CBAM Country Intelligence Kazakhstan 2026: Scope-1 Confinement, Data Dividend, and Carbon Rent Leakage

Executive Summary

The EU Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026. This report examines how it affects Kazakhstan's carbon-intensive export economy at the level of the specific enterprises exposed to it, drawing on primary EUR-Lex regulatory texts, Eurostat customs data, and corporate disclosures from the four largest CBAM-exposed producers.

Exposure is small and concentrated. On a bottom-up, physical-tonne basis, Kazakhstan's CBAM-embedded carbon liability is approximately 1.49 million tonnes of CO2 per year. This is roughly an order of magnitude below the figure implied by extrapolating from aggregate trade shares, the method behind most macro-level estimates. The exposure falls almost entirely on four enterprises: the ferrochrome producer Kazchrome and the aluminium smelter KAS (both part of Eurasian Resources Group), the Temirtau steelworks Qarmet, and the fertiliser producer KazAzot. CBAM is therefore a targeted commercial pressure on a handful of industrial assets rather than a macroeconomic shock to the national accounts.

The report identifies three linked mechanisms:

1. Scope-1 Confinement. During the definitive period, CBAM Annex II counts only direct (Scope 1) emissions for ferrochrome, steel, and aluminium. Kazakhstan's coal-heavy electricity emissions, more than 4.1 million tonnes of CO2 a year from Kazchrome's operations alone, fall outside the calculation. This both shelters Kazakh producers for now and reduces competition to a single measure: furnace-level direct emissions.
2. Data Dividend. With competition reduced to that single measure, the EU default value for high-carbon ferrochrome, 2.350 tCO2 per tonne, becomes a dividing line. Kazchrome's verified actual intensity of about 2.161 sits below it. Producers below the line gain a measurable cost advantage by submitting verified data; producers above it do not. For Kazchrome the advantage reaches roughly EUR 74 per tonne by 2028 and about EUR 107 per tonne by 2034, worth an estimated EUR 14 million to EUR 22 million a year on current EU export volumes. EU stainless steel producers and trading platforms have already begun to price carbon data into procurement.
3. Carbon Rent Leakage. Every euro of CBAM certificates paid by Kazakh exporters accrues to the EU. Because the KAZ ETS has held an effective carbon price near one US dollar for over a decade, with 100 per cent free allocation, CBAM Article 9 allows no domestic carbon-price deduction. The resulting transfer to the EU budget rises to approximately EUR 179 million per year by 2034 and exceeds EUR 640 million cumulatively over the definitive period. Each additional US dollar of effective domestic carbon price would retain about EUR 1.37 million a year in Kazakhstan.

The two enterprise cases diverge. Kazchrome captures the Data Dividend and holds a strong competitive position among non-EU suppliers. Qarmet does not: its steel intensity, though below the sector default of 5.180, still leaves CBAM costs above the level at which comparable exporters have withdrawn from EU markets, and the only proven decarbonisation route is blocked by natural-gas pipeline constraints that cannot be resolved before 2030. For the single-industry city of Temirtau, that outcome carries employment and district-heating consequences well beyond the plant itself.

Implication for policy. The central practical question for Astana concerns where the carbon rent is collected. A functioning domestic carbon price would keep a share of it in Kazakhstan and is deductible under Article 9; its absence hands the full amount to the EU. This fiscal framing has so far been absent from Kazakhstan's CBAM policy debate.

1. Introduction

The European Union's Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026, completing a three-year transition from voluntary reporting to mandatory certificate purchase for imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen [1]. For Kazakhstan, the mechanism arrives at a point of real structural exposure. The EU absorbs roughly 39 per cent of the country's total goods exports, a relationship valued at EUR 334.9 billion in 2024 according to Eurostat bilateral trade statistics [2]. That headline figure, however, is a poor guide to CBAM risk. Approximately 95 per cent of Kazakhstan's EU-bound shipments consist of crude petroleum and natural gas products classified under Combined Nomenclature chapter 27, commodities that fall entirely outside the current CBAM legislative perimeter [1][2]. The actual CBAM-exposed trade flow is a narrow but concentrated stream of ferroalloys, primary steel products, unwrought aluminium, and nitrogen-based fertilisers, together valued at approximately USD 769 million annually [2][3].

The concentration of this exposure across a handful of enterprises gives Kazakhstan's CBAM challenge its particular character. Three corporate groups account for virtually all of the country's CBAM-liable production: Eurasian Resources Group (ERG), headquartered in Luxembourg with 40 per cent state ownership, which controls the ferrochrome giant Kazchrome and the aluminium smelter Kazakhstan Aluminium Smelter (KAS); Qarmet, the former ArcelorMittal Temirtau steelworks now under domestic ownership; and KazAzot, the principal ammonia and urea producer [3][10]. Small and medium enterprises are almost entirely insulated by the capital intensity of upstream metallurgy and the KAZ ETS regulatory threshold of 20,000 tonnes CO2-equivalent per year [3]. CBAM's financial pressure, modest at the macroeconomic scale, concentrates on the specific industrial assets that anchor single-industry towns, state-linked employment, and government fiscal revenues from resource-sector dividends.

This report traces a three-part causal sequence arising from the interaction between EU regulatory design and Kazakhstan's industrial and institutional conditions. The first element, Scope-1 Confinement, is the regulatory fact that CBAM Annex II restricts the emission accounting boundary for ferrochrome, steel, and aluminium to direct (Scope 1) emissions only, temporarily exempting the large indirect burden from Kazakhstan's coal-dominated electricity grid [1]. This narrows the terms of competition to a single dimension and makes the EU's default value of 2.350 tCO2 per tonne of high-carbon ferrochrome the dividing line between suppliers who benefit from reporting actual data and those who do not [4]. The second element is the Data Dividend: the cost advantage captured by enterprises whose verified actual Scope 1 intensity falls below that default threshold and who hold the monitoring, reporting, and verification (MRV) infrastructure to document it [4][6]. The third is Carbon Rent Leakage: the fiscal result of Kazakhstan's failure, across thirteen years of operating a national emissions trading system, to produce an effective domestic carbon price that CBAM's Article 9 would recognise [3][7].

A note on method. The analysis proceeds bottom-up rather than from aggregate trade shares, and treats each enterprise and CN code separately. All regulatory parameters are taken from EUR-Lex primary texts, cross-checked against the full text of Commission Implementing Regulation (EU) 2025/2621 [4] and Commission Implementing Regulation (EU) 2025/2620 [5]. Enterprise-level emission data come from audited annual reports and corporate sustainability disclosures. Trade volumes are anchored to Eurostat Comext customs-clearance records at the eight-digit CN level [2]. That choice matters: it yields an exposure figure roughly a tenth of the macro-level estimates previously circulated in policy channels [40].