2024 is on track to becoming the hottest year on record, with the global average temperature from January to September at 1.54 °C above pre-industrial levels.[1] Achieving net zero greenhouse gas (GHG) emissions has become more critical than ever. Climate change in Kazakhstan is progressing faster than the global average, with the country’s 2022 average annual air temperature at 1.78 °C above the climate norm for the period 1961 to 1990.

At the 2023 United Nations Climate Change Conference (COP28) in Dubai, countries committed to transitioning away from fossil fuels in energy systems in a “just, orderly and equitable manner”. They also agreed to triple global renewables capacity and double the global average annual rate of energy efficiency improvements by 2030, as well as accelerate efforts to phase down unabated coal power.

Kazakhstan is dependent on coal

Kazakhstan is one of the most coal-dependent countries in the world, with vast coal reserves of 25 to 33 billion tonnes, ranking tenth globally by this indicator. These supplies could last 300 years or more. In 2023, Kazakhstan ranked eighth worldwide in total coal production, mining 116 million tonnes – 72% of which was consumed domestically

Today, coal provides 66% of Kazakhstan’s electricity and 80% of residential heat, and it also remains a key component of several industrial processes. The average age of coal power facilities in the country is 50 years. Coal combustion accounts for about 55% of GHG emissions in the energy sector and more than 40% of total GHG emissions. Despite this, Kazakhstan currently has no plans for a coal phase-down and is developing more than four gigawatts of new coal power plants.

Renewable energy, meanwhile, is starting to play an increasingly important role in Kazakhstan’s electricity production. In the first half of 2024, solar and wind together accounted for 5.5% of generation. However, as the country moves towards its 15% renewables target by 2030, integrating variable renewable energy into an energy system dominated by inflexible, old coal capacities will become increasingly challenging.

Coal production is also a major contributor to air pollution in Kazakhstan, leading to over 10,000 premature deaths annually. This is primarily due to fine particulate matter (PM2.5) pollution, which often significantly exceeds levels recommended by the World Health Organization, especially during winter in cities like Almaty and Astana. The World Bank estimates that the economic cost of air pollution in Kazakhstan exceeds USD 10.5 billion each year in healthcare expenses and productivity losses due to air quality-related health impacts.

Coal is the cheapest fuel but its role in the economy is moderate

Coal’s contribution the national economy is not as significant as one might expect, given its dominance in power and heat production – accounting for just 1.5% of gross domestic product (GDP). The World Bank estimates coal rents at a mere 0.8% of its GDP in 2021, compared to 14.8% for oil and 2.0% for gas in the same year. Interestingly, just before the collapse of the USSR, coal rents were estimated by the World Bank to be much higher – at 2.9% of GDP in 1990 – suggesting coal’s diminishing role in Kazakhstan’s economy.

However, the economic influence of coal is much more pronounced for the local economies of regions that mine and use coal, such as Karaganda and Pavlodar regions (which produce about 90% of the country’s coal), as well for cities in these regions like Ekibastuz.

Similar to coal’s contribution to GDP, its importance for employment is small on the national scale but plays an important role in several regions. Nationally, coal mining provides around 33,000 of direct jobs, while coal-fired power plants might provide another 13,000, jointly accounting for less than 1% of all jobs in the country. Indirect jobs related to the coal industry that are created in coal-dependent regions, as well as jobs not related to coal but created with the use of income generated from coal mining (such as at cafes and restaurants in coal mining regions) are also significant.

Coal provides Kazakhstan with cheap electricity and heating. The low price of coal generation in Kazakhstan is due to several factors. One of these is that 92% of coal generation assets are over 40 years old and therefore have long been paid off. The coal industry also enjoys generous government subsidies. According to United Nations Development Programme estimates, eliminating coal subsidies in Kazakhstan would raise heat tariffs by up to 35% and electricity tariffs by 11%. According to the International Energy Agency, fossil fuel subsidies in Kazakhstan were equivalent to 6% of GDP in 2023.

Kazakhstan’s energy system is characterised by the close interconnection of coal power and heating, since many coal-fired power plants operate as combined heat and power plants. These facilities generate both electricity and thermal energy (heat) from the same fuel source, which is much more efficient than separate production as they use waste heat from electricity generation for district heating systems. However, the high centralisation and interdependence of electricity and heat production in Kazakhstan complicate energy transition efforts, as coal phase-down would require a costly, comprehensive and simultaneous overhaul of power, heat and infrastructure systems. However, a comprehensive overhaul of these systems will be required in any case due to their obsolescence.

 66% of coal in generation is incompatible with carbon neutrality

In 2016, Kazakhstan committed to an unconditional goal of reducing GHG emissions by 15% below 1990 levels by 2030, with a conditional target of 25% contingent on international investment. In 2020, the country further pledged to become carbon neutral by 2060. In February 2023, Kazakhstan formalised this ambition in a strategic document outlining necessary transformations to achieve net-zero carbon emissions.

However, Kazakhstan’s updated nationally determined contribution in 2023 left its 2030 targets unchanged. Kazakhstan’s 2060 carbon neutrality strategy still lacks a clear coal phase-down plan, while new coal power plants are being planned. Renewables are gradually expanding, but simply adding them to the existing system is not enough to meet the country’s climate goals.

