ASSESSING INITIAL CONDITIONS AND ETS OUTCOMES IN A FOSSIL-FUEL DEPENDENT ECONOMY

Abstract

We analyze the energy market and ETS outcomes in Kazakhstan, a major fossil-fuel exporter. The energy market was characterized by the presence of large state-owned enterprises, prevalence of fossil fuel subsidies, and dominance of coal-fired generation. Despite the ETS, Kazakhstan’s CO2 emissions and CO2 emissions intensity of its power sector continued to grow. Power sector investment and prices declined while CO2 emissions intensity of GDP reversed its downward trend. To increase ETS effectiveness it is necessary to prioritize stakeholder engagement, address deficiencies in carbon allowance allocation and trading, and enhance the carbon cost pass through mechanism. Finally, formulating and implementing a comprehensive low-carbon transition strategy should improve ETS outcomes.