Abstract
The Kyrgyz Republic is a small emitter of greenhouse gases. However, it is vulnerable to climate change because of its mountainous landscape with glaciers and a large agricultural sector. The Kyrgyz authorities have ambitious plans to reduce carbon emissions and adapt to climate change, with consideration given to national priorities and the Sustainable Development Goals. Because of the Kyrgyz Republic's small carbon footprint, the authorities' main focus should be on adaptation policies to build resilience to climate change and reduce annual output losses from global warming. However, success of adaptation policies would hinge on the availability of sufficient financing, both from domestic and external sources.
Climate Change Adaptation and Mitigation in the Kyrgyz Republic1
The Kyrgyz Republic is a small emitter of greenhouse gases. However, it is vulnerable to climate change because of its mountainous landscape with glaciers and a large agricultural sector. The Kyrgyz authorities have ambitious plans to reduce carbon emissions and adapt to climate change, with consideration given to national priorities and the Sustainable Development Goals. Because of the Kyrgyz Republic's small carbon footprint, the authorities' main focus should be on adaptation policies to build resilience to climate change and reduce annual output losses from global warming. However, success of adaptation policies would hinge on the availability of sufficient financing, both from domestic and external sources.
A. Climate Change Prospects in the Kyrgyz Republic
1. Mean temperature changes in the Kyrgyz Republic have outpaced global averages and the country is vulnerable to climate change. The geography and topography of the Kyrgyz Republic makes it one of the most hazard-prone countries in Central Asia. It is a landlocked arid country located in Central Asia between two major mountain systems, the Tien Shan and the Pamirs. Approximately 94 percent of the country is above 1,000 meters from the sea level and about 4 percent is permanently covered by snow. Average annual temperatures vary from less than -10°C in high altitudes to over 12°C in the northern and western lowlands. Average annual temperatures have risen by approximately 1.3°C between 1992–2021, frequently exceeding the world average (Figure 1). The country experiences 3,000 to 5,000 earthquakes every year2. Since the independence in early 1990s, the country has experienced 19 climate related disasters, resulting in about US$76 million in damages (in 2020 dollars, about 1 percent of 2020 GDP), more than 2 million people affected, and 323 deaths.3
Temperature and Precipitation, 1991-2020
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
Source: World Bank Climate Change Knowledge Portal.Mean Temperature Change and Frequency of Climate-Related Disasters
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
2. The Kyrgyz Republic is likely to continue experiencing rates of warming considerably above the global average. The WB models4 for the Kyrgyz Republic show a trend of consistent warming (Box 1). By 2100 this multi-model ensemble projects 6.1°C of warming in the Kyrgyz Republic under the highest emissions pathway (SSP5-8.5)5 compared to an average increase of 5.3°C for the CCA region and a global average rise of 4.4°C. Under the lowest emissions pathway (SSP1-2.6), warming peaks at the end of the 2050s at around 1.7°C above the 1995–2014 baseline and then begins to decline. Extreme temperatures, potentially over 40°C, would become a regular occurrence in the low-lying and most densely populated areas. While considerable uncertainty surrounds projections of long-term precipitation trends in the country, the intensity of extreme rainfall events appear to be increasing with temperature. As glaciers continue to melt due to rising temperatures, more intense flooding events in the wintertime and reduced water flow in the summer are expected. Rising temperatures, changing hydrology, and frequency of extreme weather events will exacerbate the Kyrgyz Republic's vulnerability to extreme events.
Mean-Temperature Projections
1995-2014 is a reference period. Projection data is presented as multi-model ensembles, which shows the range and distribution of the most plausible projected outcomes of change in the climate system for a selected Shared Socioeconomic Pathway (SSP).
SSP1-1.9: The most optimistic scenario assumes that global CO2 emissions are cut to net zero around 2050. Societies switch to more sustainable practices, with focus shifting from economic growth to overall well-being. Investments in education and health go up. Inequality falls. Extreme weather is more common, but the world has dodged the worst impacts of climate change. This scenario meets the goal of keeping global warming to around 1.5 °C above preindustrial temperatures, with warming hitting 1.5°C but then dipping back down and stabilizing around 1.4°C by the end of the century.
