ADB outlines conditions for cutting emissions in Azerbaijan's transport sector

Transport sector emissions reductions in Azerbaijan could be achieved through a combination of mode shift and the introduction of clean fuels and energy efficiency measures, according to the Asian Development Bank (ADB), Report informs.

In a publication titled "Exploring the Impact and Opportunities of Carbon Pricing in the Transport Sector in CAREC Countries," the ADB said the rail sector is expected to play a bigger role in this regard.

"By 2060, conventional fossil fuels would be phased out. Another economic modeling and analysis explored potential scenarios involving carbon prices as a proxy for efficient decarbonization policies, alongside the gradual phase-out of natural gas and oil subsidies, to meet NDCs. Achieving the 2030 NDC target could involve carbon prices reaching $25 per ton of CO₂ (tCO₂) (footnote 6) in 2035, $41/tCO₂ by 2050, and $62/tCO₂ in 2060, while a net-zero scenario by 2060 might see prices increase to $30/tCO₂ in 2035 and $280/tCO₂ in 2060," says the ADB.

The report notes that the World Bank has suggested that the government introduce an upstream carbon tax, which would be levied on the carbon content of all fuels, whether imported or domestically produced, at the point they enter the economy:

"The tax could cover nearly 60% of all generated emissions and the current excise tax framework could be adapted or extended to accommodate the carbon tax collection. Another World Bank modeling exercise considered different policy options to employ to meet Azerbaijan's nationally determined contributions (NDCs) under the Paris Agreement. It suggested that the best option is the combination of a fossil fuel tax policy removal, which includes the elimination of subsidies for fossil fuels, along with a gradual introduction of carbon pricing. The model indicates that eliminating two-thirds of current fossil fuel subsidies is sufficient to achieve the targets for 2030. Additionally, the model considers that the revenue generated by carbon pricing should be redistributed to households, and a reduction in factor taxes (capital, labor, land) should also be considered."