BAKU, Azerbaijan, July 22. Azerbaijan's Ministry of Ecology and Natural Resources has proposed to establish a National Carbon Registry.
A new draft law "On climate" has been prepared, which will regulate climate policy in Azerbaijan within a single legal framework.
The draft law of Azerbaijan "On climate" has been placed in the "Announcements" section of the official website of the Ministry of Ecology and Natural Resources for public discussion.
The draft law "On climate" defines the legal, economic, and organizational foundations of Azerbaijan's climate policy. The document regulates the planning and implementation of measures to ensure low-emission and sustainable development, reduce greenhouse gas emissions, and adapt to climate change in accordance with the country's Constitution and international treaties to which it has acceded.
The draft law covers the formulation of the state's climate policy, emission reduction, climate change adaptation measures, the application of carbon pricing mechanisms, the issuance and use of emission quotas, the registration of carbon units and carbon projects, the creation of the National Carbon Registry, the organization of a national inventory, monitoring, reporting and verification system, as well as the collection and management of climate data.
According to the draft, the law will apply to state and local government bodies, state and non-state legal entities, and in certain cases to individuals. At the same time, carbon pricing mechanisms will not be applied to emissions arising in the field of state defense, security, and emergencies.
The document defines sustainable development, scientific justification, transparency and accountability, precaution, the "polluter pays" principle, just transition, public participation, and the application of market-based mechanisms as the main principles in the field of climate action.
The draft law also defines the main directions of state policy. These include the establishment of institutional foundations for climate policy, strengthening scientific and technological potential, preparation of strategic documents on emission reduction, phased introduction of carbon pricing, transition to a low-emission economy, integration of climate risks into state planning, implementation of international commitments, and promotion of climate finance.
According to the draft, the functions of the National Competent Authority will be performed by the Ministry of Ecology and Natural Resources. The Ministry will prepare Nationally Determined Contributions (NDC), a Long-term Low-Emission Development Strategy, form a carbon budget, determine the methodological foundations of the monitoring and reporting system, organize a national inventory, and ensure the implementation of international climate commitments.
The operator functions are expected to be performed by the National Hydrometeorological Service under the Ministry of Ecology and Natural Resources. The operator will manage the National Carbon Registry, keep records of emission quotas and carbon units, accept emission reports, register carbon projects, and ensure the security of the registry.
The draft law gives legal entities and individuals the right to participate in the ETS, develop carbon projects, acquire carbon units, conduct transactions in international carbon markets, and voluntarily cancel carbon units. At the same time, they will be obliged to calculate emissions in accordance with the established methodology, comply with monitoring and reporting requirements, submit emission reports, ensure the accuracy of data and, in cases where the ETS is applied, timely surrender the established quotas.
According to the draft law, a five-year carbon budget will be applied in the country in order to reduce emissions. The carbon budget will determine the maximum amount of emissions that can be emitted in the country during that period. The implementation of the carbon budget will be ensured through the ETS, carbon tax, and other economic mechanisms, and additional economic and fiscal measures will be developed if there is a risk of exceeding emission limits.
The document also defines the legal basis for carbon pricing. Accordingly, economic incentives will be created to reduce emissions, and carbon pricing will be implemented through the Emissions Trading System (ETS) and carbon tax. Parallel application of both the ETS and carbon tax on the same emission volume will not be allowed. Funds received from the auction of quotas and the carbon tax within the ETS can be directed to financing emission reduction, climate change adaptation, and fair transition measures.
The draft also defines in detail the mechanism for implementing the ETS. The system will determine the total emission limit, quotas will be distributed through auction, free allocation, or a mixed method, participants will prepare a monitoring plan, submit an annual emission report, and will have to transfer quotas equal to verified emissions to the National Carbon Registry. Transactions outside the registry will not have legal consequences.
According to the draft, ETS participants who fail to surrender their emission quotas within the specified period will pay a fine of an amount to be determined by the Cabinet of Ministers for each ton of carbon dioxide equivalent. In cases of repeated or serious violations, their right to conduct transactions in the National Carbon Registry may be temporarily restricted or suspended.
The draft law also regulates the activities of the carbon market. The National Carbon Registry will be a state information system that will record the release, transfer, use, and cancellation of carbon units. Registration of carbon projects will be possible only if additional emission reductions, measurability, verifiability, exclusion of double counting, management of leakage risks, and social and environmental safeguards are in place. Carbon credits will be created only based on the results of emission reductions or removals verified by an accredited independent body.
The document separately regulates the monitoring, reporting, and verification system. Emission reports will be verified by an independent accredited verifier. Without a positive verification opinion, ETS settlements will not be made, carbon credits will not be issued, and other market mechanisms will not be applied.
The draft also envisages the preparation of a National Adaptation Plan. The plan will identify climate risk assessments, priority sectors and regions, adaptation measures, funding sources, implementation mechanisms, and responsible institutions. Climate risks will also be taken into account when developing public investment programs.
The draft law also covers just transition issues.
The impact of carbon pricing mechanisms on employment, incomes, and vulnerable social groups will be assessed, and measures will be taken to support vocational training, retraining, diversification of economic activity, social protection, and small and medium-sized enterprises.
In addition, banks, insurance organizations, investment companies, and other entities operating in the financial sector will be required to identify, assess, and disclose climate risks. Criteria such as energy efficiency, emission intensity, use of low-carbon materials, waste reduction, and climate sustainability will be taken into account in public procurement.
The draft also envisages the creation of a climate information subsystem within the "Digital Ecology" information system to manage emissions, carbon projects, carbon registry, climate finance, and monitoring data on a single electronic platform. In addition, transparency of information on climate policy will be ensured, public hearings will be held, and their results will be presented to the public.
The draft law also provides for administrative and criminal liability for violation of obligations. Failure to submit emission reports, providing false information, failure to comply with the monitoring plan, failure to fulfill obligations under the ETS and carbon tax, illegal issuance of carbon credits, and violation of the rules of the National Carbon Registry will entail administrative liability. If fraud, document falsification, market manipulation, and other criminal acts are detected, the materials will be sent to law enforcement agencies.
According to the document, the ETS, carbon tax, and monitoring systems can be implemented in stages or on a pilot basis. During the pilot phase, emission reporting and data submission obligations will remain in force, and based on the results, a decision will be made on the full implementation of the system or redefinition of its parameters.
