup in the ETS in Kazakhstan
1) Legal support
 Companies were obliged to trade on an
exchange
2) No market price
3) Expected small amount of exchange
trading as a new phase of ETS is launched

20. Thank you!
Mr. Sabyr Assylbekov
Tel.: +7 702 76 76 459
E-mail: s.asylbekov@energo.gov.kz,
sssabyr@gmail.com