SSP1-2.6: In the next-best scenario, global CO2 emissions are cut severely, but not as fast, reaching net-zero after 2050. It imagines the same socioeconomic shifts towards sustainability as SSP1-1.9. But temperatures stabilize around 1.8°C higher by the end of the century.
SSP2-4.5: This is a “middle of the road” scenario. CO2 emissions hover around current levels before starting to fall mid-century, but do not reach net-zero by 2100. Socioeconomic factors follow their historic trends, with no notable shifts. Progress toward sustainability is slow, with development and income growing unevenly. In this scenario, temperatures rise 2.7°C by the end of the century.
SSP3-7.0: On this path, emissions and temperatures rise steadily and CO2 emissions roughly double from current levels by 2100. Countries become more competitive with one another, shifting toward national security, and ensuring their own food supplies. By the end of the century, average temperatures have risen by 3.6°C.
SSP5-8.5: Current CO2 emissions levels roughly double by 2050. The global economy grows quickly, but this growth is fueled by exploiting fossil fuels and energy-intensive lifestyles. By 2100, the average global temperature is a scorching 4.4°C higher.
Source: World Bank Climate Change Knowledge Portal.
B. Impact of Climate Change Risks on the Macro-Financial Situation and Long-Term Outlook
3. Climate change can result in direct human and material damages and have an adverse impact on growth. Duenwald and others (2022) analyze the growth impacts of higher temperatures, more erratic precipitation, and intensified disasters, and find that countries with low average annual temperatures of up to 19°C (such as the Kyrgyz Republic) can benefit from higher temperature. A 1°C increase in temperature is associated with higher per-capita GDP growth in CCA countries for about three years. However, abnormally large temperature deviations within one year can reduce GDP per capita (irrespective of the initial temperature level), and more so with larger deviations.
4. Weather shocks can affect some productive sectors more than others, resulting in a change of output composition with ripple effects on sectoral employment. Temperature increases above annual averages have reduced unemployment in CCA countries. However, higher precipitation has increased youth unemployment for both males and females as the young tend to have lower job security and weaker skillsets. Temperature increases have weighed negatively and persistently on agricultural employment, but have increased employment in the service sector (and the discernible effect on industry), which suggests that climate change amplifies the shift of labor from agriculture to services.
CCA: Key Macroeconomic Impacts of the Region's Main Climate Stressors, 1970-2020
CCA: Key Macroeconomic Impacts of the Region's Main Climate Stressors, 1970-2020
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CCA: Key Macroeconomic Impacts of the Region's Main Climate Stressors, 1970-2020
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5. Climate disasters weaken short-term economic performance in the CCA, with some effects persisting through the medium term. In disaster years, real per capita growth declines by 1.7 percentage points on average and recovers slowly over the medium term, resulting in a permanent output loss of almost 51/2 percentage points of GDP. Public debt surges by 2½ percent of GDP mainly reflecting an immediate budget and growth deterioration, and the current account deficit widens gradually by about 4 percentage points of GDP in the medium term.
6. Agriculture is most susceptible to climate change in the Kyrgyz Republic. Despite its declining share in total GDP, agriculture remains important for the livelihoods of rural population, which constitutes 65 percent of total population in the Kyrgyz Republic. Over the last decade, it contributed more than 14 percent to the country's annual output and employed more than 25 percent of the economically active population on average6. Leading agricultural products include grain and forage crops (80 percent of cultivated area), meat and dairy. Agricultural products comprised about 8 percent of total exports in 2020. Climate change will impact both crops and livestock (USAID, 2018).
7. Continuing glacial melt and pressure on water resources in the Kyrgyz Republic will influence food and livestock production (USAID, 2018; WB and ADB, 2021). Direct effects include changes in carbon dioxide availability, precipitation, and temperatures. Indirect effects include impacts on water resources and seasonality, soil erosion, and decline in arable areas due to desertification. Wang and others (2020) show that climate change reduces productivity of grasslands across the majority (96%) of the Kyrgyz Republic's land surface area. Increased water scarcity and droughts can reduce access to drinking water and adequate foraging, potentially reducing crop yields and exacerbating food insecurity. The increased biological stress and poorer nutrition are likely to leave the livestock more vulnerable to infectious diseases.
