Revved Up on Green Finance: The Carbon Market in Kazakhstan
Renewable Energy Certificates and Climate Finance Discussed by Valor Carbon in Kazakhstan Context
Astana International Exchange (AIX) made waves in February as it launched trading for International Renewable Energy Certificates (I-RECs), a milestone moment in Kazakhstan's quest for green finance. London-based climate finance firm, Valor Carbon, was right in the thick of it all with their purchase of 1,000 I-RECs from Samruk Green Energy, a state-owned company.
In a candid chat with The Astana Times, Valor Carbon opened up about their decisive purchase, their outlook on carbon markets, and their long game for Kazakhstan and Central Asia. Based in London, Valor Carbon also boasts offices in Astana and Bishkek.
A Promising Step in Carbon Markets
Carbon markets, essentially carbon pricing mechanisms, enable governments and non-state actors to trade credits for greenhouse gas emissions. These markets often operate in the shadows, with most deals traded over-the-counter (OTC) through private transactions lacking transparency and not allowing market participants to track prices per ton of CO2.
Valor Carbon's CEO, Rocco Huesch, shares that standardized I-RECs make more sense on exchanges for enhanced liquidity. He believes this initial trade sets the stage for more and more transactions to move from the OTC side of the market and onto the exchange for better transparency.
Regional Director, Nurzhan Aspandiyar echoes this, asserting that this move could pave the way for other environmental commodities to be traded in Kazakhstan.
Kazakhstan's ETS: Pitfalls and Possibilities
Kazakhstan's Emissions Trading System (ETS) was launched in 2013, covering 47% of emissions from 135 companies working in the energy, mining, and manufacturing sectors. All allowances, however, are currently distributed free of charge. The price of a carbon unit in Kazakhstan's ETS hovers around $1, significantly lower than other markets.
Valor Carbon acknowledges the momentum building for reforms to this ETS while cautioning about maintaining a balance between Kazakhstan's net-zero goals, its commitments under the Paris Agreement, and economy growth.
The Potential of Carbon Credits in Kazakhstan
One interesting area is the role of carbon credits. Valor Carbon proposes that carbon credits from domestic projects in Kazakhstan that reduce greenhouse gas emissions could be enable entry into the ETS, potentially generating revenue for positive projects in the country.
Paris Agreement and Beyond
Huesch also touched upon the carbon crediting mechanism, based on Article 6 of the Paris Agreement, which allows countries to transfer carbon credits to other countries. He notes that while operationalizing Article 6 at a country level can yield massive investments, the process itself is complex. Implementing Article 6 requires cooperation between multiple countries, as it takes two to tango, according to Huesch.
The Road Ahead for Carbon Markets in Kazakhstan
Despite the complexities, Huesch remains optimistic about the carbon market's potential in Kazakhstan. Valor Carbon expresses a willingness to support Kazakhstan in aligning its carbon market systems with global standards. The firm views carbon markets as a strategic entry point for Kazakhstan and the broader Central Asian region to tap into the global climate finance flows.
Valor Carbon is involved in projects that focus on carbon removal, particularly in nature-based solutions. In April, they showcased a project aimed at securing up to $180 million in climate finance to plant more than 10 million trees across 25,000 hectares in the Issyk-Kul region, with the creation of carbon credits.
Overall, Kazakhstan's carbon market presents a promising future, spurring investment in renewable energy projects and supporting the country's transition towards a greener economy. Nevertheless, challenges lie ahead in aligning the market with international best practices and ensuring its effectiveness in driving emissions reduction.
[1] World Resources Institute. (2020). Kazakhstan's Emissions Trading System (ETS): An Overview and Progress to Date. Accessed from WRI site
[2] Asian Development Bank. (2019). Carbon Markets and Emissions Trading in Central and West Asia. Accessed from ADB site
[3] Ministry of Energy of the Republic of Kazakhstan. (2023). Review of Cap-and-Trade Systems in Kazakhstan. Accessed from Ministry site
[4] Astana International Exchange. (2025). AIX Launches Trading of I-RECs. Accessed from AIX site
- The Astana International Exchange (AIX) made a significant move towards green finance by launching trading for International Renewable Energy Certificates (I-RECs), a first in Kazakhstan.
- Valor Carbon, a London-based climate finance firm, was one of the initial buyers of I-RECs, purchasing 1,000 certificates from Samruk Green Energy, a state-owned company.
- Valor Carbon's CEO, Rocco Huesch, believes that standardized I-RECs make more sense on exchanges due to enhanced liquidity, and he anticipates more transactions moving from over-the-counter (OTC) to the exchange for better transparency.
- In the context of Kazakhstan's Emissions Trading System (ETS), which covers 47% of emissions from 135 companies, Valor Carbon advocates for reforms to maintain a balance between Kazakhstan's net-zero goals, Paris Agreement commitments, and economic growth.
- Valor Carbon proposes that carbon credits from domestic projects in Kazakhstan could generate revenue for positive projects, potentially enabling entry into the ETS.
- Valor Carbon is optimistic about the carbon market's potential in Kazakhstan, and they express a willingness to support the country in aligning its carbon market systems with global standards, acting as a strategic entry point for Kazakhstan and the broader Central Asian region to tap into global climate finance flows, including projects focused on carbon removal and nature-based solutions.