The strategy for achieving carbon neutrality by 2060 assumes that up until 2040, the reduction in GHG emissions will be minimal, with most decarbonisation occurring between 2040 and 2060. This suggests that coal phase-down will not begin until the 2040s. Coal power generation is already in deep crisis, facing aging equipment, frequent accidents, personnel shortages and the reluctance of young people to work in the industry. If Kazakhstan does not promptly plan to phase down coal in a just way, the natural decline of the industry due to economic factors may result in significant social, economic and environmental challenges, especially in coal-dependent regions.

Just coal phase-down policies

Kazakhstan is not the only country with coal dependency. It can thus benefit from the experiences of others that have already developed and started to implement coal phase-out strategies, such as Germany, Spain, Poland or Chile. The experience of these countries offers valuable insights into how to design transition strategies that incorporate renewable energy expansion, ensure energy security and address social and economic challenges. Kazakhstan can then adapt these lessons to its own needs.

In Germany, the creation of the Coal Commission was a critical step in building broad consensus for the coal phase-out. This inclusive process helped to develop a balanced transition plan by incorporating diverse perspectives. Similarly, Spain created a Just Transition Institute, an autonomous governmental body attached to the Ministry for Ecological Transition and Demographic Challenge, to develop and implement measures to ensure a just transition in affected territories and to coordinate the cross-cutting inclusion of just transition principles into all the administration’s public policies.

Other common practices in many countries to move away from coal have included financial compensation to utilities for coal-fired power plant closures, subsidised retraining programmes, reemployment assistance or early retirement for former coal workers, financial support for coal regions and measures to diversify regional economies. These measures can be replicated and fine-tuned to suit Kazakhstan’s unique context.

To support a just transition from coal, Kazakhstan can also leverage targeted financial and policy tools. These could include green bonds issued by governments, development banks and companies to finance energy transition projects, diversify energy sources, retrain workers and close coal-fired power plants.

An emissions trading system (ETS) can also provide additional financial incentives for companies to reduce emissions, as it imposes a cost on carbon-intensive activities like coal use, thus encouraging cleaner energy investments. Kazakhstan’s ETS launched in 2013 and currently covers 43% of the country’s emissions. However, it has limited impact due to a high cap and low carbon prices. Strengthening the ETS with a stricter cap and regular quota reductions could increase its effectiveness and boost cleaner energy investments. Revenues from the ETS could also be used to fund retraining and social measures in coal-dependent communities; this potential remains largely untapped in Kazakhstan.

Another tool is policies mandating the adoption of best available techniques (BAT) for coal-fired power plants. Kazakhstan’s 2021 Environmental Code mandates that coal plants with significant environmental impact obtain a comprehensive permit and apply BAT to meet standards. Companies that switch to BAT are exempt from emission fees; for the rest, emission fees gradually increase every three years. This mechanism, if the price for emissions is high, could stimulate the reduction of coal generation but delays in implementation and low emission fees remain key obstacles.

International climate funds like the Climate Investment Funds and the Asian Development Bank (ADB) offer additional support for reducing the use of coal. The ADB’s Energy Transition Mechanism aims to retire coal plants early and replace them with renewables. Kazakhstan could participate in these global efforts to accelerate its transition.

To make its energy transition journey more comprehensive and effective, Kazakhstan may also consider implementing a multifaceted strategy informed by the aforementioned international experiences and opportunities. This plan should include the following components.

It is crucial to bring all key stakeholders together—from government, industry, labour unions, local communities and civil society—for a comprehensive dialogue to ensure a smooth and equitabletransition. To coordinate the coal phase-down and just transition processes, a dedicated independent institution or responsible ministry should be appointed. This body will oversee dialogue with stakeholders, manage transition plans and ensure that all voices are considered. 

The construction of new coal power plants should be prohibited, while some of the existing coal fleet that will stay in the system at least for a time should be retrofitted to increase their flexibility and thus ability to help renewables’ integration into the grid.

A coal exit date aligned with the Paris Agreement shall be defined and supported by a comprehensive closure plan, with named coal facilities. The plan should also be supported by federal laws. There should be no opportunity to sell coal assets to new owners instead of closure. 

Regions that are dependent on coal need alternative sources of income. This problem cannot be solved without a significant economic restructuring of these regions. An effective coal phase-down plan needs to be supplemented by programmes supporting investment in renewable energy and other related technologies, as well as in other green industries such as waste management, local entrepreneurship initiatives and exploring other economic diversification opportunities. A particularly important part of economic diversification should be retraining former coal workers. For some regions, in particular for cities such as Ekibastuz and Karaganda, proactive, early planning for retraining, reemployment assistance and early retirement can help pre-empt and address any social concerns resulting from the diminishing coal industry.

Finally, Kazakhstan should renew and enhance its grid infrastructure regardless, as it is outdated and does not meet current needs. However, this renewal should be focused not simply on fixing the existing coal generation infrastructure, but instead on supporting an increased integration of renewable energy sources into the grid.

This article is based on a study by Agora Energiewende and Qazaq Green: “Enabling a just coal transition in Kazakhstan. Opportunities, challenges and strategic pathways”. The full study can be accessed here: https://www.agora-energiewende.org/publications/enabling-a-just-coal-transition-in-kazakhstan.