Azerbaijan’s Nationally Determined Contribution 3.0

2.1. NDC 3.0 Background Information..................................................................................................13

2.2. NDC 3.0 Report Content Changes Compared to NDC 2 .......................................................14 3. National Context ............................................................................................................. 18

3.1. Geographic and Population Profile ...............................................................................................18

3.2. Climate Profile..........................................................................................................................................20

3.3. National Adaptation Plan (NAP) .....................................................................................................22

3.4. Stakeholder Engagement....................................................................................................................28

3.5. Integration to Greater Country-Level Vision ...........................................................................31 4. Economic Context and Emissions Profile................................................................. 34

4.1. Economic Landscape ............................................................................................................................34

4.2. Contributions to GHG Emissions ....................................................................................................34 5. Targets, Decarbonization Pathways and Mitigation Plans ................................. 38

5.1. Scope and coverage ...............................................................................................................................38

5.2. Overall Sectoral Pathways........................................................................................................................38

5.3. Sectoral Decarbonization Pathways and Mitigation Plans ......................................................39

5.3.1. Oil and Gas (Upstream and Midstream) ................................................ 40

5.3.2 Power................................................................................................. 43

5.3.3. Buildings................................................................................................ 46

5.3.4. Transportation ....................................................................................... 50

5.3.5. Industry ................................................................................................. 54

5.3.6. Waste .................................................................................................... 57

5.3.6. Agriculture, Forestry, and Other Land Use (AFOLU) ............................. 60

5.4. Infrastructure Requirements ...........................................................................................................63 6. Enabling Conditions for Implementing Mitigation Plans .................................... 66

6.1. Finance Mechanisms.............................................................................................................................66

6.2. Regulations and Policies .....................................................................................................................68

6.3. Technology and Innovation ..............................................................................................................71

6.4. Capability Building ................................................................................................................................72

6.5. Governance ................................................................................................................................................74

6.6. Implementation Challenges ..............................................................................................................75 2 Azerbaijan’s Nationally Determined Contribution 3.0

6.7. Inclusivity for Climate Action...........................................................................................................76

6.8. Sustainable Development Goals (SDGs) .....................................................................................79

6.9. Monitoring, Reporting, and Verification .....................................................................................80 7. Methodology and Clarifying Information ................................................................ 82

7.1. Approach.....................................................................................................................................................82

7.2. Information Necessary for Clarity, Transparency, and Understanding of NDC .....84

7.3. Revision and Update Mechanism ...................................................................................................92 8. Appendix........................................................................................................................... 94 A. Data sources ..................................................................................................................................................94 3 Azerbaijan’s Nationally Determined Contribution 3.0 Glossary of Terms, Abbreviations & Acronyms 3-NOP 3-Nitrooxypropanol AD Anaerobic Digestion ADB Asian Development Bank ADSEA Azerbaijan State Water Resources Agency AFOLU Agriculture, forestry and other land use AREA Azerbaijan Renewable Energy Agency under the Ministry of Energy of the Republic of Azerbaijan AERA Azerbaijan Energy Regulatory Agency under the Ministry of Energy of the Republic of Azerbaijan ASCO Azerbaijan Caspian Shipping Company AZAL Azerbaijan Airlines bcma Billion Cubic Meters per Annum BAU Business-as-Usual Baseload Minimum level of continuous electricity demand that must be met at all demand times BTR Biennial Transparency Report CapEx Capital expenditure CBAR Central Bank of Azerbaijan CCGT Combined Cycle Gas Turbine CCS Carbon Capture and Storage CCUS Carbon Capture Utilization and Storage CH4 Methane CO2 Carbon Dioxide CO2eq Carbon Dioxide Equivalent COP Conference of the Parties CSO Civil Society Organization DAC Direct Air Capture DACS Direct Air Capture and Storage Decarbonization The process of reducing all greenhouse gas emissions through the use of low-carbon energy sources and technologies. DSM Demand side management DRI Direct Reduced Iron 4 Azerbaijan’s Nationally Determined Contribution 3.0 EAF Electric Arc Furnace EBRD European Bank for Reconstruction and Development Eq Equivalent ETF Enhanced Transparency Framework EV Electric vehicle EVCI Electric vehicle charging infrastructure FAO Food and Agriculture Organization FbF Forecast based financing F-gases Fluoridated Gases: refer to industrial gasses like Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulphur Hexafluoride (SF 6), Nitrogen Trifluoride (NF3) GDP Gross Domestic Product GST Global Stocktake GWP Global Warming Potential: describe the relative potency, molecule for molecule, of a greenhouse gas, taking account of how long it remains active in the atmosphere and is calculated over 100 years. GEF Global Environment Facility GHG Greenhouse Gas GW Gigawatt IEA International Energy Association ICE Internal Combustion Engine IOC International Oil Company ILO International Labour Organization Interim target Refers to a milestone set by a country for reducing GHG emissions within a specified timeframe before the final target date. In the context of NDC 3.0 interim target is set to 2035. IPCC Intergovernmental Panel on Climate Change IPPU Industrial processes and product use IRENA International Renewable Energy Agency LDAR Leakage Detection and Repair LDES Long-Duration Energy Storage Levelized The average cost of reducing one ton of CO₂ equivalent emissions over the Abatement Cost lifetime of a decarbonization measure, considering both capital and operational expenditures Lever/measure Abatement technology or method 5 Azerbaijan’s Nationally Determined Contribution 3.0 LTS Long-Term Low Emission Development Strategy LULUCF Land Use, Land-Use Change, and Forestry MACC Marginal Abatement Cost Curve MoEn Ministry of Energy MoE Ministry of Economy MoENR Ministry of Ecology and Natural Resources MoU Memorandum of Understanding MSW Municipal Solid Waste Mt Megaton Mln Million MDB Multilateral Development Banks N2O Nitrous Oxide NAP National Adaptation Plan NAMA Nationally Appropriate Mitigation Actions NCQG New Collective Quantified Goal NDC Nationally Determined Contribution Net-Zero A state where the amount of greenhouse gases emitted is balanced by an equivalent amount removed from the atmosphere. NGO Non-Governmental Organization NHS National Hydrometeorology Service NOC National Oil Company OCGT Open-Cycle Gas Turbine OGDC Oil and Gas Decarbonization Charter OGMP Oil and Gas Methane Partnership OpEx Operational expenditure UN United Nations UNDP United Nations Development Programme UNECE United Nations Economic Commission for Europe UNEP United Nations Environment Programme UNFCCC United Nations Framework Convention on Climate Change UNFPA United Nations Population Fund 6 Azerbaijan’s Nationally Determined Contribution 3.0 UNICEF United Nations International Children’s Emergency Fund UNIDO United Nations Industrial Development Organization PPA Power Purchase Agreement PPP Public-Private Partnership PSA Production Sharing Agreement Pathway Scenario or trajectory that outlines potential future developments in areas like emissions, energy use, or climate impacts. RCP Representative Concentration Pathways: a greenhouse gas concentration trajectory used in climate modeling and research. Reference Year A year used for comparing emissions to measure the progress. In the context of NDC 3.0 the reference year is defined as 1990. R&D Research and Development RES Renewable Energy Sources SAF Sustainable Aviation Fuel Scope 1 Emissions refer to direct greenhouse gas emissions from sources owned or controlled by the organization Scope 2 Emissions cover indirect emissions from the generation of purchased electricity, steam, heating, and cooling consumed by the organization Scope 3 Emissions encompass all other indirect emissions that occur in the value chain of the organization, including both upstream and downstream activities SDG Sustainable Development Goal SOCAR State Oil Company of Azerbaijan Republic SOE State-Owned Entity SMR Steam Methane Reforming T&D Transmission and Distribution Target Year Refers to the specific year by which a country aims to achieve its stated climate goals, such as reducing GHG emissions. Theme Group of measures that outlines actions to reduce GHG emissions TW Terawatt VRE Variable Renewable Energy WMO World Meteorological Organization 7 Azerbaijan’s Nationally Determined Contribution 3.0 8 Azerbaijan’s Nationally Determined Contribution 3.0 1. High-Level Summary Global average temperatures have been rising inaugural GST is a crucial reminder that significantly in recent years, compared to 1850- intensified and collaborative efforts are essential 1900. The ten-year average 2014-2023 global for closing the gap between current actions and temperature has risen 1.2°C above the 1850-1900 global climate objectives. average and if current trends continue, it is The GST’s findings necessitate revising Nationally projected to increase by 2.8°C by 2100.1 Due to its Determined Contributions (NDCs) to set more geographical position, Azerbaijan is particularly ambitious targets and implement immediate susceptible to the impacts of climate change, measures to reduce GHG emissions. This includes including extreme weather events, temperature prioritizing adaptation strategies to help fluctuations, and sea level decline. Without global communities and ecosystems at risk, building reductions in greenhouse gas (GHG) emissions, resilience and ensuring these efforts are inclusive. the country could experience substantial impacts It is essential for the country to seek increased that pose risks to its natural environment. As a technological and financial support by engaging Party to the Paris Agreement, the country with international financial institutions and acknowledges the urgency of mitigating climate climate funds and strengthening public–private change and is committed to implementing partnerships. Additionally, expanding renewable adaptation strategies to build resilience against its energy capacity; improving energy efficiency in effects. buildings, industry, and transportation; The first Global Stocktake (GST) assessment, as strengthening international cooperation; and outlined by the United Nations Framework adopting an inclusive approach that involves local Convention on Climate Change (UNFCCC), marks a communities, civil society, and the private sector critical juncture in the global fight against climate are all essential steps to achieve heightened change. While it acknowledges concerted efforts ambition of decarbonization targets. Ultimately, and some progress, it indicates that current enhancing monitoring and reporting mechanisms measures are insufficient to meet the ambitious for transparency and accountability will ensure targets of the Paris Agreement. The assessment progress in NDC implementation. Addressing stresses the exigent need for more immediate and these areas will boost contributions to global vigorous actions to limit global warming to 1.5°C. climate goals and ensure sustainable development It also underscores the importance of bolstering and resilience. adaptive capacities and resilience, especially for In line with its commitment to the Paris communities and ecosystems at risk, and calls for Agreement, Azerbaijan is dedicated to limiting the heightened financial and technological support for global average temperature rise to 1.5°C above developing nations. Policy recommendations preindustrial levels. The country aims to achieve include expanding the use of renewable energy, 40% emissions reduction by 2035, compared to enhancing energy efficiency, and strengthening 1990, setting a transformative and highly international cooperation. Adding to this, the ambitious target. However, the success of this goal Nationally Determined Contribution (NDC) report depends on securing substantial international emphasizes the importance of an inclusive financial support, addressing gaps in technology strategy that engages diverse stakeholders, such and infrastructure. as economically vulnerable groups of people, local communities, and the private sector, to ensure In order to achieve NDC 3.0 target, the country is effective and equitable climate action. This implementing actions across all key sectors, 1 World Meteorological Organization. 9 Azerbaijan’s Nationally Determined Contribution 3.0 including power, buildings, oil and gas, Furthermore, as highlighted in this report, transportation, industry, waste, and agriculture, Nakhchivan Autonomous Republic of Azerbaijan forestry, and other land use (AFOLU) across the has also been designated as a “green energy zone” country targeting carbon dioxide (CO2), methane too, positioning it to benefit significantly from the (CH4), nitrous oxide (N2O), and industrial gases implementation of renewable energy projects. (F-gases). Some key decarbonization pathways This transformation will enable the Nakhchivan include adopting renewable energy, enhancing Autonomous Republic to become a net energy energy efficiency in various sectors, transitioning exporter, enhancing its strategic importance in the to sustainable transportation systems, and region and contributing to Azerbaijan's broader retrofitting buildings. goals of sustainable development and energy security. Recently, on 14 October 2025 Azerbaijan ratified the Kigali Amendment to the Montreal Protocol on Additionally, the COP29 Presidency has Substances that Deplete the Ozone Layer which introduced Action Agenda initiatives and was endorsed by Presidential Decree. Reducing associated pledges and declarations, which were climate-related risks and taking action are integrated into the development of this NDC and essential for environmental sustainability and aim to drive global climate action. These economic diversification. Investing in green comprehensive initiatives cover grids, energy technologies and sustainable practices can create storage, green energy zones and corridors, clean new revenue streams while generating jobs. The hydrogen, digital action, methane reduction from transition to a greener economy offers an waste sector, resilient cities, tourism, water, opportunity for Azerbaijan to innovate and finance, transparency, agriculture and human develop industries that can thrive in a low-carbon development. Collectively, these global initiatives future, thereby elevating the country’s economic underscore the COP29 Presidency’s dedication to resilience and competitiveness. extensive and coordinated efforts in addressing global climate challenges. It is crucial to highlight that the liberation and reintegration of the Karabakh and East Zangezur It is also worth noting that Azerbaijan has signed economic regions into the national economy will up to the Global Methane Pledge, an important significantly intensify the country’s efforts toward voluntary commitment to collectively reduce green growth. By transforming these regions overall methane emissions by 30% by 2030 in the through the “green energy zone” initiative as world, compared to 2020 levels. The State Oil mandated by the May 3, 2021, decree of the Company of the Republic of Azerbaijan (SOCAR) is President of the Republic of Azerbaijan Ilham one of the participants of the Oil & Gas Aliyev (which also became one of the initiatives in Decarbonization Charter (OGDC), which was the COP29 Presidency's Action Agenda), proposed and formed during COP28. The charter Azerbaijan is harnessing the considerable sets ambitious goals, including achieving Net-Zero potential for renewable energy and launching operations by 2050. Additionally, SOCAR has energy efficiency projects in these areas. This will joined the Oil & Gas Methane Partnership (OGMP pave the way for a cleaner and greener future, 2.0 – the flagship oil and gas reporting and following a long period of deforestation and over- mitigation program of the United Nations exploitation of resources during the occupation. Environment Program (UNEP)), further The government’s focused efforts on smart demonstrating its commitments. agriculture and reforestation of thousands of Transitioning to green economy in a just, orderly hectares in these regions will not only improve and equitable manner will expedite emission natural habitats but also contribute to carbon reductions and pave the way for a sustainable and sequestration, which is essential for combating diversified economy. climate change. Embracing these initiatives and investments in Karabakh and East Zangezur will Decarbonizing the country’s economy depends exemplify a successful transition toward heavily on inclusivity, ensuring that all societal sustainability, demonstrating the commitment to a groups including, women, elderly, internally cleaner future for the region and the planet. 10 Azerbaijan’s Nationally Determined Contribution 3.0 displaced persons, and children, among others, are The aim of this report is to provide transparency actively engaged in the transition. The on plans to address climate change and outline a participation of civil society organizations (CSOs), roadmap for achieving the country's mitigation non-governmental organizations (NGOs), and targets, also accounting for the National academic institutions, the private sector as well as Adaptation Plan (NAP). It reaffirms the the government entities, is crucial and has been commitment to reducing GHG emissions while actively leveraged in the development of this promoting climate resilience, supporting global document. sustainability, and ensuring an inclusive just transition for all. Azerbaijan has established strong collaborations with UN organizations, and other international As the host country and organizer of COP29 and a organizations such as such as International member of the Troika, including the UAE and Renewable Energy Agency (IRENA), UNFCCC, etc. Brazil, Azerbaijan is committed to leading global to advance these goals. Key components for a climate action by fostering international successful transition include securing adequate collaboration, implementing ambitious financing, building capacity, and enhancing environmental policies, and advancing sustainable education. Additionally, Azerbaijan’s development. The ultimate goal is to achieve a decarbonization efforts will be guided by the resilient, Net-Zero future, enhancing ambition and Enhanced Transparency Framework (ETF), which enabling action in solidarity for a green world. will serve as a cornerstone for monitoring and reporting progress and complying with any future systems or frameworks introduced by the UNFCCC. These measures will ensure effective progress tracking, alignment with UN reporting requirements, and the achievement of NDC 3.0 target. 11 Azerbaijan’s Nationally Determined Contribution 3.0 12 Azerbaijan’s Nationally Determined Contribution 3.0 2. Nationally Determined Contribution (NDC 3.0): Introduction

