In a significant stride towards sustainable finance, the Astana International Exchange (AIX) has introduced trading of International Renewable Energy Certificates (I-REC). This move was marked by a pioneering transaction involving Valor Carbon, a London-based climate finance firm, acquiring 1,000 I-RECs from Samruk Green Energy, a state-owned entity. The trade signifies a crucial development in Kazakhstan's green initiatives and highlights the potential for increased transparency and liquidity in carbon markets. In an exclusive interview, Valor Carbon delves into their motivations, market perspectives, and long-term strategies for Kazakhstan and Central Asia.

Valor Carbon's CEO, Rocco Huesch, emphasized the importance of transitioning standardized certificates like I-RECs onto exchanges to enhance market visibility and efficiency. He noted that most carbon market deals occur over-the-counter (OTC), lacking transparency. By facilitating trades on an exchange, AIX aims to set a precedent for other environmental commodities in Kazakhstan. Regional Director Nurzhan Aspandiyar echoed this sentiment, expressing hopes to bring liquidity and price discovery mechanisms to the market, particularly after the cessation of trades on the Caspi exchange since 2022.

Huesch acknowledged the complexities involved in reforming Kazakhstan's Emissions Trading System (ETS), launched in 2013. Currently covering 47% of emissions from key sectors, all allowances are distributed free of charge, leading to a low carbon unit cost of approximately $1. Comparatively, European ETS prices have reached $90. While advocating for reforms to align with net-zero goals, Huesch stressed the need to balance these changes with economic growth considerations.

Valor Carbon envisions integrating domestic carbon credits into the ETS as a viable strategy to channel revenues into beneficial projects within Kazakhstan. Such approaches have proven successful in other regions, including the United States and Singapore. Furthermore, Huesch discussed Article 6 of the Paris Agreement, which facilitates international carbon credit transfers. Although its implementation presents challenges, it holds substantial investment potential if operationalized effectively.

Beyond compliance markets, the voluntary carbon market presents lucrative opportunities, potentially reaching values between $5 billion and $30 billion by 2030. Huesch cited CORSIA, a scheme mandating international airlines to offset emissions, as an example where eligible credits under Article 6 face supply constraints due to limited country readiness.

Valor Carbon remains optimistic about Kazakhstan's carbon market prospects, ready to assist in aligning national systems with global standards. They advocate leveraging both voluntary and compliance markets to maximize climate finance inflows. Additionally, the company focuses on nature-based solutions for carbon removal, exemplified by a recent project proposal in Kyrgyzstan aiming to plant over 10 million trees across 25,000 hectares.

This initiative not only underscores the significance of structured carbon trading platforms but also highlights the dual benefits of economic and environmental sustainability. As Kazakhstan navigates its path towards greener horizons, partnerships and innovative strategies will be pivotal in achieving meaningful progress in the global fight against climate change.