World Bank supports Azerbaijan’s climate transition with carbon market roadmap

As climate change intensifies and global carbon emissions
continue to rise, the urgency for coordinated international action
has reached a critical point. While sustainable development remains
a universal aspiration, it also poses challenges that transcend
borders. Effectively addressing the climate crisis now depends not
only on policy ambition but also on strategic alignment and global
solidarity.

Azerbaijan, traditionally viewed through the lens of its oil and
gas wealth, is increasingly repositioning itself as a proactive
player in the global climate agenda. Despite its hydrocarbon
legacy, the country is aligning national development goals with
climate mitigation strategies – an approach that underscores the
complexity of transitioning to a green economy while maintaining
energy security.

This balancing act was on full display when Azerbaijan hosted
the 29th session of the Conference of the Parties to the UN
Framework Convention on Climate Change (COP29) in November 2024 –
one of the most significant climate diplomacy events of the year.
The choice of Azerbaijan as host was not only symbolic but
strategic, reinforcing its role as a bridge between fossil
fuel-dependent economies and the global push for
decarbonization.

Domestically, the designation of 2024 as the “Year of Solidarity
for a Green World” reflects the country’s political will to
integrate environmental sustainability into national policy
discourse. However, symbolism must be matched with structural
change – especially in a carbon-intensive economy.

The workshop also tackled a less visible but increasingly
influential aspect of climate governance – international carbon
markets and border adjustment mechanisms. With the European Union’s
Carbon Border Adjustment Mechanism (CBAM) set to reshape global
trade dynamics, Azerbaijan faces both opportunities and risks. On
one hand, failure to adapt could subject exports to costly tariffs;
on the other, strategic alignment with carbon market frameworks
could unlock new revenue streams and investments opportunities.

During the second day of workshop, participants conducted a
readiness assessment of Azerbaijan’s infrastructure and policy
environment for engaging in global carbon markets. Utilizing tools
like the Mitigation Action Assessment Protocol and the World Bank’s
Decision Tree for Navigating Carbon Markets, experts offered
Azerbaijan a tailored roadmap for market entry and cooperation.

The dialogue also revealed significant institutional engagement.
Representatives from key ministries and state-owned enterprises –
including SOCAR, Azerenerji, and the Ministry of Energy –
highlighted the multi-sectoral nature of the carbon transition.
However, this diversity also underscores the governance challenge
ahead: coordinating climate action across fragmented bureaucracies
and vested interests.

Azerbaijan’s current trajectory offers important insights for
other fossil fuel-dependent economies exploring climate action
without undermining economic stability. The country’s dual strategy
– embracing clean energy narratives while maintaining traditional
energy partnerships – may appear contradictory, but it reflects the
practical complexities of the global energy transition.

Ultimately, carbon pricing is not just about taxing pollution;
it’s about redefining value in a low-carbon world. For Azerbaijan,
the path forward will require more than political declarations and
international workshops. It will demand a sustained institutional
transformation – grounded in economic realism, environmental
integrity, and social fairness.

If the momentum from COP29 and the World Bank workshop
translates into concrete policy instruments, Azerbaijan could
emerge not only as a regional climate leader but also as a model
for transitional economies grappling with the dual imperatives of
development and decarbonization.

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