Chapter 5 | PROJECTS CONTRIBUTING TO THE OPEC FUND’S CLIMATE FINANCE
The benefits of decarbonizing Azerbaijan’s energy sector are manifold. Reducing domestic natural gas consumption will allow Azerbaijan to increase energy exports, partially offset- ting the anticipated decline in oil exports. In the country’s New Zero Scenario (NZS), oil exports are projected to drop to about 94 terawatt-hours (TWh) by 2060, a stark contrast to over 350 TWh in 2021, due to lower global demand and declining productivity of Azerbaijan’s oil fields. 28 This deficit can be offset if the economics of electricity trade through renewable energy proves successful. Conversely, as Azerbaijan shifts towards domestic renew- able energy, natural gas exports are expected to rise by 35 percent by 2060 (from 210 TWh in 2021 to 286 TWh in 2060), a significantly higher increase compared to the baseline scenario (214 TWh in 2060) 29 . This surge in gas exports, driven by reduced domestic demand (3 TWh in NZS versus 71 TWh in business-as-usual by 2060) 30 , will help meet the growing global demand for natural gas as a transitional fuel, particularly in Europe. However, this in- crease is temporary, as global decarbonization will even- tually reduce the demand for all fossil fuels.
shifting the trend towards renewable energy, demonstrat- ing the feasibility and attractiveness of such investments in Azerbaijan.
Assessment according to the Joint MDB Methodology for Tracking Climate Finance
According to the Common Principles for Climate Mitiga- tion Finance Tracking, both wind power projects fall un- der the category of “renewable energy generation” and, specifically, the “generation of renewable energy with low life cycle GHG emissions to supply electricity, heating, me- chanical energy, or cooling.” Therefore, these projects are eligible to be counted as mitigation finance. The criteria specify that the GHG emissions of renewable energy must be substantially lower than those from fossil fuel generation without carbon capture and storage or uti- lization. However, for energy sources widely recognized to have very low life cycle emissions such as solar, wind and tidal energy, a detailed examination of GHG emissions is not necessary. As such these investments are eligible to be counted wholly as mitigation finance.
The Absheron-Khizi project will be the first independently developed utility-scale wind power project in Azerbaijan and the largest in the Caucasus region and pivotal in
Therefore, all of the OPEC Fund’s US$50 million towards this project is classed as mitigation finance.
28 World Bank Country Climate and Development Report Azerbaijan, https://www.worldbank.org/en/country/azerbaijan/publication/country-climate-and-development-report-for-azerbaijan
29 Ibid. 30 Ibid.
40
Powered by FlippingBook