2.1. NDC 3.0 Background Information Azerbaijan, like many other countries, is severely The NDC 2 report also outlined high-level sectoral impacted by the climate crisis, as evidenced by policies, particularly in energy, industrial rising temperatures, shifting weather patterns, processes and product use (IPPU), agriculture, land degradation, water resource decline and land use, waste management, and forestry. Caspian Sea level shallowing. These changes pose serious threats to its biodiversity, water The development of the NDC 3.0 report is driven resources, and agricultural productivity, which all by the need for more ambitious targets to reduce affect economic development and public welfare. GHG emissions in line with GST outcomes, and the In response, climate action strategies are being dual pillars vision of the COP29 Presidency, which updated, including commitments mentioned in focuses on enhancing ambition and enabling the NDC 2 report supplemented by the NAP, to action. This revision addresses the limitations address these challenges through robust identified in the NDC 2 report and aims to meet the mitigation measures and international targets outlined in the Paris Agreement, cooperation. specifically limiting global warming to 1.5°C above pre-industrial levels. The report aims to establish The NDC 2 report underscored the country’s more ambitious decarbonization goals and pledge to reduce GHG emissions by 40% from present a forward-looking vision for emissions 1990 level by 2050, conditional on additional reduction. support such as financing and technology transfer. 13 Azerbaijan’s Nationally Determined Contribution 3.0

2.2. NDC 3.0 Report Content Changes Compared to NDC 2 The NDC 3.0 report features several significant updates and enhancements compared to the previous version (Table 1). Table 1. Summary of comparison between NDC 2 and NDC 3.0 Description of updates NDC 2 NDC 3.0 Sets the target to reduce Aims to reduce emissions by More ambitious targets emissions by 40% by 2050 40% by 2035 compared to 1990 compared to 1990 levels. Distributes emissions in four Energy sector splits further into Increased level of sectoral sectors – energy, agriculture, power, oil and gas, granularity industry and waste. transportation, and buildings. Includes cross-sectoral Clear mitigation plans per Outlines sector-specific mitigation measures and sectors and implementation mitigation plans and assesses the environmental roadmap implementation roadmap. impact of sectors. Reference year 1990 emission levels updated corresponding to Sets reference year as 1990, latest IPCC guidelines. Reference and baseline year takes into account baseline year Sets baseline year as 2022 to of 2016. provide greater precision for projections and impact estimates MORE AMBITIOUS TARGETS As a developing country, Azerbaijan aims to balance several socio-economic factors such as economic growth, social well-being, and environmental sustainability, ensuring that decarbonization efforts align with long-term prosperity and sectoral advancement. NDC 3.0 report sets more ambitious targets, aiming to reduce emissions by 40% by 2035 compared to 1990 contingent to specific conditionalities. The conditionalities include enhanced financial resources, international financial support (e.g., concessional loans, private sector investment), technology availability, technology transfer, increased technology maturity level, capability-building support, and availability of absorptive capacity of forests and other ecosystems (Figure 1). 14 Azerbaijan’s Nationally Determined Contribution 3.0 Figure 1. NDC 2 vs. NDC 3.0 emission target, MtCO2eq INCREASED LEVEL OF SECTORAL GRANULARITY NDC 3.0 report provides higher granularity compared to NDC 2 report and introduces comprehensive, sector-specific strategies, addressing the unique challenges and opportunities within seven key sectors: power, oil and gas, buildings, industry, transportation, AFOLU, and waste (Figure 2). This approach not only facilitates more targeted and effective policymaking but also enhances feasibility of national climate goals. Figure 2. Comparison of sectoral emission distributions in NDC 2 and NDC 3.0 15 Azerbaijan’s Nationally Determined Contribution 3.0 CLEAR MITIGATION PLANS PER SECTORS AND REFERENCE AND BASELINE YEAR IMPLEMENTATION ROADMAP In the context of NDC 3.0, the emissions baseline The NDC 3.0 report outlines mitigation plans and year for estimating reductions has been updated implementation roadmap for each sector, from 2016 to 2022, and the 1990 reference year emphasizing the involvement of multiple emissions level has been revised according to the stakeholders and outlining necessary resources, latest IPCC guidelines. This update ensures that including technological advancements. It provides GHG emissions reduction pathways for each clear pathways, action plans, and required sector are based on the most accurate and recent conditions, focusing on measurable and impactful data, thereby providing greater precision for outcomes. The report emphasizes the importance projections and estimates for the impact of levers of both public and private sector financing, along and enabling the establishment of more realistic with extra support and cooperation to effectively and ambitious climate goals for Azerbaijan. This mobilize resources for these ambitious climate update also includes an estimation of the initiatives. This strategic approach not only aligns resources required to achieve this target. with the country’s commitments under the Paris Agreement but also strengthens its policies for robust, sustainable development and global climate action cooperation. 16 Azerbaijan’s Nationally Determined Contribution 3.0 17 Azerbaijan’s Nationally Determined Contribution 3.0 3. National Context

