Azerbaijan advances toward green economy, study shows

Azerbaijan is making gradual progress towards transforming its economy and adopting a more sustainable development model, according to the Report on Turkic Economies 2025: Green Economy Transition, prepared by the Turkic Academy in cooperation with the Organisation of Turkic States (OTS) and the Turkic Investment Fund (TIF).

The report said the transition is accompanied by structural challenges and environmental pressures that require sustained institutional and technological measures.

In terms of preparedness for the green transition, Azerbaijan is grouped among countries with an emerging institutional foundation, alongside Kyrgyzstan, Turkmenistan and Uzbekistan. Hungary, Türkiye and Kazakhstan occupy the leading positions in the region.

According to the document, Azerbaijan's economic performance has fluctuated in recent years. GDP growth stood at 4.7% in 2022 before slowing to 1.4% in 2023 and rebounding to 4.2% in 2024. Growth slowed again to 1.4% in 2025. Services account for a significant share of the economy, while industry also remains an important component.

Azerbaijan's foreign trade continues to reflect its traditional reliance on the energy sector, with fuel products accounting for 91.5% of merchandise exports. The country's export concentration index is 0.596, while its Economic Complexity Index (ECI) stands at -0.574, pointing to room for further diversification of exports.

At the same time, demand for low-carbon technologies is gradually emerging. Such products account for 4.9% of imports and around 0.1% of exports. Imports cover roughly 40% of final domestic demand, while bio-goods represented 25% of Azerbaijan's imports in 2023, above the global average of 16.6%.

The study highlights the implications of increasingly stringent climate policies among international trading partners. For Azerbaijani exporters, adapting to the EU's Carbon Border Adjustment Mechanism (CBAM) is becoming increasingly important. Meeting new requirements for emissions monitoring, reporting and verification could help maintain the competitiveness of Azerbaijani products in the European market.

The energy sector offers considerable potential for further progress in the green transition. According to the report, clean energy sources accounted for 12% of Azerbaijan's electricity generation in 2024, up from 8.1% in 2000. However, fossil fuels, particularly natural gas, continue to dominate electricity production.

Industry, transport and households account for broadly similar shares of final energy consumption, while 15.6% is used for non-energy purposes. GDP energy intensity is estimated at 4,312 megajoules per $1,000 of GDP at purchasing power parity, indicating significant scope for improving energy efficiency.

The report also assesses the country's use of natural resources. Natural resource depletion represented 16.2% of Azerbaijan's gross national income in 2021. Total domestic extraction of raw materials reached 114 million tonnes in 2024, equivalent to 11.2 tonnes per capita. Fossil fuels made up around 47% of the total, while non-metallic minerals, including materials used in construction, accounted for 31%.

Environmental challenges remain another key area for development. Azerbaijan is classified as having a moderately high level of water stress, with freshwater withdrawals equivalent to around 65% of renewable water resources. Climate change is also placing additional pressure on infrastructure. The number of days with extremely high temperatures has risen by 223% compared with 1990 levels, potentially contributing to higher seasonal electricity demand.

Waste management presents further opportunities for improvement, particularly through expanded recycling and resource-recovery infrastructure. Only 12.6% of useful fractions from municipal waste are currently recovered or utilised, while the overall waste-management efficiency score stands at 21.6 out of 100. Electronic waste generation is estimated at 8.7 kilograms per person, while organised collection is described as virtually non-existent.

In international sustainable development rankings, Azerbaijan ranks 64th on the Sustainable Development Goals Index, with a score of 72.9 out of 100. It ranks 103rd in the EIU Sustainability Index, scoring 44.2 points.

The report also examines the social implications of the green transition. The wealthiest 10% of the population receives 36.8% of national income, while UNCTAD's income equality indicator gives Azerbaijan a score of 73.7 points. Labour-market conditions remain an area requiring attention during structural and energy reforms, with vulnerable employment, including self-employment and domestic work, accounting for around 53% of total employment. The report therefore highlights the need to introduce targeted social support alongside gradual energy price and tariff adjustments.

Under its updated Nationally Determined Contribution (NDC 3.0), Azerbaijan has set a target of cutting net greenhouse gas emissions by 40% by 2035 from 1990 levels. The country also aims to achieve carbon neutrality by 2050. Azerbaijan currently accounts for approximately 0.11% of global greenhouse gas emissions.

By Bakhtiyar Abbasov