8. Climate change will also adversely affect the energy sector. The estimates on how climate change can affect demand for energy vary across studies (WB and ADB, 2021; USAID, 2018)7. Nevertheless, all studies report a significant adverse effect of climate change on energy supply which is already under pressure. Hydropower provides around 90 percent of the country's electricity. Changing rainfall patterns, increasing temperatures and increasing droughts will likely reduce reliability and availability of water for hydropower and thermoelectric cooling. Increasing glacial and snow melt are expected to affect hydropower sources in the coming decades, with increases likely in the next five to ten years and significant decreases thereafter. The aging power plants, energy infrastructure and transmission would face threats from higher temperatures and increased heavy rains along with floods and mudslides.
9. Climate change will disproportionally affect vulnerable groups, aggravating poverty and inequality, and contributing to social tensions, migration, and conflict. Higher intensity and frequency of droughts stand out as the most significant risk for the poor in the Kyrgyz Republic. The poorest quintile is estimated to be more than twice as likely to be exposed to droughts than other groups (Winsemius and others, 2018). This population group typically works in, or relies on, rural agriculture for livelihood or subsistence, the sector which is particularly impacted by droughts. Smaller businesses are least able to afford space heating and cooling or investing in energy efficiency. Poorer farmers and communities are least able to afford local water storage, irrigation infrastructure, and technologies for adaptation. Women and low-income rural dwellers are most likely to be affected by flash flooding and landslide as they spend more time in exposed residential and subsistence production areas. Historical evidence suggests that a climate-driven increase in floods and landslides could contribute to rural-urban migration.
10. Climate change is a major threat to growth, prosperity, and macro-financial and socio-political stability (Duenwald and others, 2022; Saliba and others, 2022). Without adequate adaptation strategies, even in a moderate global warming scenario, climate change will:
Reduce long-term growth through adverse impacts on human and physical capital, and total factor productivity. Across sectors, changing weather patterns typically first impact agriculture and hydropower production, with ripple effects on manufacturing, trade, tourism, and services.
Undermine macroeconomic stability as lower growth would shrink the tax base and reduce fiscal space, and generate additional expenditure needs for infrastructure, social protection, and investment in human capital. This will result in higher fiscal deficits and public debt. Lower potential growth would also reduce exports, while import may rise due to the increased infrastructure investment needs. As a result, the external balance could weaken exerting pressure on international reserves, the exchange rate, and price stability.
Pose risks to financial stability as lower growth and loss of incomes by firms and households would weaken asset quality and bank balance sheets. More frequent climate disasters could also result in larger losses for insurers and investment funds and trigger capital outflows, fire sales and other negative macro-financial spillovers.
11. Compounding effects of the above-mentioned factors could cause social and political instability. Weak social safety nets and insufficient fiscal buffers to protect the vulnerable could further aggravate the situation and lead to more migration and conflicts, increase poverty especially among the youth and women, and weaken growth potential even further in a vicious cycle.
C. Adaptation Plans
12. Early adaptation is critical to strengthen resilience of the Kyrgyz economy to climate change. The country is a small emitter of greenhouse gases on the global scale but can be heavily affected by climate change if global mitigation efforts fail to deliver on the Paris Agreements. Priority should be given to policies with positive externalities that remove market imperfections and help engage private sector (see Box 2). Adaptation policies are estimated to reduce annual output losses from global warming in the Kyrgyz Republic by up to 1.5 percent of GDP by 2060 (Saliba and others, 2022)8.
13. Despite considerable progress over the past decade, the Kyrgyz Republic remains highly vulnerable to climate change. In 2020, it ranked 69th out of 182 countries on the University of Notre Dame ND-GAIN Country Index that combines vulnerability to climate change and other global challenges with readiness to improve resilience. Kyrgyzstan was the 153rd most vulnerable country and the 101st most ready country. While vulnerability to climate change overall was below international averages, the Kyrgyz Republic scored high on agriculture capacity, engagement in international environmental conventions and dependency on imported energy. In terms of readiness, control of corruption and innovation indicators had the lowest scores. In 2020, according to the ND-GAIN Index, Kyrgyzstan ranked 4th out of eight CCA countries and its score was slightly above the lowest Index in Eastern Europe.
