Azerbaijan should begin creating internal carbon market, Central Bank official says

Azerbaijan should begin creating an internal carbon market, Economist at the Department of Sustainable Development of the Financial Sector of the Central Bank of Azerbaijan Ali Ahmadzada said during Baku Climate Action Week, Report informs.

According to him, the agreement on Article 6 of the Paris Agreement was finalized at COP29, and now there is an international framework that Azerbaijan will be able to join in the future.

"What we don't have yet is an internal market. However, there is no need to start from scratch: there are more than 20 jurisdictions in the world that have been developing carbon markets for decades. We can use their experience and mistakes to create a reliable market faster and at lower costs," Ahmadzada said.

He noted that the development of a carbon market is not an easy path. Many countries have faced a sharp drop in prices due to the excessive allocation of free quotas and have revised the design of their systems. At the same time, cross-border operations are limited - they require the permission of the Cabinet of Ministers and the approval of the Ministries of Finance and Economy, which creates additional reliability for developing countries.

"We should analyze this experience more deeply and already begin work on creating the necessary infrastructure in Azerbaijan. We need to start with studying the legal framework, creating a system of measurement, reporting and verification (MRV), and gradually transitioning from a project-based market to a national one," the CBA representative concluded.