REFILE-UPDATE 1-Kazakhstan considers domestic carbon tax to dodge EU border tax

(Refiles to add dropped word in headline)

MOSCOW, Sept 15 (Reuters) - Kazakhstan is considering introducing a domestic carbon tax so that the goods it exports can dodge the carbon border tax proposed by the European Union, deputy energy minister Murat Zhurebekov said on Wednesday.

The EU proposed in July a Carbon Border Adjustment Mechanism (CBAM), or CO2 tariff, on polluting goods from 2026, forcing some companies importing into the EU to pay carbon costs at the border on carbon-intensive products such as steel and aluminium.

Kazakhstan’s main exports are oil and metals and the EU is one of its biggest trading partners, accounting for about 40% of all exports. But the carbon border tax could make Kazakh crude too expensive to compete on the EU market.

Introducing a domestic tax - together with other measures to reduce the carbon footprint - would essentially keep the money in Kazakhstan instead of handing it over to Brussels - but only if the latter approves Kazakhstan’s carbon framework.

“We are modelling different scenarios such as introducing similar taxes domestically, setting up a carbon fund, we are looking at how this might impact - and whether this can save us from - that border tax that the EU plans to introduce,” Zhurebekov told an energy conference in the Russian city of Tyumen.

“We are actively implementing renewable energy projects; coal accounts for 70% of our total (electric) power generation, so there are a lot of upgrades and investments needed,” he added.

Kazakhstan aims to increase the share of renewables in its energy mix and uses a scheme where the state guarantees that it will buy all energy from renewable producers at a certain price.

Russia, Kazakhstan’s close partner and neighbour, has said it would introduce no carbon tax and would discuss other ways of achieving carbon neutrality with its trade partners. (Reporting by Olesya Astakhova Writing by Olzhas Auyezov Editing by Louise Heavens)