Central Asia’s Climate Risks: Can Energy Diversification Help?

Central Asia has reported increased frequency of natural disasters, as rates of temperature rise in the region have exceeded the global average. On October 25, 2022, DCRES and CAREC Institute hosted a panel on climate change in Central Asia and the vulnerabilities it has created, focusing on the water-energy nexus. Here we offer our key takeaways from the discussion.

The region’s vulnerability to climate change stems from Central Asian countries’ strong dependence on water resources that are distributed unevenly and create dependencies between countries due to transboundary river systems. Increased temperatures will alter the annual volume and regional precipitation patterns. Southern parts of Central Asia, relying on a water-intensive agricultural sector, are particularly vulnerable. Frequent droughts and increased demand for irrigation water are likely to intensify crop failures and water scarcity. Central Asia’s water problem will spillover to other spheres of regional economic activity, including the interconnected energy sector. 

During the Soviet era, upstream republics (Kyrgyzstan and Tajikistan) provided downstream ones (Turkmenistan, Kazakhstan, Uzbekistan) with water in summer in exchange for energy in winter through the framework of the Central Asian Power System (CAPS). However, after they acquired independence, they started developing their own separate energy policies. The pursuit of self-sufficiency at the expense of cooperation has jeopardized both the water security of downstream states, and the energy security of upstream countries. Turkmenistan and Uzbekistan receive 90% and 80% respectively of their water supply externally. Currently, Central Asians states are collectively losing around $4.5 billion due to a lack of cooperation in the management of transboundary rivers. 

The shortage of regional cooperation poses a hurdle to addressing water-energy issues. There has notably been a 20% decrease in intra-regional energy trading between 2010 and 2019. Instead, Central Asian states have become more active in trading with countries outside the region. Inside the region, discord over equitable use of resources have long marred effective cooperation. However, since 2016, Central Asian countries have been more open to increased regional cooperation. Decision-makers have recognized the need to work closely on the issues of water and energy security on the political level, although the current level of current cooperation has not met expectations.

Power generation is particularly emission-intensive in hydrocarbon-rich Kazakhstan, Turkmenistan, and Uzbekistan. By 2050, power demand in Central Asia will increase by at least 50% relative to the current level, and possibly by as much as 90% in Kazakhstan. Currently, the region’s respective energy sectors are characterized by heavy state presence, shortage of private financing, aging infrastructure, low energy efficiency, and high carbon intensity, given their substantial reliance on non-renewable resources. 

Policy Recommendations

• Ensuring the region’s water security requires both adaptation and mitigation measures: it is critical not only to save water resources but increase the efficiency of their use. 

• The interconnected water-agriculture-energy nexus renders regional cooperation critical in addressing climate change. 

• The region’s countries should work on establishing early warning systems for extreme events induced by climate change to avoid massive economic losses.

• Coordinated management of transboundary water resources and cooperation on the interregional energy infrastructure are in high demand. De-securitizing water and energy issues will be a significant step in this regard.  

• Meeting the growing energy demand and improving the energy security of the regional countries will require the introduction of additional capacities from renewable energy sources. On the regional level, measures to harmonize standards in the field of green energy and exchange best practices on policy implementation in the field could help. 

• On a national level, reforming the existing energy pricing mechanisms and improving a social safety net should be at the core of governmental efforts for an effective and just transition. To encourage private investment in green energy sources, Central Asian governments need to provide investors with long-term planning horizons. 

• Kazakhstan and Uzbekistan have been at the forefront of efforts to incentivize investment in renewable energy and develop relevant policy frameworks. They should further pursue a marketization-oriented approach to energy transition, given the relatively developed energy sectors and relevant institutional infrastructure. By contrast, the energy-poor countries of Tajikistan and Kyrgyzstan, which have low shares of non-hydro renewable energy, could pursue a development-oriented approach to improve energy efficiency through greater reliance on external support and expertise for overcoming structural inefficiencies. 

• The Asian Development Bank’s (ADB) Energy Transition Mechanism (ETM) could help Central Asian economies phase out their coal-fired power plants ahead of schedule. Currently, ETM is active in a few Southeast Asian countries, but holds a lot of promise for Central Asia, given the reliance of some regional countries on coal-fired power generation.

• Scholars could play a significant role in addressing climate change. From a methodological standpoint, they could further localize their analysis and focus on village-level data. 

• From the policy perspective, scholars must be more specific in implementing their proposed solutions in real-world settings. Researchers could focus on the role of the private sector and measures to encourage its active involvement in mitigation and adaptation efforts. Amidst the widespread sentiment in the region that climate action is costly, there is a need for more analysis of the costs and benefits of transition, including that of a new climate economy. 

• Scholars also should be more active in communication, advocacy, and education in the field. They can play a valuable role in communicating the benefits of climate action to the public across Central Asia. 

The discussion was timely as challenges of water management and energy security become more pressing amidst ambitious decarbonization pledges and a lack of sufficient regional cooperation. The discussants drew from two reports by the CAREC Institute: Sustainable Pathways to Energy Transition in the CAREC Region: A Governance Perspective and Water-Agriculture-Energy Nexus in Central Asia Through the Lens of Climate Change.