BAKU, Azerbaijan, January 12. The energy sector will continue to play a central role in Azerbaijan’s economy in the coming years, given its significant contribution to fiscal revenues and export earnings, Anna Rose Bordon, head of the International Monetary Fund (IMF) mission in the country, told Trend.
She said that the global energy transition and declining demand for fossil fuels pose challenges to the long-term sustainability of hydrocarbon-dependent growth.
According to the mission head, in this context, economic diversification remains critical.
"The government should continue to attract private investment by pursuing key reforms such as improving state-owned enterprises' performance, enhancing governance, and promoting private sector access to finance," Bordon added.
Azerbaijan has outlined measures in its third Nationally Determined Contribution (NDC) to decarbonize the electricity sector by 2035.
Key measures include:
- Modernizing transmission and distribution networks to accommodate rising demand and boost renewable energy integration;
- Implementing advanced grid management tools to minimize technical losses;
- Significantly increasing power generation from renewables, with a primary focus on solar and onshore wind;
- Expanding installed solar capacity;
- Scaling up onshore wind power capacity.
Since the power sector mainly relies on natural gas, it continues to be the country's biggest contributor to greenhouse gas emissions, making up 21% of total emissions as of 2022.
A Nationally Determined Contribution (NDC) is a country's own plan laid out under the Paris Agreement to cut down on greenhouse gas emissions and adjust to the impacts of climate change, working towards keeping global warming down to well below 2°C, ideally 1.5°C, in comparison to pre-industrial levels. These plans lay out specific targets, policies, and measures for tackling and adapting to climate change and need to be updated every five years with rising ambition, making up the core of national climate action.