World Bank: Azerbaijan needs multibillion-dollar investments for decarbonization

On November 29, World Bank experts unveiled the "Country Climate and Development Report" (CCDR) in Baku, emphasizing that investments of approximately $44 billion will be necessary for Azerbaijan to implement decarbonization and sustainable development measures by 2060. There is optimism that a significant portion of these costs can be offset through private sector involvement.

Andrea Liverani, the leading specialist in the field of environment, natural resources and global practice of the World Bank in Europe and Central Asia, highlighted Azerbaijan as one of the initial countries chosen by the World Bank for the preparation of the Climate and Development Report. This selection is attributed to the direct impact of hydrocarbon development and export on climate change.

The report underscores the need for Azerbaijan, heavily reliant on the oil and gas sector constituting one-third of the GDP and 90% of exports, to diversify its economy. With oil reserves expected to last another 25 years, efforts toward a low-carbon economy, such as "green" hydrogen production and modernization in agriculture to reduce emissions, are recommended.

Addressing issues of soil degradation and desertification resulting from overgrazing, the report emphasizes the importance of government consideration of these risks. Rolande Pryce is the  World Bank Regional Director for the South Caucasus, advocates for an expedited pace of investment in decarbonization projects.

While Azerbaijan has signed the Paris Climate Agreement, the report notes that it has not made commitments at the national level to achieve net-zero emissions. The country has set targets to reduce greenhouse gas emissions by 35% by 2030 and 40% by 2050 compared to 1990 levels. However, challenges related to the existing economic structure, heavily dependent on the fuel and energy sector, may impede decarbonization.

The report suggests the necessity of transitioning the economy away from fossil fuels, leveraging private capital and expertise. Ivana Fernandes Duarte, Regional Manager for the South Caucasus of the International Finance Corporation, emphasized the importance of gradually withdrawing from fossil fuels to build a forward-looking economy.

The World Bank advocates for the continued reduction of fossil fuel subsidies while concurrently implementing targeted social protection measures for the poorest segments of the population. The report also delves into the impact of climate change on water resources, given the country's susceptibility to drought and water scarcity, exacerbated by extreme weather conditions.

Presented ahead of the COP28 World Climate Summit in Dubai, attended by a sizable Azerbaijani delegation, the report covers decarbonization and sustainability measures across various sectors. Although not yet available on the World Bank website, the report aligns with the broader discussion on "carbon neutrality" and decarbonization set to be a focal point at Baku's national "Industrial Safety Summit" on November 30.