AIFC to intensify trade with carbon units
AIFC Green Finance Center is going to expand trade with carbon units on its platform.
«The development of the Kazakhstani carbon market and creation of a platform for trade with carbon units is going to be a new direction for GFC. This is a very important project because the European Carbon Border Adjustment Mechanism will enter into force in 2026. According to the U.N. Conference on Trade and Development, Kazakhstan is going to lose $352 million each year if the price of carbon per ton reaches $88,» the center said in a statement.
Officials in AIFC believe that the benefits of this exchange like independent jurisdiction and international standards are a good start for rebooting the carbon market in the country.
«One of our goals is to make Kazakhstani exporters keep their competitiveness within the E.U. This is why the establishing and development of a carbon platform that will meet international standards is one of the key directions for the AIFC,» Assel Nurakhmetova, AIFC director of carbon platform, said.
In 2022, President Kassym-Jomart Tokayev said that Kazakhstan must pursue decarbonization and introduction of low-carbon technologies. In February 2023, he approved the official strategy for carbon neutrality by 2060.
The cabinet, including the Agency for Regulation and Development of the Financial Market, is currently preparing new mechanisms for green finances and the GFC is one of the drivers of the decarbonization process in the country. For instance, the center has played an important role in amending the Ecological Code of Kazakhstan. It also prepared a proposal on measures to facilitate entrepreneurs with green finances. Also, the GFC has prepared rules for green bond issuing at the AIX.
In order to reduce social risks that can emerge during the transition to a low-carbon model of development, GFC prepared a social taxonomy project. It was approved by the Ministry of National Economy and is expected to facilitate the tracking of socially critical projects that are worth being invested in.
The current volume of green finances in Kazakhstan is about $500 million. The GFC has given external evaluation for roughly 70% of these green bonds and loans. However, in countries such as Chile, Hungary and Malaysia green finances are six times higher than those in Kazakhstan, thanks to sovereign green and social bonds issued by the governments of these countries.
«There are loads of information collected by statistic agencies, state agencies and international initiatives like the U.N. Initiatives for Action and Climate Finance Mapping by IDFI. This information might be useful to track the amount of climate finance and learn how funds are distributed among different projects and investment mechanisms. In Kazakhstan, this data might be useful for proper choice of funding sources and support measures to climate projects,» said Aigul Kussaliyeva, AIFC director on sustainable development.
According to AIFC, Kazakhstan needs about $600 million of investments in low-carbon technologies. The country can get this money by issuing sovereign green bonds, taking into account climate finance in the banking sector, developing new products and preparing national standards for social finance. Sustainability-Linked Bonds can be another tool for green finance as they give companies an incentive to raise their sustainability and increase decarbonization.
In December 2022, the Eurasian Economic Commission and GFC developed a taxonomy model for green projects within the Eurasian Economic Union. Conrad Albrecht, head of the Directorate of Sustainability at the Eurasian Development Bank, says that the model can be an effective tool to promote cross-border green finance instruments within the EEU.