3.1. Geographic and Population Profile GEOGRAPHIC PROFILE Azerbaijan is located at the crossroads of Eastern Azerbaijan’s location allows the country to Europe and Western Asia, bordered by the experience a diverse range of climatic zones. The Caspian Sea to the east, Türkiye to the southwest, Greater Caucasus Mountain range shields the Russia to the north, Georgia to the northwest, country from cold air masses from the north, Armenia to the west, and Iran to the south. resulting in milder winters in most areas. This Covering an area of 86,600 square kilometers, region also receives the highest amount of Azerbaijan features a diverse topography, precipitation in Azerbaijan, fostering lush including the Greater Caucasus Mountain range in vegetation compared to the more arid regions the North, the Lesser Caucasus Mountain range in elsewhere. In contrast, the central flatlands, the South, and expansive central flatlands. The including the Kura-Araz Lowland, have a semi- country also has an 825-kilometer coastline along arid to arid climate, characterized by hot summers the Caspian Sea. Approximately 60% of the and mild winters. The Caspian Sea coastline, country is covered by mountains and 40% by including Baku, experiences a more temperate lowlands and plains. The total forest coverage climate with mild, wet winters and warm, dry constitutes 12.19% of the overall area (Figure 3).2 summers, influenced by the moderating effect of the Caspian Sea. Figure 3. Key indicators of Azerbaijan (12.19%) 2 The State Statistical Committee of the Republic of Azerbaijan 18 Azerbaijan’s Nationally Determined Contribution 3.0 POPULATION PROFILE The country's population has been growing education and healthcare,4 leading to an enhanced steadily,3 driven by economic conditions, quality of life and increased life expectancy. migration trends, and government policies. As of The urbanization rate has also been rising, with the end of 20233, the population is estimated to be 55% of the population now living in urban areas, approximately 10.2 million (mln) and is projected primarily in major cities such as Baku, Ganja, to grow by about 6% by 2030. The demographic Sumgait, and Mingachevir.3 This trend is expected profile reveals a relatively young population, with to continue. Baku remains the most populous city approximately 60% under age of 40 (Figure 4).3 and serves as the country's economic, cultural, and Significant government reforms and various administrative center with a population of more incentive programs have positively impacted than 2 mln people as of the end of 2023. Figure 4. Population growth and population demographics 3 The State Statistical Committee of the Republic of Azerbaijan 4 Azerbaijan 2030: National Priorities for Socio-Economic Development 19 Azerbaijan’s Nationally Determined Contribution 3.0

3.2. Climate Profile Azerbaijan is confronting significant climate- reduce heat absorption, and increasing public related issues. Predictions of substantial awareness and preparedness for heat waves.6 temperature increases threaten vital sectors such as AFOLU and energy, underscoring the critical Water and sea level need for immediate and effective climate action. Water resources are under significant stress due CURRENT SITUATION AND PROJECTIONS to climate change.6 The uneven distribution of water resources, combined with increased Temperature evaporation rates and river flows, has reduced Azerbaijan’s water resources by approximately The climate of Azerbaijan is strongly influenced by 15% over recent decades.6 These further strains its geographical position, relief, and the Caspian water availability and exacerbates water scarcity Sea. Over the past 23 years, the average issues, particularly critical for the AFOLU sector, temperature increase across the country has which relies heavily on irrigation. Furthermore, reached 1.1°C. In 2023, the average temperature precipitation in the country as a whole decreased rose to 14.6°C, which is 1.9°C higher than the by about 3.4% over the last 10 years, compared to norm. The highest average temperature in recent the climatic normal of 1971-2000, further decades was recorded in 2010, reaching 14.8°C.5 contributing to water stress.5 Heat waves Furthermore, the Caspian Sea, which borders The frequency of heat waves - defined as Azerbaijan, is experiencing sea level changes. prolonged periods of excessively hot weather Recent studies show a continued decline, with an lasting three or more consecutive days with average drop of more than two meters in the last temperatures exceeding 35°C - has risen 30 years mainly due to decreased river inflow and significantly in the Baku region, with the number increased evaporation due to rising temperature of heatwave days increasing from 86 days in the and other geological factors. This decline poses 1960-1990 period to 365 days in 1991-2020.6 risks to coastal infrastructure and ecosystems.5 Urban areas such as Baku experience even more According to global benchmarks, even small pronounced effects due to the urban heat island changes in sea level – such as 1-2 millimeters per effect, where urban areas have significantly higher year - can lead to the gradual loss of coastal temperatures than their surrounding rural areas wetlands. Such changes threaten coastal because of human activities and the organization infrastructure, ecosystems, and economic of the city (e.g., infrastructural elements like activities due to increased salinity, disrupted pavements). This increase exacerbates high habitats, and challenges for water-dependent temperatures, leading to more frequent and industries and communities. intense heatwaves. These temperature increases Climate-related catastrophes are likely to result in higher rates of heat-related illnesses, strain healthcare systems, and increase Significant risks remain from climate-related energy demand due to rising AC usage. catastrophes, the frequency of which has Additionally, these conditions could adversely increased over the past two decades. The country affect agriculture, reduce water availability, and is particularly vulnerable to riverine and flash heighten the risk of wildfires, further stressing floods, which have caused substantial ecosystems and human settlements. Efforts to infrastructure damage, particularly in the central mitigate these impacts include enhancing urban and southeastern regions in recent years. green spaces, improving building designs to Average monthly rainfall in the country shows two distinct peaks, with increased amounts in spring 5 Ministry of Ecology and Natural Resources of Azerbaijan Republic 6 Azerbaijan’s Fourth National Communication to the UNFCCC 20 Azerbaijan’s Nationally Determined Contribution 3.0 and fall seasons. Intensity of rainfall events is potentially reducing crop yields and increasing increasing with rising temperatures, with the agricultural water demands. This scenario annual precipitation of 491 millimeters in suggests a grim outlook for rain-fed agriculture, Azerbaijan in 2023.7 In various regions across the which may suffer disproportionately. country, while some areas experience several Inland fishery, such as those in the Caspian Sea, times the average monthly rainfall, others receive are under significant pressure from changes in significantly less than the monthly norm. This water levels. These pressures arise from human indicates variability and potential risks to activities like damming, water extraction, and agriculture, water resources, ecosystems, human climate change, directly impacting fish habitats. health, infrastructure and economy. Even relatively small changes in water levels can Frequent landslides and mudslides also occur, lead to habitat reduction, affecting the particularly in the mountainous regions, which biodiversity and productivity of inland fisheries. A exacerbates the impact of heavy rainfall and habitat reduction in inland water bodies like lakes flooding. Over the past decade, more than 200 and seas can lead to noticeable declines in fish recorded landslides have affected rural populations, which are crucial for food security communities and disrupted transportation and the livelihoods of communities depending on networks. these resources. The energy sector, which mainly relies on gas for In the last 30 years, the number of hot and dry power production instead of high-emission fuels, winds has increased 14 times, while the duration faces challenges from the rising temperatures of droughts has increased by more than 20%, associated with climate change. Urban areas, causing severe damage to agriculture. At the same particularly Baku, are likely to experience time, the number of hail events has more than intensified urban heat island effects, leading to tripled over the past 10 years. Previously, hail was higher electricity demand. This surge in demand mainly observed in mountainous and foothill could increase electricity consumption during areas, but nowadays this phenomenon affects flat peak summer months, straining energy areas as well.8 generation systems and highlighting the MAIN SECTORS AFFECTED inefficiencies caused by heat stress on such systems. Moreover, hydroelectric power Climate change significantly impacts multiple generation may continue to experience a capacity sectors, with agriculture and power being the reduction due to decreasing water flows from most affected. accelerated glacial melting and increased Agriculture, a vital sector that employs over 33- evaporation rates. Therefore, robust, long-term 35% of the workforce,9 is significantly threatened low-emission development strategies are critical by climate change. The sector's productivity is to enhancing the sector's resilience and expected to decline due to direct impacts such as adaptability to the impending changes driven by changes in, temperature, and precipitation, and global warming. indirect effects, such as altered water availability, soil erosion, and shifts in pest dynamics. Climate change is expected to exacerbate water scarcity, impacting both crop yields and irrigation practices. Rising temperatures could severely impact crop viability by increasing the frequency of days with temperatures exceeding 35°C, 7 National Hydrometeorology Service under Ministry of Energy and Natural Resources 8 Ministry of Ecology and Natural Resources of Azerbaijan Republic 9 Azerbaijan’s Fourth National Communication to the UNFCCC 21 Azerbaijan’s Nationally Determined Contribution 3.0

