Risks In Trading Quotas For The Emission Of Greenhouse Gases

On March 26, 2009 the Republic of Kazakhstan ratified the Kyoto Protocol of the United Nations Framework Convention on Climate Change ('Protocol'), which came into force on September 17, 2009. Assuming an obligation under the Protocol to reduce emissions by 15 percent by 2020 and by 25 percent by 2050 as compared with emission levels in 1990, Kazakhstan has taken an active part in the market mechanisms for trading quotas for the emission of greenhouse gases.

Market mechanisms are considered to be the main instrument of ecology policy, as part of which States or separate business entities can sell or buy the quotas for the emission of greenhouse gases on national, regional or international markets.

As of August 2013 the trading of quotas for the emission of greenhouse gases was planned to begin in Kazakhstan via the Kazakh trading exchange. Such trading is known internationally as 'Caps and Trade', the Head of Zhasyl Damu JSC Mr. Sergey Tsoi said. Please note that only the quota system and trade of greenhouse gases has been in operation since August 2013 in Kazakhstan (http://www.zakon.kz) According to the Minister of the Environment and Water Resources, Mr. Nurlan Kapparov, it was decided based on international practice not to introduce a system of tax collection (Caps and Tax), as such a conservative system can lead to misunderstandings between the government and industrial sector (http://climatechange.ru)

Under Chapter 9-1 (State Regulation of Greenhouse Gas Emissions) of the Environmental Code of the Republic of Kazakhstan dated 9 January 2007 No.122 (the 'Environmental Code'), users of natural resources are divided into the quota sector and administrative sector. On December 2012 the Government of the Republic of Kazakhstan approved the National Plan for the Allocation of Quotas ('National Plan'), which envisages the free allocation of quotas in the amount of 147 190 092 units among the current facilities of 178 large operators, who are emitting carbon dioxide at levels which exceed 20,000 tons per year. Such operators conduct their business in the following priority sectors: subsoil use, metallurgy, chemical industry, agriculture and transport ('User of Natural Resources'). Moreover, Article 94-2 of the Ecology Code (Quotas for Greenhouse Gas Emission) establishes a direct obligation on the part of Users of Natural Resources to obtain quotas on greenhouse gas emissions ('Quotas'). This is the quote sector.

Under Article 94-2 of the...