ND-GAIN Index Score
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
Source: University of Notre Dame (2021), Notre Dame Global Adaptation Initiative.Note: Higher ND-GAIN Index scores indicate lower vulnerability and greater readiness.14. The Kyrgyz Republic has made strong commitments to address climate change challenges. It has ratified the Paris Agreement, participated in COP27 conferences and reflected these international commitments in major national policy documents.9 The updated NDC (2021) represents the Kyrgyz Republic's latest plan to fight climate change and contribute to the global effort to reduce greenhouse gas emissions. It specifies guidelines for a low-carbon transformation until 2030, with consideration given to national priorities and the Sustainable Development Goals. Priority areas include green energy, agriculture and industry, low carbon and environmentally friendly transportation, sustainable tourism, waste management, and green cities. In November 2021, the State Committee on Ecology and Climate was upgraded to the Ministry of Natural Resources, Ecology and Technical Supervision. The latter will be working jointly with the Ministry of the Economy to integrate climate change into development planning. The Coordinating Council for Climate Change, Ecology and Sustainable Development, headed by the Chairman of the Cabinet of Ministers, was formed to oversee overall coordination and implementation of measures to mitigate and adapt to climate change, promote green economy. At the same time, the Coordinating Committee for the Green Economy will be formed, with the participation of the private sector, key government agencies and development partners, to develop a consolidated and justified policy for a phased transition to the principles of the Green Economy in the Kyrgyz Republic.
CCA: 2020 ND-GAIN Index Scores by Country
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
Source: University of Notre Dame (2022). Notre Dame Global Adaptation Initiative.Note: higher ND-GAIN Index scores indicate lower vulnerability and greater readiness.15. However, adaptation requires significant additional spending and hence financing. Financial resources required for adaptation are estimated at more than $2.8 billion, or 33 percent of 2021 GDP, which would require significant international support. The authorities have committed to provide 29 percent of this financing need from domestic sources and will seek the remaining 71 percent externally. The Kyrgyz authorities need to create fiscal space to allow domestic financing without compromising debt sustainability and catalyze private investment in green economy to complement government efforts (Duenwald and others, 2022).
Required Financial Resources for the Implementation of Adaptation Measures (USD million 2021)
The required resources were calculated by national experts based on the cost of specific actions of the NDC Implementation Plan under the “Adaptation” section.
Own resources refer to funds from the national budget in the amounts determined for the specified sector, as well as funds from the private sector, international donors, in current public investment programs.
International support refers to funds not currently supported by funding sources that need to be mobilized during the implementation period of NDC.
Required Financial Resources for the Implementation of Adaptation Measures (USD million 2021)
| Sector | Total requirement* | Own resources** | Need for additional international support*** |
| Water resources | 1977.7 | 577.1 | 1400.6 |
| Agriculture | 276.0 | 83.0 | 193.0 |
| Energy | 64.9 | 25.2 | 39.7 |
| Health care | 144.1 | 2.7 | 141.4 |
| Reducing the risks of climate emergencies | 309.9 | 121.9 | 188.0 |
| Forest and biodiversity | 46.2 | 4.0 | 42.2 |
| Climate resistant areas and green | 12.7 | 1.9 | 10.7 |
| Improving the adaptation reporting system | 1.6 | 0.6 | 1.0 |
| Total | 2832.9 (100%) |
816.3 (28.8%) |
2016.6 (71.2%) |
The required resources were calculated by national experts based on the cost of specific actions of the NDC Implementation Plan under the “Adaptation” section.
Own resources refer to funds from the national budget in the amounts determined for the specified sector, as well as funds from the private sector, international donors, in current public investment programs.
International support refers to funds not currently supported by funding sources that need to be mobilized during the implementation period of NDC.