3.3. National Adaptation Plan (NAP) In alignment with its commitments to the Paris To prepare NAP, several indicators based on Agreement, particularly Article 7 on adaptation, international climate scenarios are used first to Azerbaijan is implementing a comprehensive assess Azerbaijan’s vulnerability to climate range of measures to enhance resilience against change. Currently, the country is considered a the adverse effects of climate change. These highly vulnerable area (Table 2). This vulnerability measures include the development of the National is mainly attributed to increased temperatures, Adaptation Plan (NAP). limited water sources, and prolonged droughts that have occurred in recent years. Based on this NAP is developed as a strategy to strengthen assessment, sensitive areas, such as water climate resilience and improve long-term resources, agricultural areas, and the coast of the planning. This process involves collaboration with Caspian Sea, have been identified as areas local and international stakeholders to ensure that requiring urgent measures to avoid future adaptation measures are prioritized correctly. difficulties in adapting to climate change. Table 2. Climate change vulnerability index in regions of Azerbaijan by 2041- 2069, high (yellow), high to very high (red), and very high (brown) 10 Region Vulnerability index Azerbaijan Republic 0.62 Baku 0.57 Nakhchivan 0.56 Absheron-Khizi 0.64 Mountainous Shirvan 0.60 Ganja-Dashkasan 0.64 Garabagh 0.67 Gazakh-Tovuz 0.66 Guba–Khachmaz 0.63 Lankaran-Astara 0.66 Central Aran 0.68 Mil-Mugan 0.72 Shaki-Zagatala 0.64 Eastern Zangazur 0.73 Shirvan-Salyan 0.73 WATER RESOURCES Climate change can adversely affect the reliability economic sectors, and expansion of irrigated of water resources due to possible increases in the agricultural areas, the demand for water is frequency of droughts and floods. Considering the proliferating, requiring immediate adaptation rising population, development of various 10 National Adaptation Plan (NAP), 2024 22 Azerbaijan’s Nationally Determined Contribution 3.0 measures, specifically in irrigation, potable water To address these challenges, new reservoirs are supply, and sanitation. being constructed as approved by the Decree of the President of the Republic of Azerbaijan The COP29 Declaration on Water for Climate (entitled “The Action Plan on Ensuring the Action calls on nations to address climate-related Efficient Use of Water Resources for 2020-2022”). water challenges through international Additionally, the reconstruction of irrigation cooperation, enhanced scientific knowledge, and networks and planned infrastructure integration of water considerations into climate modernization are expected to prevent further policies. The initiative promotes effective water loss. Furthermore, exploring alternative sustainable water management, the protection of sources, such as wastewater treatment or water-related ecosystems, and the use of early seawater, is being considered to mitigate climate warning systems for water-related disasters. It change effects (Table 3). also includes launching the Baku Dialogue on Water for Climate Action to ensure continuous and POTABLE WATER SUPPLY AND SANITATION coordinated efforts in this area. Additionally, the Strategic goals and adaptation measures for water Baku Harmoniya Climate Initiative for Farmers supply and wastewater disposal systems have aims to unify various initiatives, coalitions, and been identified as critical areas for addressing the networks to share experiences, identify synergies adverse effects of climate change. “National and gaps, facilitate financing, and foster Strategy for the Rational Use of Water Resources” collaboration in agriculture, food, and water was adopted to increase water resources, improve sectors. It focuses on empowering local quality of potable and irrigation water and communities and women in rural areas. modernization of infrastructure. Further IRRIGATION adaptation measures mainly include modernizing existing infrastructure to reduce water loss, Irrigation systems are highly sensitive to climate reusing and repurposing wastewater, and change, making water management a critical optimizing water use in industrial processes. concern. In Azerbaijan, irrigation is widespread, Additionally, expanding water supply monitoring with up to 90% of water sources used for and further research on increased water efficiency irrigation and agriculture. However, the harmful are necessary to minimize climate change effects. effects of floods and droughts on water supply pose significant risks to irrigation efforts. 23 Azerbaijan’s Nationally Determined Contribution 3.0 Table 3. Considered adaptation measures for water resources in Azerbaijan Area Adaptation Measures • Construct water reservoirs to ensure water supply across different seasons • Reconstruct irrigation canals to minimize water losses • Utilize alternative water sources for irrigation, including treated wastewater, collector-drainage waters, and seawater • Implement agrotechnical measures, such as prioritizing the cultivation of drought-resistant and low water-demanding crops to enhance water use efficiency • Improve water accounting, promote economic regulation of water usage, educate water users, and implement other Irrigation necessary measures to encourage water conservation practices • Apply science-based, zonally differentiated, and ecologically sustainable irrigation norms, technologies, and techniques • Restore coastal Tugay forests, plant soil-stabilizing shrubs, establish anti-erosion forest strips along irrigation networks, and create forest buffers along collector-drainage systems • Implement protective and preventive measures, including flood forecasting, upgrading flood protection infrastructure, and early warning systems • Modernize existing infrastructure to reduce losses and ensure efficient water supply • Conduct research to predict riverbed erosion processes in river valleys where irrigation facilities are located • Reuse waste, such as activated sludge residues, generated in wastewater treatment plants Potable water supply and • Expand capabilities for environmental monitoring in water sanitation supply and wastewater management systems • Open up more opportunities for recycling and repurposing wastewater generated during water supply processing and wastewater disposal • Optimize the use of potable water in industrial applications to eliminate water shortages AGRICULTURAL ACTIVITIES Agricultural productivity may decrease due to increased temperatures, the severity of droughts and floods, desertification, and an increase in soil salinity caused by climate change. Examples of this decrease include reduced productivity in livestock production, decreased labor productivity due to heat stress, diminished pasture productivity, and changes in crop yield. In Azerbaijan, two main strategies are being considered to mitigate the negative effects of climate change on agriculture: the sustainable use of agricultural land and irrigation water, and adaptation to climate change in crop production and animal husbandry. 24 Azerbaijan’s Nationally Determined Contribution 3.0 SUSTAINABLE USE OF AGRICULTURAL LAND AND IRRIGATION WATER Climate change affects soil fertility and freshwater resources, necessitating measures to restore, enhance, and protect soil fertility and ensure water efficiency in irrigation systems. These measures range from awareness-raising activities to scientific research aimed at increasing technological capabilities and advancements. ADAPTATION TO CLIMATE CHANGE IN CROP PRODUCTION AND ANIMAL HUSBANDRY The significant increase in average annual temperature impacts both crops and livestock. Consequently, specific activities and awareness-raising campaigns must be implemented to adapt to climate change and sustain agricultural productivity (Table 4). Table 4. Considered adaptation measures for agricultural activities in Azerbaijan Area Adaptation Measures • Increase awareness of agrotechnical rules in agricultural production • Optimize crop mix for climate conditions and grazing norms, establish soil-protection forest strips • Promote the adoption of advanced cultivation techniques that ensure soil fertility conservation Sustainable use of • Expand the use of modern irrigation methods in agriculture agricultural land and • Educate stakeholders on the cultivation of crops with low irrigation water water requirements • Raise awareness of preserving soil moisture accumulated during winter and implementing resource-efficient agrotechnical practices • Expand scientific research focused on developing new drought-resistant crop varieties • Increase awareness of the cultivation of drought-resistant plant varieties and breeds and the assessment of the amelioration of cultivated lands • Implement pilot projects focused on preserving the genetic sources of local plant varieties and breeds at risk of extinction and expanding their cultivated areas Climate change adaption in • Expand the selection of plant varieties and breeds resistant crop production and animal to heat, drought, and soil salinity husbandry • Promote the establishment of greenhouses, including smart greenhouse technologies, supported by educational campaigns • Promote the development of integrated agroforestry systems supported by awareness-raising activities • Encourage the adoption of innovative technologies in agricultural production 25 Azerbaijan’s Nationally Determined Contribution 3.0 COASTAL ZONE OF THE CASPIAN SEA Recent studies indicate a steady decline in Caspian Sea levels compared to the early 1990s, primarily attributed to decreased river inflow and increased evaporation rates due to rising temperatures (Figure 5). Consequently, the coastal zone of the Caspian Sea, which is biodiverse and houses key infrastructure – such as ports, industrial facilities, and transportation networks – is becoming increasingly susceptible to the negative effects of climate change. Figure 5. Caspian Sea level in 1922-2023, mean meter sea-level change in Baltic Sea height altitude system (mBS) In response to these risks, adaptation measures, technical advancements include modern data- such as adopting an early warning system, are processing methods, improved communication being developed for integrated coastal zone channels, and automated meteorological management, biodiversity conservation, and complexes. The expected outcomes from this infrastructure protection. system are i) strengthened delivery models for climate services through policy and financial EARLY WARNING SYSTEM VIA AUTOMATING frameworks and improved climate data HYDROMETEOROLOGICAL MONITORING governance, ii) enhanced observations and NETWORK predictive modeling of climate and its impacts to The primary adaptation measure involves improve forecasting and develop urban climate comprehensive technical modernization of services, iii) improved dissemination and terrestrial meteorological observation systems to communication of climate risk information and establish an early warning system for climate- multi-hazard early warnings; and iv) increased sensitive sectors. Key characteristics of these capacity for climate risk management to respond to climate hazards (Table 5). 26 Azerbaijan’s Nationally Determined Contribution 3.0 Table 5. Outputs and activities to be conducted to strengthen climate information and multi-hazard early warning systems for increased resilience Outputs Activities Strengthened delivery model • Strengthen institutional, policy, and financial frameworks for climate services for climate services • Advance climate data governance and risk knowledge Enhanced observations and • Increase capacity and equipment for observations and predictive modeling of monitoring climate and its impacts • Improve weather, water, and climate modeling and impact- based forecasting • Develop urban climate services for improved health outcomes Improved dissemination and communication of climate • Establish an impact-based, multi-hazard early warning risk information and early system warnings Increased climate risk • Build capacity to prepare for and respond to climate risks management capacity and hazards • Develop Forecast-based Financing (FbF) 27 Azerbaijan’s Nationally Determined Contribution 3.0

