ADB: Azerbaijan Can Significantly Reduce CO₂ Emissions from Transportation

Azerbaijan’s transportation sector could reduce its CO₂ emissions by approximately 600,000 metric tons by 2030. The investments required to achieve this would amount to approximately 18 million U.S. dollars. This is the conclusion of a report by the Asian Development Bank (ADB) titled “Assessing the Impact and Potential of Carbon Pricing in the Transport Sector in CAREC Countries.”

According to the ADB, the number of vehicles registered in Azerbaijan rose to more than 1.3 million passenger cars and over 160,000 trucks by 2021.

The bank estimates that around 3,000 electric city buses could be in service by 2030. It also assumes that 1% of trucks and 5% of passenger cars will be electrified and that 30% of the electricity will be used at public charging stations. Together, these measures could enable the projected reduction in emissions.

Rail Transport as the Key to Decarbonization

According to the ADB, the Azerbaijan Railways (ADY) has already implemented numerous decarbonization measures, including the ongoing electrification of the rail network.

In 2024, ADY published its first sustainability report and developed a decarbonization strategy with support from the ADB. In addition, the company is working on the introduction of a company-wide emissions trading system designed to be compatible with international CO₂ trading mechanisms. The goal is to monetize emissions credits and support international climate protection goals.

However, the ADB does not view the electrification of the rail network alone as the single greatest contributor to emissions reduction. Modern diesel multiple units are already comparatively efficient. Significantly greater savings could be achieved if more freight and passenger traffic were shifted from road to rail.

Greenhouse gas emissions per passenger-kilometer are typically three to five times lower for rail transport than for long-distance buses. In freight transport, depending on the cargo, rail produces three to seven times fewer emissions per metric ton-kilometer than road transport.

CO₂ Pricing and Subsidy Reduction

According to the ADB’s assessment, Azerbaijan can significantly reduce its emissions through a combination of increased rail use, cleaner fuels, and higher energy efficiency standards.

The report assumes that, given current trends, fossil fuels could largely disappear from the transportation sector by 2060.

As part of various model simulations, the ADB also examined possible scenarios for CO₂ pricing in conjunction with the gradual phase-out of subsidies for natural gas and petroleum.

According to the report, to achieve the nationally determined contributions (NDCs) by 2030, the CO₂ price would need to rise to $25 per metric ton of CO₂ by 2035, to $41 by 2050, and to $62 by 2060.

For a scenario of full climate neutrality by 2060, significantly higher prices would be required: $30 per metric ton of CO₂ by 2035 and $280 by 2060.

World Bank Recommends CO₂ Tax

According to the ADB, the World Bank recommends that the Azerbaijani government introduce a CO₂ tax on the carbon content of all fuels—regardless of whether they are imported or produced domestically. The tax would be levied when the fuels enter the economic cycle and, according to estimates, could cover around 60% of total emissions.

In the World Bank’s view, the existing excise tax system could be expanded accordingly.

Another World Bank model study concludes that the most effective way to achieve national climate goals is through a combination of the gradual phase-out of fossil fuel subsidies and the introduction of CO₂ pricing.

According to the study, phasing out just two-thirds of existing subsidies would be sufficient to meet the 2030 climate targets. At the same time, the study recommends partially returning the revenue from CO₂ pricing to households and reducing taxes on factors of production such as capital, labor, and land.