Exchange quotation for one unit of carbon allowance according to the latest market transaction, including VAT | 397₸ |
The Republic of Kazakhstan signed the Paris Agreement on August 2, 2016 and ratified it on November 4 of the same year. All Parties to the Paris Agreement have their own commitments to reduce greenhouse gas emissions. Kazakhstan has set itself an ambitious unconditional goal to reduce greenhouse gas emissions by 15% from 1990 levels by 2030.
One of the main tools for achieving the above-mentioned goal is the Emissions Trading System (ETS).
In the Ecological Code of the Republic of Kazakhstan dated January 2, 2021, Chapter 20 is devoted to the issue of state regulation in the field of greenhouse gas emissions and removals (https://adilet.zan.kz/eng/docs/K2100000400).
The first pilot phase of the ETS began in 2013 (https://adilet.zan.kz/rus/docs/P1200001588); the second phase was in 2014-2015 (https://adilet.zan.kz/rus/docs/P1300001536 It should be noted that it was during this period in 2014 that allowances were first sold on the stock exchange. In 2015, the 3rd National Plan for the allocation of Greenhouse Gas Emissions Allowances was developed, but in 2016 the system had to be suspended for improvements, especially in terms of allowance allocation. After making comprehensive amendments, the third ETS trading period was launched on January 1, 2018 (https://adilet.zan.kz/rus/docs/P1700000873).
Kazakhstan's ETS covers the oil and gas industry, the energy sector, mining, metallurgy, chemical industry, as well as the manufacturing industry related to the production of building materials such as cement, lime, gypsum and bricks. The amount of 20,000 tons of carbon dioxide emissions per year is used as the threshold value according to which installations are included in the National Carbon Allowances Plan (NCAP). To date, the ETS covers (allocates) only carbon dioxide emissions.
Regarding the requirements of monitoring, reporting, and verification (MRV), an estimated (calculated) method is used, involving verification by a third party.
The following improvements were made during the two-year hiatus:
- implementation of electronic reporting on greenhouse gas emissions;
- The competence for the accreditation of validation and verification bodies has been transferred to the National Accreditation Center;
- adoption of specific greenhouse gas emission coefficients (benchmarks). The benchmark for the purpose of allocation in the ETS of the Republic of Kazakhstan is an indicator of CO2 emissions per unit of products produced by a entity ETS-installation. The current benchmarks were calculated by calculating CO2 emissions from production in 2013-2015. (average value). 52 benchmarks for the energy sector, industry and the oil and gas sector have been developed and approved (https://adilet.zan.kz/rus/docs/V1700015396).
Since 2021, allocation of installation have been carried out entirely based on the use of the benchmarking method. Allowances for greenhouse gas emissions in the NCAP for 2021 were calculated by multiplying benchmarks by the average value of production for 2017-2019 (https://adilet.zan.kz/rus/docs/P2100000006).
In the draft NCAP for 2022-2025, allowances for installations were also fully calculated by applying the benchmarking method. The carbon allowances in the NCAP for 2022-2025 were calculated by multiplying benchmarks by the average production value for 2017-2019, taking into account commitments to reduce greenhouse gas emissions.
By April 1 of this year, the entity ETS-installation is required to fill out the electronic form of the greenhouse gas emissions inventory report for the previous year in the state carbon cadastre.
Based on the greenhouse gas emissions inventory reports, a list of entity ETS-installations is being compiled to be included in the National Carbon Allowances Plan.
The number of carbon allowance units for entity ETS-installations to be allocated free of charge is calculated by applying benchmarks.
A National Carbon Allowances Plan is being developed and approved for an appropriate five-year period.
The carbon allowance defined in the National Carbon Allowances Plan for each ETS-installation is credited to the corresponding account of the operator of the ETS-installation in the state register of carbon units.
After the ETS-installation submits an annual report on the inventory of greenhouse gas emissions, allowances are repaid (carbon units are withdrawn from circulation in accordance with verified CO2 emissions).
Carbon allowance units formed by reducing the capacity of the ETS-installation cannot be sold and must be returned to the reserve of the National Carbon Allowance Plan.
A decrease in capacity is understood as a decrease in the annual volume of production, processing and (or) transportation of products.
When the capacity of a ETS-installation is increased, the ETS-installation applies to the authorized body in the field of environmental protection to obtain an additional carbon allowance.
Also, a ETS-installation with a surplus/deficit of allowances can sell/buy carbon allowances through a commodity exchange or by entering into a direct transaction in accordance with the Rules for the sale of carbon units (https://adilet.zan.kz/eng/docs/V2100023719).
All transactions with carbon units are carried out in the state register of carbon units (withdrawal, repayment, purchase, sale, receipt of the main/additional allowance, etc.).
The state carbon cadastre contains the reporting data of enterprises in electronic form (reports on the inventory of greenhouse gas emissions).
"Zhasyl Damu" JSC informs that the agreement on the implementation of the project "Partnership for the implementation of the emissions trading market" (hereinafter – the Project) between the Ministry of Ecology and Natural Resources of the Republic of Kazakhstan (hereinafter - MENR RK) and the International Bank for Reconstruction and Development (hereinafter – Agreement) signed on April 23, 2024.
The objectives of the Project are to increase the efficiency of the Emissions Trading System (hereinafter – ETS) and to support the expansion of carbon payments in order to facilitate the implementation of Kazakhstan's updated goals in terms of a nationally determined contribution by 2030 and achieving carbon neutrality by 2060.
The Market Implementation Partnership helps countries develop, test, and implement pricing tools in accordance with their development priorities.
It is expected that the key results of the Project will be:
1) Improved ETS to stimulate the reduction of greenhouse gas emissions in the country by introducing a minimum carbon price, conducting industry analysis, and promoting the domestic offset market.
2) Improved monitoring, reporting and verification system in the ETS.
3) Improved carbon unit allocation system by launching auctions.
4) Improved structure of internal carbon offsets, including an upgraded information technology infrastructure for transactions with carbon units.
5) Evaluation of options for expanding carbon pricing.
The beneficiaries of the Project will be interested government agencies, ETS-installation, carbon offset participants, key stakeholders/industries related to ETS and carbon taxes, as well as communities affected by the energy transition.
Partnership for Market Implementation Project
During the period from January to May 2024, the following regulatory legal acts of the Republic of Kazakhstan on regulating greenhouse gas emissions were adopted:
1. Order of the Minister of Ecology and Natural Resources of the Republic of Kazakhstan dated January 30, 2024 No. 16-Ө "On Amendments to the Order of the Minister of Ecology, Geology and Natural Resources of the Republic of Kazakhstan dated July 11, 2022 No. 525 "On Approval of the National Carbon Allowances Plan" (https://adilet.zan.kz/rus/docs/G24NP000016);
2. Order of the Minister of Ecology and Natural Resources of the Republic of Kazakhstan dated May 15, 2024 No. 102-Ө "On Amendments to the Order of the Minister of Ecology, Geology and Natural Resources of the Republic of Kazakhstan dated August 26, 2022 No. 588-O "On Approval of the List of Installations with Distributed Carbon Allowances";
3. The Law of the Republic of Kazakhstan dated April 6, 2024 No. 71-VIII ZRK "On Amendments and Additions to Certain Legislative Acts of the Republic of Kazakhstan on Doing Business" (https://adilet.zan.kz/rus/docs/Z2400000071#z1103).