3.4. Stakeholder Engagement Azerbaijan is dedicated to fostering an inclusive Furthermore, Azerbaijan remains committed to process within the climate agenda, ensuring that collaborating with non-governmental multiple stakeholder groups are given the organizations (NGOs) to guarantee inclusiveness opportunity to express their views and actively and the representation of various societal participate in the formulation and implementation interests. The integration of global experience and of national initiatives aimed at achieving NDC 3.0 expertise is maintained through active target. Building on the momentum gained over engagement with international and multinational recent years, Azerbaijan will continue to organizations. Collaboration with international proactively engage with diverse stakeholders. The and multilateral entities underscores the nation's Ministry of Ecology and Natural Resources commitment to adhering to international ensures that this process is inclusive, transparent, environmental standards and practices. and equitable. Table 6 presents a non-exhaustive overview of Throughout the whole process of NDC 3.0 major stakeholders actively involved in development, including baseline estimation, contributing to achieve NDC 3.0 target. In addition projections construction, target setting and to listed entities, numerous private sector decarbonization pathways identification, companies, municipalities, educational collaboration with multiple entities was heavily institutions, and other international and local leveraged. These stakeholders include: central organizations play a crucial role in driving and regional government bodies, municipalities, decarbonization transformation. These NGOs, educational institutions, civil society stakeholders contribute through diverse organizations, major private sector companies, initiatives, investments, and innovations, and SMEs, as well as sector associations. underscoring the collaborative effort required across public, private and societal domains to achieve sustainable, long-term impact. 28 Azerbaijan’s Nationally Determined Contribution 3.0 Table 6. Stakeholder engagement and related activities (non-exhaustive) List of Stakeholders Activities/Efforts ● Oversees national climate change strategy, develops policies Ministry of Ecology and for carbon reduction, promoting decarbonization projects. Natural Resources ● Provides crucial data and forecasts that serve as a base for (MoENR) climate policy and disaster preparedness efforts (through National Hydrometeorology Service (NHS) under MoENR). ● Oversees energy sector's transition to sustainable practices and implements energy efficiency measures, supporting renewable energy projects. ● These efforts include the installation of the Garadagh Solar Power Plant, the largest in the Caspian and CIS region when commissioned, and the Khizi-Absheron Wind Power Plant, currently under construction, through PPPs. Ministry of Energy ● Azerbaijan Renewable Energy Agency (AREA): Organize, (MoEn) regulate and coordinate activities in the field of renewable energy sources (RES) and their efficient use, including development of solar, wind, and hydropower projects. ● Azerbaijan Energy Regulatory Agency (AERA): Carries out regulatory and inspection functions over enterprises in electricity, gas and heat supply industry, as well as over consumers. Government Bodies ● Stimulates and promotes measures on efficient use of energy Energy Efficiency Fund resources and energy efficiency and develops and managing under MoEn funding mechanisms and incentives. ● Implement state policy and regulation of the economy in Ministry of Economy Azerbaijan and is supervising activity of SOEs. (MoE) ● Introduce and promote FDI into sustainability projects including through various incentive policies. ● Implements policies for sustainable agricultural practices and oversees the development and promotion of climate-resilient farming techniques. Ministry of Agriculture ● Employs digital platforms and precision agriculture (MoA) techniques to optimize resource use. ● Promotes the use of drought-resistant crop varieties and implements irrigation efficiency programs. ● Implements measures to reduce GHG emissions, which includes prioritizing public transportation, expanding Ministry of Digital pedestrian zones, creating dedicated bus lanes, establishing a Development and network of micro-mobility lanes, digitizing transport Transport operations, modernizing vehicle parking technologies, and expanding and developing railway transport and metro services. Azerbaijan State Water ● Integrates climate resilience into water management Resources Agency infrastructure projects. (ADSEA) 29 Azerbaijan’s Nationally Determined Contribution 3.0 ● Participates as a full member of Coalition of Finance Ministers for Climate Action, which signifies a commitment to Ministry of Finance integrating climate considerations into national economic Government Bodies policies and leveraging financial tools to address climate challenges ● Takes targeted actions towards promoting sustainable finance. ● Approved country’s first Sustainable Finance Roadmap for Central Bank of 2023-2026, that aims to ensure resilience of financial Azerbaijan (CBAR) institutions against risks arising from climate change and other environmental, social, and governance (ESG) factors. The State Commission on ● Coordinate climate efforts through relevant ministries, Climate Change committees, and other organizations. NG Local and International ● Conducts environmental education programs and public Os NGOs awareness campaigns. ● Invests in renewable energy projects, improves energy efficiency, and reduces carbon footprint across operations. ● Joined the "Oil and Gas Decarbonization Charter" (OGDC) at COP28 in Dubai, committing to Net-Zero operations by 2050, SOCAR eliminating routine flaring by 2030, near-zero methane emissions by 2035, and adopting industry best practices for emission reduction, such as OGMP 2.0 for reducing methane emissions in accordance with international standards. ● Expands its renewable energy capacity and modernizes power plants to enhance energy efficiency. ● Invests in development of hydropower projects to diversify Azerenergy OJSC the energy mix and decrease dependency on high-emission fuels, leaving hydropower as the largest source of renewable energy. Azerishiq OJSC ● Implements smart grid and green technologies. Azergold CJSC ● Perform sustainable mining practices. SOEs ● Implements recycling programs, waste-to-energy projects and Tamiz Shahar OJSC sustainable waste management. Azerbaijan Caspian ● Carries out sustainable shipping operations by exploring Shipping Company decarbonization technologies including alternative fuels (ASCO) ● Carries out sustainable air transportation activities by Azerbaijan Airlines prioritizing near and long-term efforts around improvements (AZAL) in operations and infrastructure as well as opportunity assessment around use of SAF ● Engages in railway transportation with the focus on Azerbaijan Railways CJSC optimizing fuel consumption and scaling up electrification of its operations ● Aims to achieve Net-Zero by 2035 by strengthening air quality SO Port of Baku Es control. 30 Azerbaijan’s Nationally Determined Contribution 3.0 ● Developed a long-term strategy titled "Baku Port 2035 - CO2 Zero Emission" in 2021 under the "Support to Strengthening the Operational Capacity of Baku Port - Phase 2" project, funded by the European Union. ● Works on several environmental and sustainability initiatives, such as expansion of green areas, application of recycling Baku Metropolitan CJSC technologies for groundwater, and replacement of LB-type interior lights in trains with new LED-type lamps. ● Facilitates projects on energy efficiency, sustainable World Bank agriculture, and water management as well as renewable International Organizations energy projects (i.e., AZURE). Asian Development Bank ● Supports green energy initiatives, including improving (ADB) infrastructure and operational efficiency. European Bank for ● Supports the country’s green economy, including financing for Reconstruction and RES, increased energy efficiency, cleaner transport, and Development (EBRD) sustainable infrastructure. ● Collaborates with sectors for low-carbon transitions and aids UNEP in adaptation and mitigation efforts. ● Funds biodiversity conservation, climate resilience, and other GEF environmental initiatives.

3.5. Integration to Greater Country-Level Vision Demonstrating the dedication to achieve long- programs focus on the core objectives of a term sustainability and improve climate sustainable environment and green growth, resilience, NDC 3.0 includes forward-looking including increased use of renewable energy in country-level strategies to address the critical the power sector, efficient waste management challenges of decarbonization. The NDC’s with improved recycling, and expanded forest preparation and implementation require an land. All these elements are considered in forming inclusive, society-wide approach, involving sectoral decarbonization pathways. government agencies, non-governmental institutions, and businesses. This approach is NDC 3.0 is also supplemented by the NAP, which essential for integrating climate action into the enhances climate resilience and adaptation national vision, enabling the NDC to be tailored to capacity, and prepared as a stand-alone document. specific climate change frameworks. ALIGNMENT WITH INTERNATIONAL NDC 3.0 considers the core objectives of FRAMEWORKS OR OTHER PLANS Azerbaijan's Constitution, which emphasizes the NDC 3.0 is designed to be in line with relevant duty to ensure a decent quality of life and a healthy international agreements and frameworks, first environment for all citizens, aligning with global and foremost the Paris Agreement under the sustainable development commitments. UNFCCC and related decisions thereof. To ensure NDC 3.0 is closely aligned with “Azerbaijan 2030: adherence to the ETF, the country is also raising National Priorities for Socio-Economic the profile of transparency by delivering a Development” the 10-year-vision, as well as its Biennial Transparency Report (BTR), in line with first 5-year-implementation program, the 2022- the commitments of NDC 3.0. The NDC 3.0 also 2026 Social and Economic Development Strategy incorporates the quality assurance checklist for of the Republic of Azerbaijan. These state revising NDCs by UNDP and adheres to official 31 Azerbaijan’s Nationally Determined Contribution 3.0 guidance related to NDCs contained in the relevant challenges in urban areas and catalyze urban UNFCCC decisions. climate finance. Promoting sustainable tourism practices and integrating them into national Other international frameworks, such as the UN’s climate policies is another key focus. There is also Sustainable Development Goals (SDGs), are also a call for integrated approaches to combat climate integrated into the development of NDC 3.0, change impacts on water resources and covering improving health, taking urgent climate ecosystems and to develop policies for methane action, and ensuring affordable and clean energy. reduction in waste and food systems. These alignments ensure that the climate actions contribute to broader sustainable development Azerbaijan is committed to working objectives, enhancing the coherence and collaboratively and continuing its pursuit of the effectiveness of national climate policies. key outcomes from the GST. This includes recognizing the need for deep, rapid, and NDC is also aligned with COP29 Presidency’s sustained reductions in GHG emissions in a Action Agenda initiatives, which provide targets nationally determined manner, considering for climate action. The associated pledges and different national circumstances, pathways and declarations aim to substantially enhance global approaches and a global pledge to triple energy storage and grid capacity by 2030, renewable energy capacity and double the promoting regional cooperation and economic average annual rate of energy efficiency growth and fostering investment in green energy improvements by 2030, among others. zones and corridors. In addition to these efforts, they focus on unlocking the potential of clean The country will ensure that efforts to scale up hydrogen markets by addressing regulatory and renewables and improve efficiency are conducted technological barriers. Moreover, the declarations in an environmentally responsible manner, highlight the critical role digital technologies play including through relevant policymaking, in climate action while addressing their workforce development, and strengthened environmental impacts. international collaboration. Furthermore, the pledges aim to enhance multisectoral cooperation to tackle climate 32 Azerbaijan’s Nationally Determined Contribution 3.0 33 Azerbaijan’s Nationally Determined Contribution 3.0 4. Economic Context and Emissions Profile

4.1. Economic Landscape The nation's robust economic growth since the reflects the government's ongoing efforts to early 2000s, has been pivotal in driving extensive reduce the economy's dependency on oil and gas. infrastructural development. The diversification of the economy has been a key focus for the Investment activity remained robust, with capital government, aiming at reducing reliance on investments showing solid growth. Notably, hydrocarbons, and utilizing respective benefits in investments in the non-oil sector demonstrated an developing other sectors. As a result, sectors such increase, further strengthening the economic as agriculture, tourism, construction and diversification strategy. At the same time, the manufacturing have seen growth, contributing to energy sector continues to play an important role a more balanced and diversified economic in overall economic structure. Advancements in structure.11 Moreover, in line with the COP29 energy-related infrastructure enhance energy pledge on the Declaration on Enhanced Action in security through efficiency and reliability Tourism, growth in the tourism sector will be improvements, generating consistent revenue enhanced by promoting innovative sustainable streams. practices to reduce emissions. The country has demonstrated substantial Azerbaijan’s economy continues to demonstrate economic resilience and a strong commitment to resilience and sustainable growth. The non-oil climate action through strategic GDP growth, sector contributed 63.1% to the country's gross impactful climate change initiatives, and a domestic product (GDP), growing by 3.7% dedicated shift toward the objectives of the Paris compared to 2022, driven by strong performance Agreement. in agriculture, construction, and services. This

