Marina Gruzer | 23 July 2024

Summary

• In the last 30 years, Kazakhstan has become one of the key oil exporting nations with its oil production having grown approximately 3.8 times. The country exported 70 million tons of oil in 2023, a 10% increase from 2022. 

• Due to falling oil prices and a subsequent decrease in oil export revenue, Kazakhstan aims to increase oil production and exports in 2024 via the trans-Caspian trade corridor.

• Obstacles to achieving Kazakhstan’s 2060 net zero emission targets largely lie in insufficient domestic energy policies rather than growing oil exports.  

In the last 30 years since the collapse of the Soviet Union, Kazakhstan’s economy has relied significantly on the rapid development of the oil industry. In this time, Kazakhstan has discovered new deposits and attracted strategic partnerships and investments. In 2022, the energy sector contributed approximately 9 trillion tenge (USD 18.9 billion) to Kazakhstan’s National Fund and regional budgets. As an economy dependent on oil exports and fossil fuel production to maintain high energy demands, Kazakhstan is also facing severe environmental challenges. Air pollution in Almaty and Astana regularly exceeds the World Health Organisation (WHO) air quality standard by up to seventeen times in winter months. The World Bank estimates that the energy sector, specifically in terms of residential heating and transport, is the main cause of emissions and that air pollution annually contributes to approximately 10,000 premature deaths and costs $10.5 billion in damage. 

However, due to falling oil prices and a subsequent decrease in oil export revenue, Kazakhstan aims to increase oil production and exports in 2024 via the trans-Caspian trade corridor. Specifically, Kazakhstan hopes to maintain large oil exports to partners such as the European Union, China, Korea and Türkiye while also acting as an oil transit partner for Russia. While Kazakhstan is continuously reliant on oil, which accounts for 50% of exports and 30% of tax revenue, Kazakhstan's ecological challenges are arguably rooted in contradicting domestic policy.

According to the Climate Action Tracker (CAT), Kazakhstan’s emissions will grow until at least 2035 under current policies. This is due to contradictory policies in the energy sector, which accounts for approximately 80% of carbon emissions. While Kazakhstan has implemented policies in moderate support of renewable energy, there are also plans to build new coal power plants across the country. As part of domestic emission reduction efforts, Kazakhstan has focused on replacing some coal-powered energy with natural gas, which is considered a moderately cleaner alternative. This is seen in the completion of the Saryarka gas pipeline in 2019 and the conversion of Astana’s heating system to natural gas. Additionally, Kazakhstan has invested in renewable energy facilities but this only achieved enough renewable energy capacity for 1,897 MW in 2021. Other projects include a planned hybrid power plant at the Uzen oil field which will generate electricity via gas, solar and wind energy sources. Due to insufficient renewable energy infrastructure, fossil fuels still account for 98% of Kazakhstan's energy. 

From a legislative perspective, Kazakhstan has put in place the 2021 Environment Code, which offers an emissions trading system and incentives for the major polluting companies to adopt more renewable technology by 2030. However, Kazakhstan is yet to introduce a clear commitment and plan to phase out coal which currently accounts for 55% of national emissions and 70% of electricity generation. Therefore, Kazakhstan’s modest progress in environmental commitments largely stems from insufficient domestic policies as it is currently not technologically or economically feasible for the country to replace oil with a different key export. In this way, Kazakhstan can maintain economic growth through the oil industry, however, it needs to develop a more clear transition strategy to achieve more sustainable domestic energy production. 

Forecast

• Short-term:  

  • The risk of worsened public health in large cities is likely to continue as CO2 levels remain high with the average pollution levels being over four times greater than the annual WHO guideline in 2023.

• Medium-term: 

  • The share of renewable energy in electricity generation is likely to grow in the next few years, due to an increased level of legislative support for this technology. However, the scale of this change is likely to be limited due to a lack of sufficiently detailed policy plans.

• Long-term:  

  • Oil is highly likely to remain the backbone of Kazakhstan’s economy and is expected to continue being Kazakh’s primary export, as the demand for oil remains high globally.