On June 8and 9, Kazakhstan’s capital assembled an impressive array of current and former government and industry leaders; policymakers; CEOs of multinational organizations; representatives from International Financial Institutions (IFIs) and other experts for the first edition of the Astana International Forum, a two-day brainstorming session which dealt with the world’s most pressing challenges and finding ways to rebuild a common culture of multilateralism.
The topic of climate change and green transition featured prominently during the Forum’s various sessions and side events: discussions ranged from financing the green transition to the development of carbon markets; from the role of green hydrogen and nuclear in the energy transition to addressing the so-called energy trilemma – ensuring energy security, accessibility and affordability – on the road to net zero.
The scale of the challenge, especially for the Central Asian region, is well known. President Kassym-Jomart Tokayev, during his speech at the Forum’s plenary session, referred to climate change as the world’s most existential threat. And Central Asia is one of its frontlines. Even in the optimistic scenario of limiting the temperature rise to 1.5 degrees (and this is a big if), Central Asia is likely to experience temperature rises between 2-2.5 degrees. This will lead to the desertification of large swathes of the region, potentially making them uninhabitable. The frequency and intensity of extreme weather events is on the rise, causing damages equivalent to 1.3 percent of GDP per annum. And it is expected that Central Asia’s two main rivers – the Syr Darya and the Amu Darya – will lose 15 percent of their volume by 2050.
Decarbonisation and green transition efforts in Central Asia are still very much in their infancy, with coal remaining a primary source of energy. Kazakhstan, for example, generates approximately 70 percent of its electricity from coal but aims for renewables to supply half its power by 2050. This shift is intended to help meet the government’s ambitious goals of reducing the country’s greenhouse gas emissions to 15 percent below their 1990 levels by 2030 and reaching carbon neutrality by 2060.
For the better part of its three decades of independence, Kazakhstan’s energy market was characterized by a monopolistic structure and prevalence of fossil fuel subsidies. Such price distortions, not reflecting the real costs of environmental externalities, have made it difficult to diversify the types of energy used for the domestic market and promote energy efficiency, and have hindered the introduction of new technologies.
Yet, in recent years, Kazakhstan has been a frontrunner in the region in announcing decarbonisation targets and adopting green economy strategies and programmes to reduce greenhouse gas emissions. The Concept on transition to a Green Economy was adopted in 2013 and laid the foundation for a completely new development paradigm, whose urgency is now latent. Kazakhstan is working on updating this concept, with new goals and indicators. It was also in that year that Kazakhstan became the first country in the region to have an Emissions Trading System (ETS) in place. In 2021, a new Environmental Code was adopted promoting more efficient technologies, standards and norms. In 2018 it introduced a system of electronic auctions to attract investment in the renewable energy sector and help lower lower tariffs for new renewable and gas-fired electricity capacity. More recently, Kazakhstan has adopted a Low Emissions Development Strategy to reach net zero by 2060.
Evidently, there is a long road ahead from policy planning and strategy towards implementation and enforcement. It calls for enormous financial and human resources. It requires leveraging the involvement of the private sector and IFIs, increasingly green conscious. For example, as announced by Aida Sitdikova from the European Bank for Reconstruction and Development (EBRD), all their projects as of January 2023 are aligned with the Paris climate agreement and it aims for green financing to account for more than 50 per cent of its annual business volume by 2025. Moreover, the transition will necessitate upskilling and reskilling, with structural changes in the labour market to prevent a skills mismatch. According to the UN Environment Programme (UNEP) statistics, the transition to a green economy will add an estimated 60 million new jobs to the market by 2030.
At the Forum, it was noticeable to see the presence of renewable companies from the Middle East. Indeed, some of the biggest projects in the field of renewables in Central Asia are funded by countries of the Gulf Cooperation Council (GCC), in particular the United Arab Emirates and Saudi Arabia, countries which like Kazakhstan are blessed with abundant natural resources, and over a decade ago saw the value in betting on renewables and investing abroad, thereby shaping the energy transformation in other regions. Middle East giants Masdar (UAE based) and Saudi ACWA Power have both started operations this year in Kazakhstan’s renewable energy market, the former having signed an agreement to develop a wind energy project with a generation capacity of up to 1 GW; and the later having recently announced the development of a 1 GW wind energy and battery storage project with an initial investment of USD 1.5 billion.
Apart from its well-known endowment of solar and wind, Kazakhstan is also betting on green hydrogen. Hydrogen will play a critical role in decarbonizing the most polluting sectors, such as mining, transportation, aviation, etc. Late last year, the Kazakh government signed a USD 50 billion deal with European renewables group Svevind to build one of the world’s five largest green hydrogen production facilities in the Mangystau Region, in the country’s west. It aims to start production by 2030 and produce two million tons annually from 2032, the equivalent of 20 percent of the EU’s 2030 target for green hydrogen imports.
And let’s not forget the Electric Vehicle (EV) revolution. Electric cars require six times the amount of minerals compared to regular cars. Global demand for critical raw materials is set to skyrocket over the next several decades, especially for minerals used in EV batteries. Specifically, demand for lithium is expected to be 12 times greater by 2030 and 21 times higher by 2050. Being richly endowed with critical raw materials, such as tungsten, lithium and rare earth elements, Kazakhstan has an additional important role to play in this aspect of the global green transition.
While the decline of fossil fuels is inevitable, it is equally true that renewables are not a panacea, as many speakers pointed out at the Forum. CEO of TotalEnergies Patrick Pouyanné indicated that in order to meet the rapidly growing energy demand, one needs to work on two parallel tracks: to continue investing in oil and gas, which will continue to be with us for a few decades to come; and to finance green projects. To illustrate: on the sidelines of the Forum, TotalEnergies signed a 25-year Power Purchase Agreement (PPA) for a 1 GW onshore wind farm combined with a 600 megawatt-hour (MWh) battery energy storage system, which is expected to provide electricity to one million people.
To have a realistic option of achieving net zero, nuclear energy must also be considered. Just like in the EU, where despite the reluctance of various Member States, nuclear has been designated in the EU taxonomy as an environmentally sustainable and transitional energy sources to replace dirtier fossil fuels such as oil and coal. Kazakhstan is considering to construct its first commercial nuclear power plant, building on its role as the world’s largest producer of uranium. At present, Kazakhstan is selecting a potential nuclear supplier from four foreign companies: the China National Nuclear Corporation, Russian State Corporation Rosatom, France’s EDF, and Korea Hydro & Nuclear Power Company. A decision is expected later this year.
Looking ahead, Kazakhstan should focus on furthering an enabling policy and business environment that supports the renewable uptake. The expansion in wind and solar needs to be accompanied by policies that support the ageing grid infrastructure. There is a need to invest in smarter grids that can handle the intermittency of supply of renewables, when the sun is not shining and the wind is not blowing. Kazakhstan should consider joining the Global Methane Pledge (methane makes up 15 percent of Kazakhstan’s total emissions). And there have been calls for Kazakhstan to consider increasing the scope of its Emissions Trading Scheme to cover more sectors.
From the various discussion at the Astana International Forum, it is clear that Kazakhstan has a golden opportunity to lead the green transition in Central Asia. The challenges are high, but not insurmountable. Therefore, I would like to conclude with the upbeat words of Kazakhstan’s Minister of Natural Resources Zulfiya Suleimenova, who spoke to us on the sidelines of the UN Water Conference, held in New York earlier this year: “When we are speaking about carbon neutrality contributing to the global green transition, we would like to see ourselves as part of the solution for the future, positively contribution to global climate action”.