4.2. Contributions to GHG Emissions Azerbaijan’s GHG emissions are driven by seven POWER key sectors, each contributing uniquely to the national emissions profile. The power sector is a critical component of the energy landscape, contributing significantly to the OIL AND GAS (UPSTREAM AND MIDSTREAM) nation's GHG emissions. In 2022, the power sector accounted for approximately 21% of the country's The oil and gas sector, which is one of the core total emissions, accounting to 14.4 MtCO2eq. The pillars of the country’s economy, accounted for main source of emissions in this sector is the about 28% of total emissions in 2022, or 19.2 combustion of natural gas for electricity MtCO2eq. The main sources of emissions are fuel generation. combustion for power and heat generation, and machine drive (e.g., compressors), along with BUILDINGS flaring, venting, and fugitive emissions from upstream operations. The buildings sector accounted for approximately 14% of total emissions in 2022, totaling to 10.0 MtCO2eq. This sector includes residential and 11 The Ministry of Economy of the Republic of Azerbaijan 34 Azerbaijan’s Nationally Determined Contribution 3.0 commercial buildings, with emissions mainly Without modern systems for waste processing, driven by energy consumption for heating. organic materials decompose anaerobically in landfills, leading to the release of methane. TRANSPORTATION Shortcomings of proper waste segregation, The transportation sector is a significant source of recycling, and composting further exacerbate this emissions, accounting for approximately 13% of issue. total GHG emissions in 2022 constituting 9.3 AGRICULTURE, FORESTRY AND OTHER LAND MtCO2eq. One of the main drivers was road USE (AFOLU) transport, which relies heavily on gasoline and diesel fuels. Other drivers include domestic AFOLU contributed to about 4% of the net total aviation, railways, water-borne navigation, and GHG emissions in 2022, totaling to 2.8 MtCO2eq other transportation. emissions, with the main drivers being enteric fermentation from livestock, non-mobile INDUSTRY stationary equipment, and the use of nitrogenous The industry sector accounted for about 13% of fertilizers in agriculture. Emissions from this the total emissions in 2022 with emissions of 8.9 sector primarily consist of methane (CH 4) and MtCO2eq. The main sources of emissions in this nitrous oxide (N2O), which have higher global sector include downstream oil and gas (refining warming potentials compared to CO2. and petrochemicals) operations and industrial Forestry and land use, covering roughly 12,19% of processes, such as production of cement, steel, and the country's land area, is pivotal, with activities chemicals, which involve energy-intensive such as afforestation, reforestation, and processes. Additionally, emissions are generated sustainable forest management enhancing CO 2 from the use of raw materials and the chemical sequestration. Grasslands and pastures, which reactions that occur during manufacturing. constitute around 28% of the country’s land, store WASTE substantial carbon in plant biomass and soil, managed through rotational grazing and land The waste management sector contributed restoration. around 7% of total GHG emissions in 2022 with a total emission of 4.9 MtCO2eq, with the main The mentioned sectors and the respective drivers being methane emissions both from distribution of GHG emissions across components landfills and wastewater treatment processes. of each sector are shown below (Figure 6). 35 Azerbaijan’s Nationally Determined Contribution 3.0 Figure 6. Total net emissions and their distribution across sectors as of 2022, MtCO2eq 36 Azerbaijan’s Nationally Determined Contribution 3.0 37 Azerbaijan’s Nationally Determined Contribution 3.0 5. Targets, Decarbonization Pathways and Mitigation Plans

5.1. Scope and coverage NDC 3.0 report includes an assessment of all GHG emitted domestically. This covers Carbon Dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O), and industrial gases (F-gases), all of which are reported in CO2 equivalents using the AR6 Global Warming Potential (GWP) normalization (Figure 7). For the purpose of NDC 3.0, the following GHG emission scopes are considered: • Country level: Emission volumes are reported only as total emissions, without a breakdown by scope. • Sector level: Mitigation measures target both direct and indirect emissions (Scope 1 and Scope 2). Figure 7. GHG emissions gas split for baseline year of 2022, MtCO2eq

5.2. Overall Sectoral Pathways NDC 3.0 outlines comprehensive decarbonization pathways economy-wide, covering all domestic sectors contributing to GHG emissions. Across power, buildings, oil and gas, transportation, industry, waste and AFOLU sectors, four decarbonization themes, which are feasible in the country, were explored to define sectorial pathways. 1. Electrification generated by Renewable Energy Source (RES): Transitioning from gas-fired power plants, machine drives, and heat to electricity to electricity produced by renewable energy. 2. Biofuels: Substituting high-emission fuels consumption by switching to sustainable fuels. 38 Azerbaijan’s Nationally Determined Contribution 3.0 3. Operations upgrade and equipment changes: Upgrading operational processes or replacing equipment to reduce emissions. 4. Energy efficiency: Achieving abatement via reduced high-emission fuel consumption. As a result of phased pathways’ realization, GHG Moreover, the availability of technology plays a key emissions are targeted to be abated by 40% by role in the decarbonization of the power, industry, 2035. and transportation sectors, particularly in relation to alternative fuels for aviation. By 2035, the country aims to implement primarily low-cost, currently feasible solutions that include There are also requirements for international energy efficiency levers, methane reduction, technology transfer and advancements in the transition to EV transportation, shift to RES and maturity of certain technologies, with focus on installation of heat pumps. these technologies becoming more financially viable for at-scale adoption in the future. This Attaining NDC 3.0 target is conditional upon includes SAF in the transportation sector and several factors. As a developing country, dietary alternatives for livestock in the AFOLU Azerbaijan aims to balance economic growth, sector. social well-being, and environmental sustainability, ensuring that decarbonization Collectively, these sectoral targets reflect an efforts align with long-term prosperity and ambitious commitment to a sustainable future, sectoral advancement. Access to enhanced aiming to reduce emissions, enhance economic financial resources will help to facilitate resilience, and ensure environmental implementation speed and expansion of key sustainability initiatives, such as renewables, electric grid upgrades, retrofitting, and EV infrastructure, etc.

