Smart Green Businesses – The Case of Designing An Emissions Trading System in Kazakhstan

Michael A. TruebloodDirector, USAID/CAR Economic Development Office

Astana Economic Forum21 May 2014

Presentation Outline

• Experience developing pollution permit systems – lessons for Kazakhstan

• How USAID’s is helping to implement the emission trading system in Kazakhstan

Key Elements of a Green Economy

• Reduced carbon use intensity

• Natural resource conservation

• Sustainable agricultural practices

• Improved environmental practices

Basics of Emission Trading Systems (ETS)

• ETS rely on market incentives

• Government sets pollution targets

• Firms are initially allocated so many permits of

pollution (or allowances), not to exceed a limit (“cap”)

• If a firm wishes to exceed the cap, it must purchase

(“trade”) additional permits from more efficient (less

polluting) firms

United States ETS System

• A cap and trade ETS system implemented in 1995

– Targeted sulfur dioxide (SO2), nitrogen oxides that

contribute to acid rain

– Permits traded on the Chicago Board of Trade

– Target : reduce overall emissions by 50% of 1980 levels

• Program was successful

– Pollution targets were met, acid rain was reduced

U.S. Reductions of SO2 Emissions

Source: US Environment Protection Agency, Acid Rain Progress Report 2009.

Clean Air Act of 1990 passed

New ETS system started

European Union’s ETS System

• Up until 2008 the EU had program called the “Climate and Energy Package 20-20-20”

– ETS started in 2005

– Largest program in the world with 11,000 participating firms

– Trading was limited to the country level

• In March 2013, EU made changes to program

– Trading expanded to EU level, should be more effective

– Targets reduction of greenhouse gases (GHG) by 40 percent of

1990 levels by 2030

California’s (State Level) ETS System

• California passed Global Warming Solution Act (2006)

– Reduces GHG emissions to 1990 level by 2020

– It took a few years of debate how to design new program

• CA cap and trade program just started in 2013

– All allowances were sold at five auctions

– Since January 2014, the program has been linked with

Quebec’s ETS for greater flexibility and cost-effectiveness

• By 2015 CA ETS will cover 85 percent of all GHG

Kazakhstan’s ETS System

• Government committed to developing new “KazETS”

system in 2011 as part of green economy vision

• A pilot KazETS program was tested in 2013

combining features of other ETS systems in world

• New full KazETS opened in March 2014

– Government is currently debating penalties for firms that do

not comply with standards

How USAID is Helping Kazakhstan to

Implement the ETS

USAID Goals

• Improve Government capacity to administer and enforce GHG mitigation policies and measures

• Strengthen the business community’s ability to comply with and implement GHG reduction policies

• Expand capability of GHG and energy professionals to conceive and implement GHG abatement and energy efficiency measures

USAID Activities for Government

• Improve the capacity of the Government of Kazakhstan (GOK) to implement and enforce GHG-reducing policies and measures

• Enhance Government capability to implement Law on Energy Savings (LES), other energy saving policies

• Strengthen Government coordination and analytic facility on climate change and energy policy

USAID Activities for Businesses

• Expand corporate capacity to assess, develop and implement GHG and energy reducing measures

• Improve corporate-level GHG and energy data measurement, reporting and verification

• Strengthen capabilities of audit and verifier community

USAID Early Successes With Government

• Made recommendations on

changes to Ecological Code

for KazETS design,

management and operation

• Conducted on-the-job training

for key ETS staff

• Developed priority actions to

increase energy efficiency

KCCMP official launch, 23 January 2014

USAID Early Successes With Businesses

• Trained businesses on making GHG calculations

• Reviewed GHG management systems used by enterprises in Kazakhstan

• Assessed capacity of accredited energy auditors via meetings and feedback from Government and businesses

How USAID Is Helping Kazakhstan in Other Areas

• Promoting resiliency to climate change for agriculture

• Training entrepreneurs for more diverse economy

• Strengthening economic governance, oversight

• Promoting more dynamic trade sector, regional trade

• Support more integrated regional power market

• Strengthening governance and rule of law

Find out more atwww.Facebook.com/USAIDCentralAsia

Thank you!