Required Financial Resources for the Implementation of Adaptation Measures (USD million 2021)
| Sector | Total requirement* | Own resources** | Need for additional international support*** |
| Water resources | 1977.7 | 577.1 | 1400.6 |
| Agriculture | 276.0 | 83.0 | 193.0 |
| Energy | 64.9 | 25.2 | 39.7 |
| Health care | 144.1 | 2.7 | 141.4 |
| Reducing the risks of climate emergencies | 309.9 | 121.9 | 188.0 |
| Forest and biodiversity | 46.2 | 4.0 | 42.2 |
| Climate resistant areas and green | 12.7 | 1.9 | 10.7 |
| Improving the adaptation reporting system | 1.6 | 0.6 | 1.0 |
| Total | 2832.9 (100%) |
816.3 (28.8%) |
2016.6 (71.2%) |
The required resources were calculated by national experts based on the cost of specific actions of the NDC Implementation Plan under the “Adaptation” section.
Own resources refer to funds from the national budget in the amounts determined for the specified sector, as well as funds from the private sector, international donors, in current public investment programs.
International support refers to funds not currently supported by funding sources that need to be mobilized during the implementation period of NDC.
16. Decisive policy measures will be needed to create fiscal space. More revenue can be collected by eliminating or reducing tax exemptions, adjusting certain tax rates and improving administration. On the expenditure side, there is a significant potential for fiscal savings by reducing the public wage bill and energy subsidies, including by raising electricity tariffs, and improving efficiency of capital spending. Structural reforms to strengthen governance and reduce corruption, restructure or divest loss-making SOEs, and improve the electricity sector would generate higher and more inclusive growth and broaden the tax base. Carbon taxation is another potential source of climate financing. According to the IMF estimates10, taxing production and use of fossil fuels can raise up to 6 percent of GDP in additional revenue by 2030. Such measures, however, would need to be paired with a well-targeted social assistance system to protect the vulnerable and promote inclusiveness.
CCA: Potential Carbon Tax Revenue, 2030
(Percent of GDP)
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
Source: Duenwald and others (2022).17. Leveraging various multilateral and bilateral sources of climate financing would be important to mobilize international support. The multilateral adaptation assistance is often linked to countries' institutional capacity to apply, implement, and manage projects. This limits access to such sources of climate financing for countries in transition, especially low-income and underdeveloped countries, which face significant climate vulnerabilities. In all countries of the CCA region, including the Kyrgyz Republic, the available financing falls considerably short of their estimated adaptation costs. Mobilizing more concessional financing for adaptation is crucial, given tight fiscal space particularly after the COVID-19 pandemic. Moreover, multilateral support for adaptation can also have a catalytic effect in crowding-in private sector investment, including FDI (Duenwald and others, 2022). Swift progress in long-overdue structural reforms aimed at strengthening domestic institutions and governance would be essential for mobilizing international financing. The IMF's new Resilience and Sustainability Facility (RSF) that was put in place in 2022 to complement the IMF's lending toolkit is an innovation that could help countries finance reforms that address climate-related challenges.11
CCA: Climate Adaptation Costs and Related Development Financing, 2009-19
(Percent of GDP)
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
Source: Aligishiev and others (2022), Duenwald and others (2022).D. Mitigation Plans
18. The Kyrgyz Republic is a small emitter of greenhouse gases, both in per capita and in absolute terms. In 2018, the country contributed only about 0.03 percent of the world's total carbon emissions, or 15 million tons of greenhouse gas. It ranks seventh out of eight CCA countries on emissions in absolute terms. Among CCA oil importers, the country emits more greenhouse gas in per unit of output, but less in per capita terms (Figure 2).
