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7 CCLR 71 (2013)
Emissions Trading in Kazakhastan: Challenges and Issues of Developing an Emissions Trading Scheme

handle is hein.journals/cclr2013 and id is 75 raw text is: CCLR 112013 In the Market I 71 Emissions Trading in Kazakhstan: Challenges and Issues of Developing an Emissions Trading Scheme Karl Upston-Hooper and Jeff Swartz The meme for carbon markets in 2013 is the increased utilisation of domestic emissions trading as a primary policy tool across a broad spectrum of UNFCCC Parties. Previous issues of the CCLR have addressed developments in China, South Korea, Japan and other jurisdictions.' In this issue of In the Market'. we will briefly review how Kazakhstan is implementing its emissions trading scheme and the implications of this scheme for the wider region. This article is based on a Workshop sponsored by the European Bank of Reconstruction and Development held in Astana on 20 June 2013, at which both the authors were present. I. Background In 2012, Kazakhstan began to create a domestic emissions trading system (ETS), which has led to a pilot phase commencing in January of this year. The ETS will help the country achieve its goal of reduc- ing greenhouse gas (GHG) emissions 7 % below 1990 levels by 2020, and it allows Kazakhstan to claim the title of being the first Asian nation to undertake an economy-wide cap on its emissions.2 Prior to the implementation of an emissions trading system, Kazakhstan had put in place a policy to reduce energy consumption per unit of GDP by 15% by 2015 and 25% by 2020. Kazakhstan is now a signatory to the Kyoto Protocol, with an inscrip- tion in Annex B for a GHG reduction of 5 % below baseline levels by 2020. In 2012, 13 regulatory acts were passed in order to implement the ETS. The goal of the ETS is to reduce emissions cost-effectively through trading. * Karl Upston-Hooper is Co-Chair of the Steering Committee of the B-PMR and Jeff Swartz is the IETA Secretariat co-ordinator of the B-PMR. 1 See, for instance, the various contributions in a recent special issue, 6 Carbon & Climate Law Review (4/2012): Emerging Carbon Markets in the Developing World: Trends and Perspectives, in particular Peter Sopher, Emissions Trading around the World: Dynamic Progress in Developed and Developing Countries, 306 et sqq. 2 South Korea will launch an economy-wide ETS on January 1, 2015. 2013 is a pilot year that will establish rules and trading elements, such as the national registry, the MRV framework and methodologies for domestic offset projects. The national registry and trading rules will be administered by Zhasyl Damu, a government agency. Trading will be linked to the Kazakh stock market and be based in Almaty. Emissions allowances (quotas) are already in the process of being allocated to 16 companies that the Ministry of Environmental Protection has selected as the initial participants in the scheme. For the period 2013-2014, all allowances will be issued for free. In the future, allowances will be issued through auctioning, and any legal entity can open an account on the national registry. There will be sepa- rate auctions for each sector, and they will be closed and anonymous. Consequentially price discovery will be opaque at best. There will be at least two auctions per year, and 30 % of the total allowances will be issued in the first auction. 178 companies will eventually face a compliance obligation - most of these firms are located in the petrochemical, mining, power and metallurgical sectors. The initial cap was set at 147 million tonnes COe, but this will be revised, as in June the Ministry announced that it would now adopt a 2013 base year (replacing the previous 2010 base year). Policy makers are relying on the pricing mechanism of the market without any fixed reserve floor price. CCLR 1|2013 In the Market | 71

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