5.3. Sectoral Decarbonization Pathways and Mitigation Plans Azerbaijan aims to ensure that decarbonization Conditionality will be a variable factor across efforts align with long-term prosperity and sectors depending on technical maturity, access to sectoral advancement, balancing the country’s finance and domestic human capital capabilities. economic growth, social well-being, and By incorporating such conditional factors across environmental sustainability. As such, the NDC all relevant sectors, realistic and scalable sectoral acknowledges the vital role of conditional factors, decarbonization pathways are ensured. These such as access to financial resources (e.g., pathways not only align national efforts with concessional loans, private sector investment), global climate finance mechanisms and technology availability, transfer and increased international technological cooperation but also maturity level, capacity-building support, and require substantial public and private sector availability of absorptive capacity of forests and investment and expertise. Achieving these goals other ecosystems in shaping sectoral pathways will depend on strong collaboration with and achieving ambitious climate goals. international partners, ensuring that efforts are synchronized as we transition toward a low- carbon economy. 39 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.1. Oil and Gas (Upstream and Midstream) In the context of NDC, the oil and gas sector companies conduct operations, including encompasses upstream (exploration and Azerbaijan’s National Oil Company (NOC), and production) and midstream (transportation, international oil companies (IOCs), in the form of storage, and distribution) parts of the value chain. joint ventures and production sharing agreements The sector is contributing approximately 37% to (PSAs) to operate large assets. the GDP.12 The primary activities in the upstream sector include the exploration and extraction of In 2022, the sector accounted for approximately oil, condensate, and natural gas, which are 28% (19.2 MtCO2eq) of total emissions, driven by consumed by the transportation sector, methane from venting and fugitives, flaring, and petrochemical- and petroleum-refining industries, CO2 emissions from fuel combustion (Figure 8). and energy production facilities. Multiple Figure 8. Oil and gas sector GHG emissions breakdown in 2022, MtCO 2eq SECTORAL PATHWAYS The main emission types in the oil and gas sector Most oil and gas players in Azerbaijan (mainly are CH4 and CO2, which drive the selection of international majors), as well as SOCAR, are bespoke decarbonization measures to abate each signatories of the Oil & Gas Decarbonization type of emission. To mitigate methane emissions, Charter (OGDC), launched during COP28. This measures that enhance energy efficiency and charter aims to achieve Zero-Routine flaring by involve structural modifications to current 2030 and near-zero methane emissions by 2035. operations are implemented. For the reduction of Furthermore, OGDC signatories commit to CO2 emissions, strategies such as electrification reaching Net-Zero in all operations by 2050. and carbon capture, utilization, and storage (CCUS) are employed, focusing on the use of In line with its established commitments, the lower-emission energy sources. upstream oil and gas assets are on the way to achieve zero-routine flaring by 2030 (some amount of safety flaring will remain – to be tackled 12 The State Statistical Committee of the Republic of Azerbaijan 40 Azerbaijan’s Nationally Determined Contribution 3.0 by venting reduction initiatives and offsetting). considering national energy security and Further, the country’s oil and gas sector will be economic development goals. decarbonized through a balanced transition, MITIGATION PLAN Decarbonizing the oil and gas sector would ENGINEERING SOLUTIONS (VENTING require a comprehensive set of measures and REDUCTION) technological choices. Each of the selected Engineering solutions aim to abate venting decarbonization measures would include a emissions, a controlled process of direct methane specific approach to address emissions. These emissions into the atmosphere due to operational choices will also vary by their application, issues and specifications. Various engineering abatement potential, and pace of introduction. The solutions are planned to eliminate gas use, list of emissions reduction measures is prevent equipment failure, and upgrade summarized in Table 7. operational practices to avoid venting (also leading to safety flaring reduction). ENERGY EFFICIENCY Energy efficiency initiatives concentrate on RES ELECTRIFICATION AND SCOPE 2 reducing emissions by optimizing the fuel REDUCTION consumption of specific equipment types through RES electrification and scope 2 reduction targeted projects. Given their straightforward initiatives target the decarbonization of implementation and the resultant operational combustion-related CO2 emissions and are closely expenditure savings, these measures are linked with advancements in the power sector. anticipated to be adopted in the short term. These measures involve the electrification of natural gas turbine-driven power, machine drives LEAKAGE DETECTION AND REPAIR (e.g., gas turbine-driven pumps and compressors), Leakage detection and repair (LDAR) projects are and heat generation, utilizing a grid powered by designed to address fugitive emissions, which are RES such as solar or wind. This approach unintentional methane emissions into the addresses both direct (Scope 1) and indirect atmosphere due to leakages, by identifying and (Scope 2) carbon dioxide emissions, thereby repairing their sources. The abatement potential significantly contributing to overall emission and cost of LDAR projects vary depending on the reduction efforts. accessibility of the emission sources and the extent of repair work required. Table 7. Oil and gas sector mitigation measures Themes Planned measures Planned measures by 2035 • Improve energy efficiency in operations to reduce Energy efficiency combustion-related emissions • Identify and fix leaks in equipment and pipelines to prevent LDAR fugitive emissions • Implement comprehensive initiatives to reduce methane Engineering solutions emissions from venting through operational upgrades and improved technologies (partially abating safety flaring) RES and scope 2 reduction • Replace purchased electricity (Scope 2 emissions) with renewable energy generated from the company's own RES 41 Azerbaijan’s Nationally Determined Contribution 3.0 Achieving decarbonization target by 2035 in the technologies, as well as access to funding and oil and gas sector will require financial support, capability building, will be vital to unlocking with the largest portion allocated to methane- sectorial decarbonization. Additionally, the reduction solutions and captured gas re-route development of RES in the power sector and grid pipeline infrastructure to fulfill the OGDC’s upgrades will be essential for achieving NDC 3.0 targets. target by addressing CO2 emissions from combustion. To tackle last-mile solutions, Transferring methane-measurement technologies international partnerships, technological to the country, such as satellite technologies, advancements, capability building through infrared cameras, and methane-abatement upskilling and reskilling will be critical. 42 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.2 Power The power sector plays a crucial role in the faced reduced capacity factors due to water country's economic framework by supplying scarcity. reliable and uninterrupted energy to residential and commercial consumers, and major sectors Given that the power sector primarily relies on including oil and gas, agriculture, and industry natural gas as its energy source, it emerges as the sector (e.g., metals and non-metallic minerals). country’s largest contributor to GHG emissions, emitting 14.4 MtCO2eq in 2022, or 21% of total The installed power generation capacity in 2022 emissions (Figure 9). There is significant potential stood at 8.0 gigawatts (GW), formed mostly with to enhance efficiency and expand the use of natural gas-fired power plants. Out of the total sustainable energy sources such as renewable 29.0 terawatt-hours (TWh) of electricity energy to reduce GHG emissions. generated in 2022, 93.6% (27 TWh) was generated from natural gas, consuming 6.5 billion The sector has made significant progress in cubic meters (bcm)13. Hydropower accounted for reducing emissions over the last two decades by 5.2% of the generation mix, while other sources shifting from fuel oil to natural gas. Additionally, contributed minimally, with solid waste unlike many other countries, Azerbaijan does not incineration providing 0.7%, while solar and wind use coal for power generation, resulting in a contributed by 0.5% of total generation. 42.4% of relatively lower carbon footprint per kilowatt- gas-fired generation came from combined cycle hour (kWh) produced. However, there is still gas turbines (CCGTs), operating at higher substantial potential to further improve efficiency efficiency, while 57.6% was generated by less and increase the adoption of RES. efficient plants. Additionally, hydropower plants Figure 98. Power sector activity structure and emissions level in 2022 13 Including natural gas consumption for both power and district heat generation. 43 Azerbaijan’s Nationally Determined Contribution 3.0 SECTORAL PATHWAYS Considering that decarbonization efforts in other transform power generation into a more high-emission sectors are primarily driven by sustainable and environmentally friendly sector. electrification, particularly in industrial processes, Key abatement measures include upgrading buildings, and transportation, electricity demand power transmission and distribution is expected to increase. This increase would lead infrastructure, expanding renewable energy to higher emissions from the current conventional capacity with a focus on solar and wind, deploying power system. The implementation of this long-duration energy storage (LDES) batteries, pathway is contingent upon solutions for the replacing Open-Cycle Gas Turbines (OCGTs), as limitations mentioned above, cooperation with well as gas engine plants with CCGTs. Together, international partners as well as securing these measures are expected to drive notable international funding for the least economically emission reductions while ensuring energy attractive levers. These goals are planned to be security and grid reliability. achieved through various measures designed to TRANSMISSION AND DISTRIBUTION (T&D) RENEWABLE POWER CAPACITY UPGRADES Another important lever involves expanding A critical lever in the country’s energy transition is renewable energy generation capacity to upgrading the grid infrastructure to remove the maximize electricity production from clean current limitations to meet growing electricity energy sources. Due to its more economically demand and enable renewable energy generation. attractive potential, solar power generation will T&D modernization will focus on reinforcing high- be prioritized, followed by the utilization of wind voltage transmission lines, constructing new power based on its availability. The country has substations, and upgrading existing ones with significant potential for both onshore and offshore advanced automation and digital control systems. wind power. Currently, onshore wind is more Similarly, the distribution network will also be economically feasible and, following solar, is improved by upgrading transformers, enhancing prioritized for development. Offshore wind will be automation, and implementing smart grid considered as a subsequent option if technological technologies. These upgrades will enable higher advancements and market conditions improve its integration of RES into the national grid on top of economic viability over time. BAU plans, allowing for a more significant LONG-DURATION ENERGY STORAGE contribution from solar and wind power. As BATTERIES (LDES) decentralized energy generation and electric vehicle (EV) adoption grows, the distribution To ensure a sustainable energy supply, LDES network will be key in managing these batteries will need to be installed. These batteries complexities by efficiently handling electricity will store excess energy produced from renewable flow ensuring the system remains reliable and sources, ensuring stable and reliable energy flexible. Additionally, operational improvements supply. By enhancing the integration of to the distribution network can potentially reduce renewables, this measure will help unlock the technical losses via further optimizing electricity transition to a steadier renewable energy system generation and reducing the sector’s total by 2035. emissions. 44 Azerbaijan’s Nationally Determined Contribution 3.0 MITIGATION PLAN The table below provides an overview of the power sector’s planned mitigation measures (Table 8). Table 8. Power sector mitigation measures Themes Planned measures Planned measures by 2035 • Implement upgrades to the power transmission and Transmission and distribution network to accommodate growing electricity Distribution (T&D) upgrades demand, and to enable increased renewable integration and energy efficiency • Implement grid control mechanisms to minimize technical losses in electricity supply • Increase renewables generation share, primarily driven from solar and onshore wind power Renewables expansion • Expand solar power capacity • Expand onshore wind power generation capacity With strategic plans of exporting green energy, to export markets, which will be strengthened including electrons and molecules, the country has further with the introduction of battery and linked its economic plans closely to domestic storage facilities, thus contributing to regional decarbonization efforts, including at scale decarbonization efforts. deployment of offshore wind capacities, electrolyzers, and other infrastructure Attaining to NDC 3.0 target will require substantial development and upgrades. This strategy not only investment with the largest portion of capital supports global decarbonization initiatives but expenditure (CapEx) allocated to renewable also enhances the domestic energy landscape by power. Significant CapEx will also be necessary for integrating RES and further reducing the reliance grid upgrades and the expansion of solar on high-emission fuels. Given that variable capacities. However, these investments will yield renewable energy solutions mentioned in the operational expenditure (OpEx) gains through the decarbonization pathway would also be capable of shift from higher-cost gas-fired power plants to producing electricity more than it is demanded, RES, reducing the marginal costs of electricity excess supply of energy is intended to be diverted production. 