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Climate change is coming to Kazakhstan, as it is to many countries in Central Asia. A recent report The World Bank has revealed that the country’s average temperature could rise by a whopping 5.3 degrees Celsius by the end of the century. If that happens, it could disrupt Kazakhstan’s delicate climate systems, triggering a wave of potentially catastrophic droughts, floods and landslides.
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A a new study from the World Bank Group shows how Kazakhstan could prepare for that new climate normal.
The recently released Kazakhstan Climate and Development Report says major changes must be made in key economic sectors to enable the country to address the climate crisis. Specifically, the country will need to encourage climate-smart agricultural practices, invest in efficient water infrastructure to conserve its supplies, and strengthen other infrastructure to build resilience.
That process will be expensive. The cost of adapting to climate disasters will be more than $700 million per year, or 0.4 percent of the country’s GDP.
But it will be a good investment: annual losses from natural disasters could be five times the total, while failure to decarbonise could lead to sustained economic contraction in the not-too-distant future. The European Union’s carbon cap adjustment mechanism would cost Kazakhstan $250 million in annual revenue from iron and steel exports, and up to $1.5 billion if it included crude oil, without decarbonization.
Wiebke Schloemer.
The reality is that Kazakhstan’s government will be hard-pressed to foot the bill for climate change adaptation itself. The help of the private sector will be needed.
Since the early 2000s, the country made ambitious, market-oriented reforms, driving a wave of investment in extractive industries and spurring economic growth. However, in many sectors affected by climate change, barriers to private investment remain.
Their removal will be key to helping Kazakhstan adapt to a new normal climate. Reforms to improve competition, increase access to finance (by removing credit subsidies that distort the financial sector), promote investment in innovation and strengthen trade connectivity will help attract investment and raise productivity by enabling more efficient allocation of capital between sectors and locations.
The lack of a credible climate policy also limits the participation of the private sector in the climate transition. Only about 1 in 10 private firms in Kazakhstan are subject to climate policy – and they are less willing to engage in green management practices or invest in environmentally friendly solutions than in other Central Asian countries.[1]
So what exactly can Kazakhstan do?
First, the report recommends further reducing the role of the state in the economy. Acting on climate change requires addressing key market distortions, such as regulated prices, and fostering growth in new sectors, such as renewable and hydrogen energy, critical minerals and climate-smart agriculture.
Second, Kazakhstan needs to implement reforms in its financial sector that will make it easier for companies to borrow money for climate-related projects. With more funding, companies will be able to adopt production processes with lower carbon emissions and implement technological innovations that contribute to the fight against climate change.
It should also continue to support the development of green and social bond markets, which help channel finance to businesses, including smaller businesses, that are embarking on environmentally friendly projects. Reforms to improve disclosure and reporting practices for green projects will also support the market.
Third, it will be essential to develop a comprehensive climate policy, which will outline the transition from a planned to a market economy and accelerate the transformation from dependence on oil to a competitive diversified economy, driven by the private sector.
Introducing energy efficiency standards for new buildings, for example, will be vital to promoting sustainable infrastructure. In transport, expanding the public transport network and improving the existing fleet through higher fuel quality standards and fuel efficiency labeling are key.
A credible and stable climate policy will also help to signal in which areas the private sector will be attractive for investment.
Finally, the report recommends focusing on the development of climate-smart infrastructure projects that are attractive to the private sector. Currently, there is capital and willingness to invest, but there simply aren’t enough projects that can pay off.
The changes could also unlock a wave of investment in projects, such as solar and wind farms, that help Kazakhstan reduce its carbon footprint and reduce its reliance on often expensive imported fossil fuels.
The development benefits of building resilience and decoupling emissions from growth—including improved energy efficiency in businesses and households, improved soil fertility and agricultural yields, and reductions in local air pollution—can also contribute to higher economy-wide productivity while reducing spatial and household inequalities. . .
The annual United Nations climate change conference, COP27, ended last week. With gatherings like these, we hope that in some way, the countries that make the biggest contributions will significantly reduce the greenhouse gas emissions that drive climate change.
But that hasn’t happened yet. This means that Kazakhstan must start preparing – to reduce carbon emissions by switching to greener energy and also build resilience, adapt to climate change and avoid the worst-case scenario.
The author is Vibke Schlomer, director of the International Finance Corporation (IFC) for Turkey and Central Asia. IFC is a member of the World Bank Group.
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