WB calls Azerbaijan for estimation of challenges & transition timeline while charting green path

The combined effects of the global economic slowdown from the pandemic and the war in Ukraine call for a realistic estimation of the challenges and a transition timeline while charting Azerbaijan’s green path, Report informs referring to a study by the World Bank (WB).

The decarbonization pathways supported by low-carbon policies, financing, and near-term targets adopted by Azerbaijan’s main trading partners like China, the EU, Georgia, India, Israel, and Turkiye will affect the structural transformation of Azerbaijan’s economy.

“The EU’s ambition is to reduce fossil fuel consumption in all member countries, and the EU countries account for over 45% of Azerbaijan’s oil and gas exports, followed by Turkiye with 18.8%. Due to the large share of fossil fuel exports and resource rents in its GDP, Azerbaijan is highly exposed3 to transition risks and market volatility, while at the same time, the country’s resilience4 to such changes is low due to the lack of economic diversification and weak preparedness overall, including human capital,” reads the study.

As an oil-dependent and carbon-intensive economy, the key question for Azerbaijan is what adaptive strategy the country will pursue for its industries and sectors that will bear the brunt of these challenges.

“Moreover, the confluence of recent economic and geopolitical challenges indicates the need for Azerbaijan to strategically address the risk of transition shocks and determine the new, green growth poles – sectors with the potential to attract and significantly boost sustainable green growth, contribute to decarbonization and climate resilience, and create jobs.

“While the war in Ukraine has led to a short-term increase in demand for oil and gas, the long-term global ambition, however, continues to be a significant reduction of the dependence on fossil fuels and cutting GHG emissions. These developments mean that, while in the immediate future Azerbaijan will certainly gain from its untapped gas resources, as the global energy mix shifts from fossil fuels to renewables and new technologies emerge, kick-starting a green development trajectory in a timely manner will be a winning proposition. Taking early action to untie Azerbaijan’s revenue dependence from oil and gas will reduce the uncertainties and related risks, including associated future costs,” the WB noted.

“In addition to the transition risks, Azerbaijan’s economy is exposed to the physical impact of climate change. Addressing the related risks on time and in a strategic manner will bring multiple benefits. The diversification efforts towards greener growth need to consider the anticipated impacts of climate change on different sectors and aspects of life, notably the risks as well as the potential opportunities they bring.

As this study indicates, in the context of Azerbaijan, green growth and climate action in several sectors has the potential to bring mitigation and adaptation benefits; contribute to addressing sector- and country-specific environmental challenges and goals; and address the identified climate risks and vulnerabilities and strengthen climate resilience.

Such sectors include integrated approaches in water management, agriculture, land use and forestry, as well as a broader context of developing blue economy and coastal areas of the Caspian Sea.”