Kyrgyz Republic and Peers: Greenhouse Gas Emissions, 2018
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
Sources: CAIT, WB WDI, IMF WEO; and IMF staff calculations.Note: All greenhouse gases are converted to CO2-equivalents to account for their different warming potential. See WRI (2015) for more information on the CAIT greenhouse gas data.19. Nevertheless, the authorities' NDC sets out plans to reduce emissions further. While the Kyrgyz Republic's economy is relatively small, greenhouse gas emissions are set to increase with economic development and the planned expansion of energy production, where around 60 percent of all emissions in the country are concentrated. Mitigation actions and policies in the NDC are primarily concentrated in energy, agriculture, forestry and other land uses. The mitigation measures were developed on the basis of data from the 4th National Greenhouse Gas Inventory (4NGHGI), carried out according to the IPCC 2006 methodology. The projections extend to 2050, but the time horizon for mitigation planning in the updated NDC is through 2025 and 2030. As part of the updated NDC under the Paris Agreement, the overall mitigation goal is to unconditionally (WM scenario) reduce greenhouse gas emissions by 16.63 percent by 2025 and by 15.97 percent by 2030, relative to the business-as-usual scenario (BAU). The carbon reduction goals conditional on international support (WAM scenario) are a 36.61 percent reduction by 2025 and a 43.62 percent reduction by 2030 (Figure 3).
Energy. The core of the mitigation plan is to decrease consumption of fossil fuels and increase power generation from renewable sources. Modernization of energy supply systems, expansion of the natural gas network, and promotion of electric vehicles and other energy efficient consumption will also be essential.
Agriculture. Climate policy priorities in agriculture are to increase farming of climate-resistant crops; reduce headcount and increase productivity of livestock and improve the pedigree; expand the area of cultivated organic and climate change-resistant crop farming lands and increase efficiency of fertilizer use and generation of biogas.
Forestry and other land uses. The authorities' plans to preserve and increase the area of forests and expand perennial plantations have both adaptation and mitigation potentials.
Mining. Transition to more environmentally friendly gold extraction technologies would help preserve glaciers and fresh water.
Greenhouse Gas Emissions
Citation: IMF Staff Country Reports 2023, 092; 10.5089/9798400232725.002.A002
20. Mitigation policies will also require significant financing. Table 1 below summarizes the authorities' own estimates of the needed financing to cover mitigation costs. Similar to adaptation, the bulk of financing is envisaged from external sources which are yet to be identified.
E. Policy Options
21. For the Kyrgyz Republic, which is small carbon-polluter, but is vulnerable to global warming, adaptation should be at the heart of its climate policies. Building resilience to climate change involves creating fiscal space for additional public spending on green infrastructure, human capital and social protection. Public investment in climate-resilient infrastructure and other adaptation projects would help reduce adverse impacts of climate shocks and provide foundation for sustainable economic growth. Improving human capital by investing in skills upgrading, healthcare and education would make the labor force more resilient and productive, while strengthening social safety nets would be critical to shield the vulnerable from the fallouts of climate change. It is also important to incentivize adaptation in the private sector by enforcing regulations and improving financial inclusion of farmers and small businesses. To strengthen adaptive capacity of agriculture, the sector that provides jobs and incomes to most of the rural population, there is a need to put in place a comprehensive agriculture risk management system with built-in mechanisms to mitigate, reduce, or transfer climate risks, and provide timely hydrometeorological information to farmers. Switching to water-conserving crops and improving irrigation efficiency by providing incentives to adopt water-saving technologies would also be important.
Kyrgyz Republic: Necessary Financial Support for the Implementation of Mitigation Measures
(USD million 2021)
The required resources were calculated by national experts based on the cost of specific actions of the NDC Implementation Plan under the “Mitigation” section.
Own resources refer to funds from the national budget in the amounts determined for the specified sector, as well as funds from the private sector, international donors, and current public investment programs.
International support refers to funds not currently supported by funding sources that need to be mobilized during the implementation period of the NDC.
Kyrgyz Republic: Necessary Financial Support for the Implementation of Mitigation Measures
(USD million 2021)
| Sector | Resources required* | Own** funds: scenario WM | International support: scenario WAM*** |
| Energy | 7,155.8 | 2,857.1 | 4,298.7 |
| IPPU | 0.6 | 0.1 | 0.4 |
| Agriculture | 19.3 | 12.1 | 7.1 |
| LULUCF | 63.0 | 36.2 | 26.8 |
| Waste | 3.8 | 0.5 | 3.3 |
| Total | 7,242.4 (100%) |
2,906.1 (40%) |
4,336.4 (60%) |
The required resources were calculated by national experts based on the cost of specific actions of the NDC Implementation Plan under the “Mitigation” section.
