AZTAF: Sustainable development in Azerbaijan backed by EU, WB Caliber.Az review

Development of "green" energy and energy efficiency systems, digitalization of the economy, innovation implementation, and human capital development are the key goals of the long-term program "Azerbaijan 2030: National Priorities for Socio-Economic Development."

International structures, including the European Union and the World Bank (WB), have shown interest in these strategic directions. About two and a half years ago, the EU and the WB signed an agreement with the government of the republic on a grant for the Azerbaijan Rapid Technical Assistance Facility (AZTAF) program. The implementation of projects and new initiatives in this area was discussed at the second annual reporting meeting on the AZTAF program, held the day before in Baku.

The expert community is unanimous in the opinion that the "Azerbaijan 2030: National Priorities" program has identified the most crucial directions for the transformation of the domestic economy to more fully integrate it into the international division of labour. This involves the digital transformation of society and the economy, the implementation of Fourth Industrial Revolution (4IR) technologies, enhancing the competitiveness of the non-oil sector in domestic and international markets, qualitative growth of human capital, development of programs ensuring the creation of a clean environment and "green growth", as well as the implementation of the Great Return plans to the liberated territories.

To implement the world's best practices in these areas, the government is interested in attracting structures from the European Union, international financial organizations (IFOs), etc. Essentially, these are the goals served by the AZTAF program, financed by the EU and supported by WB specialists, whose tasks are formulated in close cooperation with the government and the Ministry of Economy of Azerbaijan.

"The Azerbaijan Rapid Technical Assistance Facility (AZTAF) program is an important step towards the sustainable development of a country actively striving for energy transition and energy efficiency, increasing women's participation in the labour market, adapting to climate change, digitalization, the development of 'smart villages,' and more. All these aspects play a key role in the sustainable development of the country, and in this context, the AZTAF project acquires special significance as an important element in the implementation of the Azerbaijan 2030: National Priorities and the Socio-Economic Development Strategy of Azerbaijan for 2022-2026," said World Bank Country Manager for Azerbaijan, Stefanie Stallmeister, during the meeting. The World Bank representative emphasized that four of the nine directions implemented under the AZTAF program are nearing completion.

Notably, despite misunderstandings on several foreign policy issues with some EU countries, Azerbaijan continues to make consistent efforts in matters of business, scientific, technical, and humanitarian cooperation with the European Commission and other EU structures, implementing advanced European experience in various fields.

The AZTAF program is a clear example of an effective partnership with the EU, as confirmed by European experts themselves. " The European Union, and specifically the EU Delegation in Baku, are pleased to support these initiatives in partnership with the World Bank, as well as several UN agencies that implement our projects," said Viktor Bojkov, Head of the Cooperation Department at the EU Delegation in Azerbaijan, during the reporting forum.

"The AZTAF program covers key areas that are closely linked to the UN Sustainable Development Goals (SDGs), and our commitment to strengthening resilience, inclusiveness, and sustainability in Azerbaijan remains steadfast," he added.

The grant budget for the three-year AZTAF project amounts to 5.25 million euros. At the same time, many of the initiatives presented in the program are also funded through separate programs and projects by the EU and the World Bank.

Specifically, as noted by Advisor to the Minister of Economy of Azerbaijan, Rauf Najafli, over more than 30 years of successful cooperation, the World Bank has provided Azerbaijan with over $4 billion in state-guaranteed loans for 52 investment projects, as well as $30 million in technical assistance and grants for 115 initiatives.

"These loans in the areas of transportation, social protection, water supply and irrigation, agriculture, ecology, and 'green' initiatives have made a significant contribution to the development of the country's economy," emphasized the advisor. Equally significant is the investment support from the European Union, and according to Najafli, from 2012 to 2023, the total volume of EU investments in Azerbaijan amounted to $24.7 billion.

In addition, through the main credit institution of the EU - the European Bank for Reconstruction and Development (EBRD), approximately 3.7 billion euros have been provided to the country for financing around 190 projects from 1992 to the present day. Moreover, in recent years, as part of the EBRD's new country policy, there has been increased activity in financing "green" initiatives and the renewable energy sector.

This includes loans for improving municipal and energy efficiency in Ganja under the EU's "Green Cities" project (GCAP) and financing for the company ACWA Power, which is constructing the Absheron-Khizi wind power plant. In the future, the EBRD is prepared to participate in financing other projects in the renewable energy sector, including initiatives for offshore wind generation in the Azerbaijani sector of the Caspian Sea, the Black Sea Energy submarine cable project, and the development of Azerbaijan's hydrogen strategy, among others, with the support of the European Bank.

The environmental focus presented in the pilot grant program AZTAF, the development of the renewable energy segment, and energy efficiency are promising directions that are planned to be implemented in the coming years within the framework of new initiatives by the WB and the EU in Azerbaijan.

For instance, within the AZTAF program component "Energy Efficiency and Climate," the World Bank is participating in a project to support the "Energy Efficiency Fund" and the "Roadmap for the National Renovation Program" (NRP)in Azerbaijan. As part of this work (scheduled to be completed in July 2024), activities have been carried out to support the activities of the Energy Efficiency Fund and prepare the roadmap for the NPR: data have been collected on dozens of public buildings in the cities of Ganja, Shaki, and Gakh, these buildings have been classified according to typology and climatic zones, and have undergone energy audits. The WB is ready to support Azerbaijan in improving the efficiency of heating systems in the municipal sector, where significant problems are currently observed.

"Around the world, approximately 30% of energy consumption is attributed to buildings, but in Azerbaijan, this figure reaches 38% in the residential sector alone. If we include industry and other sectors, it amounts to around 50%: the average energy consumption of buildings in the country is about 0.85 gigajoules, which is higher than the global average," emphasized Florian Kitt, a World Bank energy specialist participating in the reporting meeting.

According to the expert, energy efficiency is the most accessible and rapid measure to reduce the rapidly growing energy consumption in the heating and cooling sector, and steps in this direction will help reduce losses in the energy sector, supporting energy diversification towards the 'green' track.

"The World Bank plans to discuss with the government of Azerbaijan the possibilities of monetizing carbon dioxide emissions quotas. Today, there are several instruments, such as carbon taxes and carbon markets, and together with the government, we aim to find the optimal solution for Azerbaijan," noted Kitt.

According to him, the possibility of monetizing carbon dioxide emissions quotas will be discussed with the government as part of the preparation and implementation of a joint project with the WB on electricity transmission - AZURE. The project involves integrating wind and solar power plants being constructed in the country to transmit one gigawatt of electricity to Azerbaijan's unified energy grid.