Carbon pricing in Turkmenistan

A recent report by the Eurasian Development Bank looks into carbon pricing opportunities in Central Asia and Azerbaijan. The report looks into whether Central Asian countries and Azerbaijan should start putting a price tag on carbon pollution, a policy known as carbon pricing. In simple terms, carbon pricing means making companies or consumers pay for the greenhouse gases they release. This encourages them to switch to cleaner methods and reduces emissions. The funds collected can then be invested in green projects.

Although Central Asia and Azerbaijan account for a relatively small share of global greenhouse gas (GHG) emissions (about 1.4%), they face a strategic dilemma: they rely heavily on fossil fuels, but delaying climate action could hurt their long-term economic competitiveness due to rising global pressure on carbon regulations (like the EU’s carbon taxation on imported goods).

Implementation is currently uneven across the region:

• Kazakhstan is the most advanced, as the only country that already has a carbon pricing tool in place since 2013. However, the current carbon price is very low, making it ineffective as a strong incentive for reduction.
• Azerbaijan and Uzbekistan have many of the necessary prerequisites to implement carbon pricing soon. They are actively considering using a carbon tax to diversify their economies and remain competitive globally.
• Kyrgyzstan and Tajikistan have low emissions. For them, carbon pricing is currently deemed not mandatory to achieve their climate targets, and focusing on other green growth opportunities might be more beneficial right now.
• Turkmenistan faces the biggest hurdles. It has extremely high fossil fuel subsidies, which act as “negative carbon prices” and counteract any attempts at carbon regulation. The country first needs to establish basic infrastructure, such as accurate monitoring systems, before implementing carbon pricing.

Turkmenistan

The report highlights that Turkmenistan is a major emitter relative to the size of its economy, faces severe climate policy challenges due primarily to subsidies, and has little readiness for immediate carbon pricing implementation.

Emissions Profile and Economic Context

• Global Share and Emissions Intensity: Turkmenistan’s share of GHG emissions is approximately 0.19%. Crucially, Turkmenistan is identified as the largest emitter of GHGs relative to GDP in Central Asia, with a carbon intensity of 0.60 kg CO₂ per USD in 2021, the highest among the countries examined.
• Total and Per Capita Emissions: In 2022, Turkmenistan emitted 69.8 million tonnes of CO₂. Its per capita CO₂ emissions were 11.0 metric tonnes in 2022, the second highest in the region. Between 2000 and 2023, the country’s per capita emissions increased by 2.42 tonnes.
• Sectoral Contribution: The energy sector is overwhelmingly dominant, responsible for the majority (72.5%) of CO₂ emissions in 2020. The power sector alone emitted 141.1 Mt in 2020, making it the second-largest power sector emitter in the region. Other sectors contributing in 2020 include Transport (7.1%), Agriculture (7.2%), and Industry (6.3%).
• Methane Concentration: Turkmenistan has the largest volume of methane emissions from oil and gas operations in the region. Methane (CH4) accounts for a significant portion of the total GHG emissions, making up 41.28%.
• Energy Mix: The electricity generation relies entirely on fossil fuels: 100% of electricity generation comes from natural gas. The country’s total energy supply mix is 86.5% natural gas and 13.4% oil.

Climate Policy and Commitments

• Vulnerability and Focus: Turkmenistan is recognized as vulnerable to climate change. Its climate policy objectives emphasize promoting economic growth, modernization, and diversification, along with improving energy efficiency.
• NDC Targets: The updated Nationally Determined Contribution (NDC) submitted in 2023 sets an unconditional target to reduce GHG emissions by 20% by 2030 under a business-as-usual (BAU) scenario relative to 2010 levels. Turkmenistan has no net-zero target.
• Methane Pledge: Turkmenistan is a signatory of the Global Methane Pledge, committing to a 30% reduction in methane emissions from 2020 levels by 2030.

Barriers to Carbon Pricing

The primary obstacle to effective climate policy, including carbon pricing, is the enormous scale of fossil fuel subsidies.

• Highest Subsidies Globally: Turkmenistan has the highest fossil-fuel pre-tax subsidy in the world at US$2,385.5 per capita per year (2022 data).
• Subsidy Scale: In 2021, these subsidies represented 18.3% of GDP ($6.8 billion).

Turkmenistan’s readiness for formal carbon pricing mechanisms is considered low and premature.

• Lack of Regulation/Infrastructure: The country does not currently have any regulations on a carbon pricing instrument in effect. There is no obligatory accounting for GHG emissions by companies. Prior to implementing any carbon pricing, the government must first introduce a National Inventory System for GHGs and adopt Monitoring, Reporting, and Verification (MRV) guidelines.
• Market Exposure: Turkmenistan is not heavily exposed to transition risks from international carbon policies. For example, Turkmenistan does not have significant exports to the EU.
• Policy Outlook: Decision-makers currently prioritize economic growth and modernization.
• Governance: Turkmenistan scored low on governance indicators in 2022, with Government Effectiveness at the 12.26 percentile and Regulatory Quality at the 1.89 percentile.

Overall, the report suggests that carbon pricing cannot be a “one-size-fits-all” solution and must be tailored to each country’s unique economic structure, energy mix, and policy readiness. For many countries in the region, success depends on gradually eliminating fossil fuel subsidies while establishing credible monitoring and reporting systems.