Own resources refer to funds from the national budget in the amounts determined for the specified sector, as well as funds from the private sector, international donors, and current public investment programs.
International support refers to funds not currently supported by funding sources that need to be mobilized during the implementation period of the NDC.
Kyrgyz Republic: Necessary Financial Support for the Implementation of Mitigation Measures
(USD million 2021)
| Sector | Resources required* | Own** funds: scenario WM | International support: scenario WAM*** |
| Energy | 7,155.8 | 2,857.1 | 4,298.7 |
| IPPU | 0.6 | 0.1 | 0.4 |
| Agriculture | 19.3 | 12.1 | 7.1 |
| LULUCF | 63.0 | 36.2 | 26.8 |
| Waste | 3.8 | 0.5 | 3.3 |
| Total | 7,242.4 (100%) |
2,906.1 (40%) |
4,336.4 (60%) |
The required resources were calculated by national experts based on the cost of specific actions of the NDC Implementation Plan under the “Mitigation” section.
Own resources refer to funds from the national budget in the amounts determined for the specified sector, as well as funds from the private sector, international donors, and current public investment programs.
International support refers to funds not currently supported by funding sources that need to be mobilized during the implementation period of the NDC.
22. Mitigation policies would help reduce relatively small greenhouse gas emissions even further. This includes maintaining and, if fiscal space permits, expanding fiscal instruments to encourage green transition, such as preferential customs tariffs for fuel-efficient vehicles and energy-efficient appliances while also discouraging air, soil, and water pollution through fines and penalties. Introducing feebates, i.e. revenue neutral sliding scales of fees on products and activities with above or below average emission intensity, would help promote more mitigation responses without additional fiscal costs. Giving preference to public procurement of goods and services with reduced environmental impact throughout their life cycle for the same cost as would otherwise be procured would help reducing emissions without adding budget pressures. Expanding renewable power generation and gradually raising electricity tariffs to cost recovery, a long-standing reform priority, would attract private investment in power generation. Similarly, a gradual increase in heating tariffs to its cost-recovery rate would reduce excessive consumption of heating, and by implication, of fossil fuels used to generate heating. The authorities should also consider raising fuel (diesel, natural gas, coal) prices through corrective taxes to their efficient levels that reflect both supply and environmental costs. Extra revenue from mitigation measures would contribute to fiscal space, including to compensate the vulnerable for higher prices.
23. Climate change mitigation and adaptation policies should follow certain economic principles (Box 2). Effective climate policies require improved climate data collection, including information on the costs of high and low intensity disasters, disaster response expenditure, and sources of financing. It would also be important to mainstream climate resilience into all sectoral plans and strengthen cooperation across ministries, especially between Ministry of Finance, Ministry of Economy, Ministry of Natural Resources, Ecology and Technical Supervision, and Ministry of Emergency Situations, and standardize post-disaster information gathering and reporting across ministries. Translating overarching plans and commitments (including NDC) into implementable and “finance-ready” sectoral strategies would increase realism of policies. Finally, it is critical to strengthen institutional capacity to implement the commitments.
24. Success of climate change policies would hinge on the availability of sufficient financing. It would be important to take a strategic view in matching climate projects with financing sources that can be accessed with reasonable efforts and at acceptable cost. NDC forums should be used as a catalyst to articulate a strategy for raising climate-change financing. Mobilizing private financing and external grants would help avoid further worsening of fiscal and debt sustainability, which will require a continued dialogue with development partners to secure donor financing for unmet climate and development goals. Advancing structural reforms will be critical to improve climate resilience but also to strengthen engagement with development partners. In addition to reforms of governance, SOEs and the energy sector, priority should be given to public finance management to improve efficiency and transparency of climate-related spending. This would include strengthening climate-sensitive budgeting, rigorous practices for prioritizing, costing and monitoring of projects, regular spending reviews and systematic ex-post audits of climate investments.
Economic Principles for Climate Change Policies 1/
Climate change adaptation and mitigation policies should follow certain economic principles. Climate change policies should be part of a holistic development strategy involving both private and public sector responses. Maximization of future welfare given available resources requires information on efficiency and fairness of spending across alternative climate programs to allow prioritization and balance across sectors, population groups, and generations. The authorities should prioritize climate change programs with positive externalities and address market imperfections to make private sector responses efficient. Climate change programs should be prioritized based on a cost-benefit analysis, including their distributional aspects. Some climate change programs may require compensations for damages through carefully calibrated subsidies to prevent excessive risk taking.
