Azerbaijan developing new model of green development - REPORT

Azerbaijan is demonstrating gradual progress toward economic transformation and transitioning to a more sustainable development model, Report informs, citing the Report on Turkic Economies 2025: Green Economy Transition, prepared by the Turkic Academy jointly with the Organization of Turkic States (OTS) and the Turkic Investment Fund (TIF).

This process is accompanied by a number of structural features and environmental challenges that require consistent institutional and technological solutions.

In terms of readiness for the green transition, Azerbaijan belongs to a group of countries with an emerging institutional base, alongside Kyrgyzstan, Turkmenistan, and Uzbekistan. Meanwhile, leading positions in the region are held by Hungary, Türkiye, and Kazakhstan.

The report notes that Azerbaijan's economic dynamics in recent years have been characterized by certain fluctuations. After growing by 4.7% in 2022, GDP growth rates stood at 1.4% in 2023, recovering to 4.2% in 2024. In 2025, economic growth rates slowed again to 1.4%. In the structure of the national economy, the services sector plays a significant role, while industry retains substantial weight.

The country's foreign trade structure largely reflects its traditional specialization in the energy sector. Fuel products account for 91.5% of total merchandise exports. Azerbaijan's export concentration index stands at 0.596, while its Economic Complexity Index (ECI) is at -0.574, indicating opportunities for further expansion and diversification of the export basket.

At the same time, a gradual formation of demand for low-carbon technologies is noted. Their share in imports accounts for 4.9% of the total volume, while exports account for about 0.1%. The share of imports in meeting final domestic demand remains relatively stable at around 40%. Meanwhile, bio-goods account for 25% of Azerbaijan's import structure (2023 data), which is higher than the global average of 16.6%.

Special attention in the study is paid to foreign trade prospects amid tightening climate policies of international partners. In particular, adapting to the requirements of the EU's Carbon Border Adjustment Mechanism (CBAM) is becoming an important factor for Azerbaijani exporters. Compliance with new emissions monitoring, reporting, and verification standards will help preserve the competitiveness of products on the European market.

Significant potential for a further green transition is tied to the energy sector. According to the report, the share of clean energy sources in Azerbaijan's electricity generation increased from 8.1% in 2000 to 12% in 2024. However, the main portion of generation still relies on fossil fuels, predominantly natural gas.

In final energy consumption, comparable shares are held by industry, transport, and the residential sector, with another 15.6% of energy used for non-energy purposes. The energy intensity of GDP stands at 4,312 MJ per $1,000 of GDP at PPP, which, according to the study's authors, indicates significant potential for further energy efficiency improvements.

The report also provides indicators on natural resource utilization. The share of natural resource depletion in Azerbaijan's gross national income was 16.2% in 2021. In 2024, total domestic extraction of raw materials reached 114 million tons, or 11.2 tons per capita. About 47% of this volume consists of fossil fuels, while 31% accounts for non-metallic minerals, including raw materials for construction material production.

The environmental component remains one of the important vectors for further development. Azerbaijan belongs to countries with a moderately high level of water stress: fresh water abstraction accounts for about 65% of renewable reserves. Simultaneously, climate change imposes additional burdens on infrastructure. The number of days with extremely high temperatures increased by 223% compared to 1990 levels, which, among other things, may contribute to growth in seasonal electricity demand.

In waste management, potential also remains for further developing recycling infrastructure and resource recovery. The rate of utilization and extraction of useful fractions from municipal waste stands at 12.6%, while the overall waste management efficiency score is estimated at 21.6 points out of 100. Furthermore, electronic waste generation reaches 8.7 kg per capita, while its organized collection, according to the study, is currently virtually non-existent.

In international sustainable development rankings, Azerbaijan holds 64th place in the Sustainable Development Goals index (SDG Index), scoring 72.9 points out of 100. In the EIU Sustainability Index, the country ranks 103rd with a score of 44.2 points.

The social dimension of the green transition is also examined in the study. The top 10% most affluent population accounts for 36.8% of national income, while the income equality indicator assessed by UNCTAD stands at 73.7 points. One of the areas requiring attention during structural and energy reforms remains the labor market: the share of vulnerable employment, including self-employed and domestic workers, accounts for about 53% of total employment. In this regard, the gradual implementation of price and tariff adjustments in energy assumes the simultaneous development of targeted social support mechanisms.

Under its updated Nationally Determined Contribution (NDC 3.0), Azerbaijan set a target to reduce net greenhouse gas emissions by 40% by 2035 compared to the baseline year of 1990. The country's long-term goal envisions achieving carbon neutrality by 2050. To date, Azerbaijan accounts for approximately 0.11% of total global greenhouse gas emissions.