Chapter 5 | PROJECTS CONTRIBUTING TO THE OPEC FUND’S CLIMATE FINANCE
OPEC Fund-supported projects are vital for Uzbekistan’s cli- mate goals. The updated NDC targets a 35 percent reduction in GHG emissions per GDP unit by 2030 and aims for renew- ables to make up 25 percent of power generation. The OPEC Fund supports one-third of the 3 GW wind power target and fosters private sector investment through a partnership with ACWA, aligning with the government’s climate policy. Transitioning to renewable energy will establish Uzbekistan as a regional leader in sustainable energy and reinforce its climate commitments. The partnership emphasizes the role of global cooperation in achieving climate targets and pro- moting sustainable development.
The country is already experiencing the harmful effects of climate change, with the ecological disaster of the dry- ing Aral Sea – once the fourth largest lake in the world – creating substantial environmental and developmental is- sues. Droughts, extreme heat, unpredictable rainfall and dust storms are severely impacting both the population and the economy. Air pollution is also a growing environmental and health challenge in Uzbekistan, with annual health dam- age costs increasing. Effects of pollution are now equalling 6.5 percent of the country’s GDP. This pollution dispropor- tionately affects women, children and vulnerable groups. 55
Purpose of the Loan
Assessment according to the Joint MDB Methodology for Tracking Climate Finance
The OPEC Fund’s loans are key to Uzbekistan’s transition to a low-carbon economy, focusing on renewable energy, par- ticularly wind power. This shift is essential for reducing the country’s high GHG emissions from its fossil fuel-dependent energy sector. The loan helps Uzbekistan meet its goal of a 35 percent re- duction in GHG emissions per GDP unit by 2030, financing one-third of its wind power target. Partnering with ACWA Power, the loan provides capital and international expertise for renewable energy development. This funding supports immediate climate targets and long- term sustainable development by transitioning from gas to renewables like wind and solar. It enhances energy security, reduces emissions, and fosters economic growth, setting the stage for a cleaner, more resilient energy sector and posi- tioning Uzbekistan as a regional renewable energy leader.
The OPEC Fund financed mitigation activities in both ACWA power projects:
Investments in wind power are eligible for mitigation finance. According to the Common Principles for Climate Mitigation Finance Tracking, wind power projects fall under the cate- gory “renewable energy generation,” specifically the eligible activity “generation of renewable energy with low life cycle GHG emissions to supply electricity, heating, mechanical en- ergy, or cooling.” Therefore these investments are eligible to be counted as mitigation finance. Both investments satisfy additional criteria to determine eligi- bility. The additional criteria state that GHG emissions from re- newable energy should be substantially lower than those from fossil fuel generation without carbon capture and storage or utilization. However, examination of GHG emissions is not necessary for energy forms widely recognized to have very low life cycle emissions, such as solar, wind, and tidal energy. Therefore, both investments qualify as mitigation finance.
Expected Outcomes
Uzbekistan is ambitiously tackling climate change and trans- forming its economy. After ratifying the Paris Agreement in 2018, it committed to a 10 percent reduction in GHG emissions per GDP unit by 2030, which was increased to 35 percent at COP26 in 2021.
Mitigation finance for these projects has been estimated at US$20 million each, totaling US$40 million.
53 University of Notre Dame (2024). Notre Dame Global Adaptation Initiative. URL: https://gain.nd.edu/our-work/country-index 54 European Commission (2024). INFORM Index for Risk Management. Armenia. URL: https://drmkc.jrc.ec.europa.eu/inform-index 55 World Bank Climate Knowledge Portal: https://climateknowledgeportal.worldbank.org/sites/default/files/2021-09/15838-Uzbekistan percent20Country percent20Profile-WEB.pdf
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