Cost-benefit analysis (CBA) needs to be applied to climate change policies. A CBA would provide a comprehensive assessment of social welfare impacts from adaptation and mitigation programs. It would allow to identify programs with positive net present value (NPV), some of which can be self-funding, while others may require financing. For instance, additional spending to make some public infrastructure more resilient and prevent future damages can have a positive NPV for the public if construction costs are smaller than potential losses from climate shocks.
Distributional aspects of climate change policies should also be considered. The NPV of a program measures the aggregate net benefit to the society, but distributional impacts can be critical since programs can generate winners and losers. The positive NPV programs may not make everyone better off, but winners could potentially compensate losers. The government can redistribute the aggregate gains of climate change programs, for instance, by taxing carbon emissions to pay for adaptation. In some cases, equity considerations may lead to scaling back climate change programs when net benefits fall on the wealthiest.
Macro-fiscal implications should be considered in selecting climate change programs. Global adaptation needs in 2030 are estimated at 0.25 percent of world GDP per year, with costs reaching above 1 percent of GDP per year for some developing countries. Lack of fiscal space, however, may prevent many countries from financing all viable positive NPV projects. Competing programs should be ranked using CBA and priority should be given to projects with greatest synergies and positive externalities. By consistently investing in projects with the higher social and economic returns, governments can maximize spending efficiency.
Climate change policies should be planned and mainstreamed into fiscal policy. Climate change mitigation and adaptation policies would benefit from being guided by plans in coordination with other developmental objectives. These plans should identify institutional arrangements and coordination mechanisms, maximizing ownership and facilitating circulation of information. The international experience suggests four building blocks are essential for these plans to be effective: Identifying climate vulnerabilities and adaptation gaps. This includes taking stock of climate vulnerabilities, their macroeconomic impacts, identifying weaknesses in terms of adaptation (e.g., capacity gaps, information gaps), developing roadmaps for implementation of plans, and establishing guidance on normative principles of climate change policies.
Identifying solutions. This requires addressing the information gaps and capacity constraints, followed by identification of potential solutions to climate vulnerabilities that are consistent with national development plans, CBAs of climate change policies and their distributional impacts, and communicating these solutions to the public.
Mainstreaming of adaptation in public financial management (PFM). This includes mainstreaming climate change policies into national planning, incorporating the needs in the budget, and enhancing implementation capacity.
Monitoring, evaluation, and reporting. This involves continuously monitoring the progress made, reevaluating climate change plans, and regularly updating those plans.
References
Aligishiev, Z., Bellon, M., and Massetti, E. (2022). “Macro-Fiscal Implications of Adaptation to Climate Change,” IMF Staff Climate Note 2022/002 (Washington, D.C.: International Monetary Fund).
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Source: National Statistical Committee of the Kyrgyz Republic (http://stat.kg/en/).
Analysis of fifteen studies in the world examining the impact of ambient temperature on total electricity consumption showed that the actual increase of the electricity demand per degree of temperature increase varies between 0.5 and 8.5 percent (Santamouris and others, 2015).
Kahn et al. (2019) estimate that the total losses from the climate change for the Kyrgyz Republic range between 0.48 and 3.91 percent of GDP by 2050.
These include: National Development Strategy for 2018-2040, the Decree of the President of the Kyrgyz Republic “On measures to ensure environmental safety and climate sustainability", the Green Economy Development Program for 2019-2023, and Updated Nationally Determined Contribution 2021. The country also developed sectoral policy documents in the field of emergencies, health care, forestry and biodiversity, agriculture, industry, energy, waste and water resources management.
Estimations are based on a model calculation from the Carbon Pricing Assessment Tool (CPAT) developed by the IMF and World Bank. For the description of the model and its parameterization, see IMF (2019).
More information is available at: https://www.imf.org/en/Topics/Resilience-and-Sustainability-Trust.
