COP29: Is Azerbaijan ready for decarbonisation?

In November 2024, Azerbaijan will host one of the largest international events – the COP29 climate summit. Azerbaijan's candidacy was supported by all representatives of the Eastern European group of countries and it will mark a milestone on the country’s journey to make its economy greener.

The World Summit of the United Nations Framework Convention on Climate Change (UNFCCC) – Conference of Parties (COP) – is a large-scale event. As the relevance of climate issues and their politicisation grows, so does the number of its participants. Azerbaijan is keen to host this prestigious event and has already successfully organised many large-scale forums.

"Hosting large-scale international events certainly puts a lot of responsibility on us. However, we have held many international events so far. At COP29, tens of thousands of foreign representatives will come to our country, and for two weeks Baku will become the centre of the world. According to some estimates, during this period our country will host approximately 70-80,000 foreign guests," said Azerbaijani President Ilham Aliyev on December 15 at a meeting on the organisation of COP29 in Baku.

Baku’s COP29 will be the third time in a row that the World Climate Summit will be held in an oil and gas producing country. The previous two were hosted by Egypt and the UAE.

Transition Plan

The fact that Azerbaijan is an oil and gas producing country should not be an obstacle to organising climate discussions and developing green energy, according to Aliyev.

On December 25, the president signed a decree declaring 2024 as the “Green World Solidarity Year” and reaffirming Azerbaijan’s commitments to global climate change efforts. The decree set ambitious targets, aiming to reduce greenhouse gas (GHG) emissions by 35% by 2030 and 40% by 2050, relative to the 1990 baseline year.

"Focusing on energy policy, Azerbaijan prioritises the creation of green energy sources and the global distribution of green energy. The goal is for renewable energy to constitute 30% of electricity generating capacity by 2030," the document says.

The latest round of climate goals follows from February 2021, when Aliyev signed the "Azerbaijan 2030: National Priorities for Socio-Economic Development" programme, in which alternative energy is defined as one of the five national priorities. Concrete progress has already been made. New energy facilities in Karabakh and Eastern Zangezur, declared by the president as a green energy zone, are in the process of being connected to the country's power grid.

By 2060, the global economy aims to achieve complete decarbonisation. According to the World Bank's country report on climate and development, decarbonisation will cost Azerbaijan $44bn. Regional director for the South Caucasus of the World Bank Rolanda Price believes that regardless of the pace of global decarbonisation, accelerating investments in decarbonisation is in Azerbaijan's interests. These efforts also align with the national goals of diversifying the economy, she thinks. The amount is substantial, but Azerbaijan is determined to achieve its goals.

In the medium term, Azerbaijan aims to become an exporter of electricity generated from alternative sources. This will be aided by the implementation of large-scale projects in territories recently liberated from Armenian occupation. By 2025, air quality measurement stations will be installed in these regions. Transforming these territories into a zero-emission zone is Azerbaijan's contribution to improving the planet's unified ecosystem.

Overall, Azerbaijan has signed contracts and memoranda of understanding (MoUs) with foreign companies for projects generating 10 GW of solar and wind energy. Their implementation will enable a smooth transition from fossil fuels to renewable energy sources without harming the national economy and will provide green energy to European consumers.

The success of these plans is facilitated by the growth of the Azerbaijani economy and, consequently, the country's capabilities. Azerbaijan is already implementing a number of large-scale green projects, which were presented at the national pavilion in Dubai during the COP summit.

According to forecasts by Azerbaijan's Ministry of Economy, by 2025 the share of the non-oil sector in GDP will be 72.9%. By 2026, Azerbaijan aims to increase the volume of non-oil and gas exports by 85% compared to 2021.

International Cooperation

For collaboration in the development of alternative energy Azerbaijan has chosen companies that are among the largest in implementing relevant projects.

On October 26, 2023, the Garadagh Solar Power Plant with a capacity of 230 MW was launched in Baku by Masdar from the UAE. This plant is capable of supplying electricity to 110,000 residential homes. During the opening ceremony Masdar signed three more investment agreements with the Azerbaijani side in the field of green energy with a total capacity of 1,000 MW. These include the construction of a solar power plant with a capacity of 445 MW, a solar power plant with a capacity of 315 MW, and a wind power plant with a capacity of 240 MW.

In June 2021 the Ministry of Energy of Azerbaijan and BP signed an executive agreement for co-operation in assessing and implementing a project to build a 240-MW solar power plant in the Zangilan-Jabrayil zone. ACWA Power from the Kingdom of Saudi Arabia (KSA) will commission the Khizi-Absheron wind power station in Azerbaijan in 2025 with a capacity of 240 MW. The project will involve the installation of 40 turbines, each with a capacity of 6 MW. Turkey, Denmark, Germany and Israel have expressed their readiness to participate in alternative energy projects.

And in April 2021, an MoU was signed between the Ministry of Energy and the International Finance Corporation (IFC) for co-operation in the use of offshore wind energy to develop renewable energy sources in Azerbaijan in collaboration with leading world companies, and attracting foreign capital to the green energy sector will allow Azerbaijan to keep pace with global trends.

Opportunities and Potential of Azerbaijan

A large part of Azerbaijan's total potential for alternative and renewable energy sources is attributed to solar energy – 5,000 MW. Wind energy is the second highest with a potential of 4,500 MW. The Caspian Sea has the greatest potential. Preliminary estimates suggest that just in the Azerbaijani sector of the sea, 157,000 MW of energy can be generated. This is much more than the total capacity of Azerbaijan's power plants. The liberated regions of Karabakh and Eastern Zangezur could generate 10 GW of wind and solar energy. Currently the total installed capacity of hydropower plants (HPPs) built on the liberated lands is about 80 MW. The total capacity of all the power plants being implemented or planned in these regions will exceed 370 MW.

The next decade should see Azerbaijan transitioning to widespread use of green energy. A few years ago, the International Renewable Energy Agency (IRENA) noted in its report the high potential for renewable energy in Azerbaijan: "Despite currently relying on oil and gas, the country possesses excellent wind and solar resources, along with significant potential for biological, geothermal and hydroelectric projects."

Risks and Challenges

While focusing on the development of green energy, Azerbaijan recognises that it cannot make abrupt changes in this direction. The country, for whom the export of hydrocarbon energy resources remains one of the most important sources of income, cannot afford to set records in the transition to alternative energy. Although Azerbaijan faces demands for rapid change due to its selection as the host for the COP29 climate summit, the republic has its own interests, and damaging its national economy is not among them. A sharp reduction in pace, let alone a complete shift away from hydrocarbon energy at this stage, poses serious risks. Therefore all work is carried out in stages. Officially Baku has repeatedly announced its energy transition schedule and continues to adhere to it.

Economic development and politics go hand in hand, and the model for solving climate problems promoted by Europeans has a certain degree of politicisation, according to the president. Azerbaijani experts are closely studying ways to implement the energy transition and technological limitations of renewable energy sources. Efforts are made to separate what is seen as the political component of the energy transition and to provide an impartial assessment of the real prospects of decarbonisation processes based on renewable energy sources. Foreign experts also note that political risks and costs of implementing climate policy measures increase manifold in countries whose industrial sector depends on hydrocarbon energy sources.

In a certain sense, the energy transition and decarbonisation are a serious test for the Azerbaijani economy, a test of its resilience. Abandoning the oil and gas sector is not possible, not least because the country has signed long-term contracts. The republic will have to move along both vectors simultaneously to adapt its oil and gas sector to new conditions. Decarbonisation is inevitable, and Azerbaijan is ready for it.