Rahat Sabyrbekov, PhD, Research Fellow at Crossroads Central Asia and Visiting Fellow at Davis Center for Russian and Eurasian Studies, Harvard University
Aijan Sharshenova, PhD, Executive Director at Crossroads Central Asia and a Leading Researcher at the Populist Encounters research group at Riga Stradins University
Climate change poses a significant challenge for Central Asia, and the Kyrgyz Republic is no exception. As global efforts to curb greenhouse gas (GHG) emissions intensify, carbon pricing has emerged as a key instrument for climate mitigation. By assigning a financial cost to carbon emissions, carbon pricing creates economic incentives for businesses and consumers to adopt cleaner energy sources and improve efficiency.
This report examines the opportunities and challenges of introducing carbon pricing in Kyrgyzstan, assessing two main approaches: carbon taxes and emissions trading schemes (ETS). While both mechanisms have been successfully implemented in different countries, their suitability depends on Kyrgyzstan’s economic structure, administrative capacity, and regulatory framework. Supported by a research grant from the CAREC Institute, the study was conducted by Rahat Sabyrbekov and Aijan Sharshenova from Crossroads Central Asia.
Regional Context: Where Does Kyrgyzstan Stand?
Several Central Asian countries have taken steps toward carbon pricing:
- Kazakhstan introduced an ETS in 2013, modeled after the European Union’s system.
- Uzbekistan has launched carbon credit trading initiatives, supported by international partners.
- Kyrgyzstan, despite its ambitious climate commitments, has no structured carbon pricing policy, and lacks the necessary legal and administrative mechanisms to implement one.
Key Findings from the Study
The report identifies several critical insights regarding the feasibility of carbon pricing in Kyrgyzstan:
- High-Emission Sectors: The energy supply, trade, manufacturing, and mining sectors are the largest contributors to CO₂ emissions. Addressing emissions in these industries will be crucial for any carbon pricing mechanism to succeed.
- Economic Impact: If a carbon price of $50 per ton of CO₂ were implemented, the total carbon cost across all sectors would exceed $560 million annually, creating both financial risks and revenue opportunities.
- Policy and Administrative Readiness: The government, private sector, and civil society are not yet fully prepared for carbon pricing. Key barriers include lack of technical capacity, legal frameworks, and stakeholder engagement.
- Stakeholder Perspectives: While government officials recognize the importance of carbon pricing, they emphasize the need for international technical and financial support to ensure effective implementation.
- Public Awareness and Business Readiness: Many businesses and consumers lack awareness of carbon pricing and may resist new policies unless they are accompanied by clear communication, incentives, and support mechanisms.
Choosing the Right Approach: ETS vs. Carbon Tax
The study evaluates two possible scenarios for Kyrgyzstan:
- Emissions Trading Scheme (ETS)
- Allows businesses to trade emission permits, creating flexibility.
- Requires complex monitoring, reporting, and verification (MRV) systems.
- Less feasible due to Kyrgyzstan’s small industrial base and limited private sector engagement.
- Carbon Tax (Recommended Approach)
- Easier to implement using existing tax structures.
- Could generate up to $288 million annually, which can be reinvested in clean energy and social programs.
- Can be gradually introduced, focusing on high-emission sectors first.
- Requires strong revenue allocation policies to ensure fairness and effectiveness.
Policy Recommendations
- For a successful transition to carbon pricing, the study recommends:
- Developing a clear legal and administrative framework to support implementation.
- Starting with a pilot carbon tax in key sectors (e.g., mining and trade).
- Ensuring carbon tax revenues are reinvested in renewable energy and social protection programs.
- Engaging stakeholders across government, business, and civil society to build trust and awareness.
- Seeking international financial and technical support to bridge gaps in expertise and infrastructure.
Conclusions
Carbon pricing presents a significant opportunity for Kyrgyzstan to combat climate change while supporting economic sustainability. By assigning a financial cost to emissions, it creates incentives for cleaner energy use and efficiency improvements. After analyzing two primary options—ETS and Carbon Tax—this study finds that a carbon tax is the most practical and effective solution for Kyrgyzstan. If properly designed, a carbon tax could reduce emissions, generate sustainable revenue, and drive investment in cleaner technologies. However, success will depend on careful implementation, strong governance, and well-structured revenue allocation to prevent disproportionate economic impacts on businesses and consumers.
Despite its potential benefits, implementing carbon pricing in Kyrgyzstan poses challenges. The lack of existing legal frameworks, administrative capacity, and public awareness could slow adoption. Additionally, industries and consumers may resist carbon pricing if they perceive it as an additional financial burden without clear benefits. Learning from Kazakhstan’s ETS experience and Uzbekistan’s carbon credit initiatives could provide valuable insights for designing a policy that is both effective and politically feasible. International collaboration and donor support will be crucial in providing technical expertise, capacity-building programs, and financial resources to facilitate implementation.
With strong government leadership, stakeholder engagement, and strategic planning, carbon pricing can become a powerful tool for environmental and economic progress in Kyrgyzstan. By integrating it into the country’s broader development and energy transition strategies, the Kyrgyz Republic can reduce emissions, enhance investment in sustainable technologies, and position itself as a regional leader in climate action. Implementing a well-structured carbon pricing mechanism will not only support Kyrgyzstan’s commitments under the Paris Agreement but also contribute to a cleaner, more resilient, and economically sustainable future.
Download the full report here.
This study was funded by a research grant from the CAREC Think Tank Network (CTTN). The original report was published on the CAREC Institute website at:
https://www.carecinstitute.org/publications/exploring-carbon-pricing-in-central-asia-new-insights-from-the-kyrgyz-republic/