Carbon Pricing in the Kyrgyz Republic: A Path to Sustainable Development and Climate Resilience
As climate change impacts intensify globally and countries are turning to innovative strategies to mitigate emissions. For Central Asia, carbon pricing is emerging as a promising mechanism for sustainable development. This approach, which levies a cost to CO2 emissions, can drive the shift to cleaner technologies and more resilient economies. In the Kyrgyz Republic, the carbon pricing could play a transformative role. This blog presents a brief highlight of the current carbon pricing landscape, its potential for economic growth and environmental sustainability, and the opportunities and challenges it presents in the Kyrgyz Republic. This blog post is based on an original research project on carbon pricing in the Kyrgyz Republic implemented by the authors Dr. Rahat Sabyrbekov and Dr. Aijan Sharshenova (Crossroads Central Asia think tank) in May-September 2024.
What is Carbon Pricing, and Why Now?
Carbon pricing is a market-driven approach to reduce greenhouse gas emissions by assigning a cost to each ton of carbon dioxide emitted. It can be implemented through two primary ways: a carbon tax, which is levied on the carbon content of fuels, or an emissions trading scheme (ETS), which caps total emissions and allows companies to buy or sell emission allowances. Both methods have shown their effectiveness by being successfully implemented in various regions across the globe. For the Kyrgyz Republic, carbon pricing holds promise as a method to generate revenue for green projects, drive energy efficiency, and stimulate the transition of industries toward cleaner practices.
The Kyrgyz Republic’s Context: Early Stages in Carbon Pricing
While Central Asian countries have made climate pledges through their Nationally Determined Contributions (NDCs) under the Paris Agreement, they are at varying stages of carbon pricing implementation. The Kyrgyz Republic has recently announced ambitious goals for reducing greenhouse gas emissions, where carbon pricing is expected to play a key role. Some sectors of the economy rely more heavily than the others on fossil fuels (see Figure 1). However, there is currently no legislative framework or infrastructure for enforcing carbon pricing, and sectors such as energy, mining, and manufacturing lack the necessary resources to adapt quickly.
Figure 1.Consumption of types of energy by sectors in percentages in the Kyrgyz Republic. Source: authors’ calculations using Energy Balance Report 2022
Despite these challenges, some existing regional examples highlight the potential prospects for the country. For instance, Kazakhstan established an ETS in 2013, and Uzbekistan has recently taken steps to develop carbon credits for international markets. These initiatives provide useful lessons for the Kyrgyz Republic. Yet comprehensive country specific economic feasibility analysis and the necessary groundwork activities are required to successfully implement carbon pricing.
Modeling the Economic Impacts of Carbon Pricing
In therecent study on the feasibility of carbon pricing in the Kyrgyz Republic (R. Sabyrbekov and A. Sharshenova, 2024) , the researchers found that implementing a $50 per ton carbon price could generate approximately $564 million revenue annually, primarily from the energy, trade, and mining sectors . The revenue could be channeled into decarbonization efforts, infrastructure upgrades, and social support for vulnerable populations.
Figure 2. Top five sectors with the highest carbon cost. Source: authors’ calculations.
However, a direct implementation of carbon pricing would place a significant economic pressure on fossil-intensive sectors such energy supply, trade, manufacturing, and mining (see Figure 2). A carbon tax may be more viable in the short-term period due to its administrative simplicity and potential for immediate revenue generation. The generated tax revenue could be allocated to support green projects, such as renewable energy installations, which would help offset the tax burden on consumers and small businesses.
Challenges and Stakeholder Perspectives
Establishing carbon pricing in the Kyrgyz Republic will require overcoming several structural and societal challenges. The government lacks the regulatory framework and monitoring systems needed for the effective functioning of such mechanism. Furthermore, local stakeholders, including government agencies, private businesses, and civil society, expressed concerns about the impact on energy costs and competitiveness. Government officials, however, have shown interest in exploring carbon pricing mechanisms[1], and local civil society organizations have highlighted the need for public education and awareness.
Survey data[2] suggests that both government agencies and the private sector currently are not well prepared to implement carbon pricing. Increasing the public’s understanding on climate issues and providing financial incentives for businesses to adopt greener technologies are essential first steps towards a successful carbon pricing policy.
Conclusion: The Path Forward for Carbon Pricing in Kyrgyzstan
Carbon pricing could be a game-changer for the Kyrgyz Republic, providing a sustainable revenue stream for green development and helping the country to meet its climate goals. A phased approach that begins with a less sophisticated carbon tax on high-emission sectors, combined with targeted support for affected industries and low-income households, would likely be the most feasible option. A well-structured carbon pricing policy has a potential to align with broader economic goals, driving growth in clean industries, improving public health through reduced pollution, and fostering a resilient low-carbon economy.
As the Kyrgyz Republic explores this path, regional cooperation and knowledge-sharing through platforms like the CAREC Think Tank Network (CTTN) can provide vital support. Through collaboration and shared expertise, the CAREC region can accelerate its journey towards a sustainable and climate-resilient future.
[1] Regional Dialogue on Carbon Pricing (REdiCAP) in Central Asia
[2] Survey conducted as part of the research on “Carbon Pricing in the Kyrgyz Republic: A Path to Sustainable Development and Climate Resilience” by R. Sabyrbekov and A. Sharshenova in 2024