45 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.3. Buildings The buildings sector plays a crucial role in meeting consumption resulted in emissions amounting to the energy needs of the population and supporting approximately 10.0 MtCO2eq, making buildings various economic activities, encompassing a wide the second highest-emitting sector in the country range of structures from residential apartments to in 2022 constituting 14% of overall emissions. commercial buildings. Specifically, the sector comprises approximately 2.1 million residential Space heating is the primary source of sector dwellings, accommodating over 10.1 million emissions in all segments with 72% (7.2 MtCO2eq) residents and 0.5 million commercial, of total emissions coming from residential institutional, and industrial buildings. The total dwellings and 10% (1.0 MtCO2eq) coming from enclosed residential area is about 220 million commercial, institutional, and industrial square meters, while the commercial, buildings. Water heating is the second biggest institutional, and industrial area spans 47 million source of emissions in all segments with 13% (1.3 square meters. MtCO2eq) of emissions coming from water heating for residential dwellings and 2% (0.2 MtCO 2eq) Natural gas is the primary energy source for coming from water heating for commercial, buildings. In 2022, the residential segment institutional, and industrial segments. Cooking consumed approximately 4.0 bcm natural gas, represents 3% of the sector’s emissions, while commercial, institutional, and industrial amounting to 0.3 MtCO2eq (Figure 10). segments used approximately 0.5 bcm. This Figure 90. Buildings sector GHG emissions breakdown in 2022, MtCO2eq 46 Azerbaijan’s Nationally Determined Contribution 3.0 To manage emissions, various policy levers and Another significant factor contributing to strategic initiatives have been implemented to inefficient energy use is suboptimal insulation of improve the sector’s emissions level across recent buildings from the Soviet era. These buildings, years (Table 9). More detailed information is have higher energy consumption for heating and available in Section 6.2. Regulations and Policies. cooling and being quite old, are partially included in the country’s demolition and renovation plans. Moreover, various demand-side management (DSM) and energy efficiency initiatives are STANDARDS FOR NEW BUILDINGS continuously being implemented to improve To improve the energy performance of newly energy consumption patterns and promote constructed buildings and the energy efficiency of sustainable development. The DSM program is equipment within these structures, specific laws supported by several legislative frameworks, most setting standards for buildings have been notably the Law on Rational Use of Energy introduced. Stricter energy performance Resources and Energy Efficiency, which came into requirements are defined by the Minimum Energy effect in July 2022. This law establishes Efficiency Standards for Buildings (August 2023) comprehensive rules for conducting energy which ensure the use of modern insulation, audits, managing energy services and setting heating, and cooling technologies, along with the efficiency requirements across production, incorporation of RES. Better energy management transmission, distribution, storage and is also encouraged by the Thermal Insulation of consumption of energy. The legislation also Equipment and Pipelines regulation (April 2023), includes measures to raise public awareness and which ensures that buildings' heating and cooling provides incentives for adopting energy-efficient systems are adequately insulated to minimize technologies. In addition, the implementation of energy loss. the Energy Management System (2022) in accordance with the ISO50001 standard, is INSTALLATION OF RENEWABLE ENERGY required by law. This mandates the appointment SYSTEMS of energy management in i) economic entities with The incorporation of renewable energy into the an annual energy consumption exceeding 1,000 buildings sector has recently received significant tons of oil equivalent, and ii) in non-residential attention. To encourage the use of renewable buildings with a construction area of at least energy in urban areas, the Rooftop Solar Energy 10,000 square meters or an annual energy System Installation Requirements (November consumption of more than 250 tons of oil 2023) set forth standards for integrating solar equivalent. It also mandates that energy audits are energy systems into building designs. Stricter conducted every three years. insulation and rooftop solar installation standards are required for liberated territories. Table 98. Buildings sector current policy and measures Area Current measures • Comprehensive rules for conducting energy audits, managing energy services, and setting efficiency standards with Law on Rational Use of Energy Resources and Energy Improvement of energy Efficiency (July 2022) efficiency • Energy management systems mandatorily installed in non- residential buildings exceeding certain energy consumption, according to Energy Management System Requirements (August 2022) Standards for new buildings • Stricter energy performance requirements by the Minimum Energy Efficiency Standards for Buildings (August 2023) 47 Azerbaijan’s Nationally Determined Contribution 3.0 • Adequate insulation of heating and cooling systems with Thermal Insulation of Equipment and Pipelines (April 2023) Installation of renewable • Guidelines for rooftop solar system installation, promoting energy systems renewable energy integration in buildings (November 2023) SECTORAL PATHWAYS To achieve decrease GHG emissions, two themes currently powered by natural gas, and (2) are deployed: (1) electrification of equipment increasing energy efficiency. ELECTRIFICATION OF EQUIPMENT POWERED INCREASING ENERGY EFFICIENCY BY NATURAL GAS To increase the energy efficiency of buildings is A major goal for 2035 is to ensure the transition of critical to achieve decarbonization target by 2035. equipment powered by natural gas to equipment First, buildings are expected to be retrofitted with powered by renewable electricity. To this end, high-performance insulation materials, such as buildings are expected to install electric air-to- advanced thermal insulation and double-glazed water heat pumps and electric stoves, both windows. Improved insulation will increase powered by renewable electricity. Heat pumps, energy efficiency, reducing heating and cooling which are approximately three times more energy demand. Secondly, switching to LED efficient than natural gas systems, will provide lighting and promoting high-efficiency appliances, heating and hot water, reducing reliance on such as refrigerators, washing machines, and natural gas. Electric stoves, which use dishwashers, will further lower energy electromagnetic energy to heat cookware, will consumption. Lastly, installing high-efficiency air replace gas stoves, cutting down on energy waste conditioning systems that are designed to meet and further decreasing the use of natural gas. global energy standards, will also enhance cooling performance while using less electricity. MITIGATION PLAN A detailed emission mitigation plan, including specific actions and measures for emission reduction, is critical to achieving decarbonization targets by 2035 (Table 10). Table 10. Buildings sector mitigation measures Themes Planned measures Planned measures by 2035 • Transition to electric heat pumps and electric stoves of existing residential buildings • Establish guidelines for allowable heating sources in new Electrification of equipment buildings powered by natural gas • Support the use of renewable electricity to power electric heat pumps and electric stoves • Incentivize the installation of electric heat pumps in urban and rural areas 48 Azerbaijan’s Nationally Determined Contribution 3.0 • Installation of adequate insulation of existing buildings • Set high insulation standards for new buildings • Promote the use of LED lighting, high-efficiency appliances Increasing energy efficiency and air conditioning of existing buildings • Establish guidelines and incentives to ensure that LED lighting, high efficiency appliances and air conditioning are used in new buildings Achieving NDC 3.0 target will require substantial buildings sector. Despite higher upfront costs, capital investments to install electric heat pumps, electric heat pumps are expected to deliver OpEx electric stoves, advanced insulation, LED lighting, savings through reduced energy consumption, and high efficiency appliances and air due to their approximately three times greater conditioning in existing and new buildings in the energy efficiency compared to gas boilers. 49 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.4. Transportation The transportation sector is an essential population growth, and increased vehicle component of the country’s economy, ownership. In 2022, emissions reached contributing approximately 6%14 to the GDP. The 9.3 MtCO2eq, constituting 13% of the country’s well-developed transportation network includes overall GHG emissions. Road transportation is the roads, domestic railways, aviation, and maritime primary source of these emissions, accounting for transport. The sector comprises 2,704 kt of annual 92% of the total with 8.6 MtCO2eq, mainly driven fuel consumption by road vehicles powered by by gasoline and diesel from internal combustion gasoline, diesel, CNG/LPG, and electricity. In 2022, engines (ICE). Domestic aviation represents 5% of domestic railways, aviation, and maritime the sector’s emissions, equating to 0.5 MtCO2eq, transport collectively consumed 220 kt of diesel, and domestic maritime transport and railways aviation fuel, and maritime oil. represent 2% and 1% of the sector’s emissions, respectively. This is primarily due to marine fuel Azerbaijan’s transportation sector has consumption in shipping and diesel locomotives in experienced a considerable growth in emissions, railways (Figure 11). reflecting broader economic expansion, Figure 1110. Transportation sector GHG emissions breakdown in 2022 To manage growth sustainably, various policy Program for Renewal and Development of the levers and strategic initiatives have been Road Network in the Republic of Azerbaijan implemented over the years to improve (2006-2015),” several highways, roads, and transportation sector emissions (Table 11). parking lots were constructed and expanded, with improvements to the street-road network, to TRANSPORTATION PLANNING AND PLANNED reduce traffic congestions and, consequently, GHG FLEET UPGRADES emissions. As a result of the introduced “State Program on the Development of Transportation System in the Concerning air transportation emissions, the Republic of Azerbaijan (2006-2015)” and “State aviation segment is currently undergoing fleet 14 The State Statistical Committee of the Republic of Azerbaijan. 50 Azerbaijan’s Nationally Determined Contribution 3.0 renewal to enhance fuel efficiency and lower GHG ELECTRIFICATION OF TRANSPORTATION emissions. Between 2005 and 2015, the fleet was To boost energy efficiency and improve electric modernized through new aircraft replacements. transport infrastructure in Azerbaijan, the Beginning in early 2023, the aviation fleet will government is planning the early adoption of undergo further renewal with the addition of 20 public transport electrification. For electrification new aircraft, contributing to further emission purposes and to potentially establish local reductions. manufacturing capabilities, 160 electric buses were purchased, and the installation of chargers Additional measures to support the development will be completed by the end of 2024 in Baku city of an efficient transportation network include routes. Moreover, to further encourage the expanding railway transport for passenger adoption of electric vehicles, the government has mobility, developing and expanding the metro been implementing various incentives and tax system, and increasing awareness of “eco-driving” exemptions for importing and selling electric for passenger and freight transportation. vehicles. In particular, the import and sales of ENVIRONMENTAL EMISSION STANDARDS electric cars and chargers are exempt from VAT, Driven by the commitment to reducing emissions, with the import duty tariff set at 0% for factory the Cabinet of Ministers implemented the Euro-4 production of vehicles up to three years after emission standard on April 1, 2014, as a production. regulatory measure. Additionally, diesel and gasoline produced at the Heydar Aliyev Oil Refinery have already been brought up to Euro-5 standards. Moreover, based on key decisions made on March 27, 2024, regarding the use of taxis, taxis are now required to adhere to a minimum of Euro-5 ecological norms and use vehicles less than 15 years old. To further improve the age of the fleet, a limit is imposed on the import of passenger cars older than 10 years from their manufacturing date. Table 9. Transportation sector current policy and measures Area Current measures Transportation planning and • Renovation and development of transportation systems and planned fleet upgrades improvement to the road network for reduced traffic congestion based on various state programs • Renewal of aviation fleet with 20 new aircraft • Shift to railways transport in freight and passenger transportation • Development of metro transport and expansion of the metropolitan network • Increased awareness of “eco-driving” for passenger and freight transportation Environmental emission • Application of Euro-4 ecological norms for transportation in standards Azerbaijan since April 1, 2014 • Taxis to follow minimum Euro-5 ecological norms as of July 1, 2024 • Limit on the import of passenger cars older than 10 years from their manufacturing date 51 Azerbaijan’s Nationally Determined Contribution 3.0 • Production of diesel and gasoline produced at the Heydar Aliyev Oil Refinery, which have been brought up to Euro-5 standards Electrification of • Purchase of 160 EV buses, chargers, and potential local transportation manufacturing of EVs by the end of 2024 • Various incentives and tax exemptions for the import and sale of EVs Sectoral pathways Several pathways and enablers have been distance (km) traveled by road transportation, 2) identified, such as enhanced electrification reduction of emission intensity per kilometer technologies, heavy batteries, and longer-range traveled by enhancing the efficiency of the current long-haul trucking. These enablers allow for faster fleet and introducing cleaner fuel sources, 3) adoption and considerable emission reductions in achieving an optimal modal shift by introducing the road transportation sector. new mobility solutions and increasing the share of public transportation. Energy transition in the transportation sector will target three key objectives: 1) reduction of STRUCTURAL AND OPERATIONAL UPGRADES replacing them with electric and hybrid vehicles. To encourage this shift, substantial investments in A primary goal is reducing overall GHG emissions electric charging infrastructure and incentive from urban mobility through the sustainable mechanisms will be required. expansion of public transportation usage. This will be achieved through modernizing infrastructure, BIOFUELS introducing micro-mobility solutions, and Biofuels need to be utilized in transportation. enhancing public transportation's attractiveness Additionally, regarding aviation and maritime and accessibility to reduce public transit travel transport, exploring alternative fuel sources and time. promoting the use of biofuels will be essential for reducing GHG emissions from these ELECTRIFICATION transportation segments, by further increasing Significant decarbonization of the transportation the share of this technology. sector requires a gradual phase-out of ICEs, MITIGATION PLAN To achieve decarbonization target by 2035, a which includes specific actions and measures for detailed emissions mitigation plan is critical, emission reduction (Table 12). Table 102. Transportation sector mitigation measures Themes Planned measures Planned measures by 2035 Structural and operational • Expand and modernize the public transportation networks, upgrades including buses, trains, and metro 52 Azerbaijan’s Nationally Determined Contribution 3.0 • Incentivize behavioral change toward increased usage of public transportation and micro-mobility • Increase the use of and expand the railway network • Plan the initial retirement of the ICE fleet and renew the public transportation park Electrification • Increase EV share in passenger car, bus, and truck fleets • Support the adoption of EVs through incentive programs • Adopt biofuels in transportation Biofuels • Utilize biofuel blending in aviation fuel activity The transportation sector’s shift to sustainability By addressing key challenges and implementing requires significant amounts of CapEx, mainly for strategic initiatives, the country is set to EV infrastructure, such as charging stations and significantly reduce emissions from the grid upgrades. Although upfront costs are higher, transportation sector and contribute to global OpEx savings are expected from EVs due to lower climate goals and environmental outcomes. fuel and maintenance costs compared to ICE vehicles, along with improved efficiency. 53 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.5. Industry The industry sector is an important source of last 10 years, whereas metals segment totaled economic growth and jobs, with multiple at-scale around 0.8 million tons of metal production in industrial companies, contributing up to 25% of 2022, primarily from steel and aluminum the country’s non-oil and gas GDP. This production. contribution and growth have been driven by government policies as well as investments from In 2022, the industry sector generated 8.9 the private sector and SOEs. This continued MtCO2eq of emissions, driven by the use of growth is projected to translate into higher GHG emission fuel in energy and raw materials across emissions, making decarbonization of this sector six segments. Downstream oil and gas products, as one of the main priorities in achieving emissions well as non-metallic minerals, are two major targets. contributing segments, collectively responsible for 6.3 MtCO2eq in total sector emissions. Other In 2022, this sector was primarily composed of: contributors include metals, chemicals, and food downstream oil and gas products, production of and beverage which together account for an non-metallic minerals such as cement and metals additional 2 MtCO2eq. The remaining 0.6 MtCO2eq such as steel and aluminum. Downstream oil and was generated by other industry segments such as gas products are mainly produced by gas construction and construction materials (Figure processing plant, petroleum refinery, 12). petrochemical plants, methanol plant, and urea plant. This segment has experienced strong It should be noted that the industry sector is often growth over the past decade, with increased considered hard-to-abate in terms of GHG production and export volumes. emissions, primarily due to the high temperatures required in industrial processes. These processes Metallic and non-metallic material production is often rely on hydrocarbons and produce gases another key segment in this sector with non- from chemical reactions that may also contain metallic minerals producing 2.7 million tons of fluorine. clinker in 2022 achieving over 50% growth in the Figure 12. Industry sector GHG emissions breakdown in 2022, MtCO2eq 54 Azerbaijan’s Nationally Determined Contribution 3.0 Industrial activity growth is prioritized in the use natural gas (and later can use carbon capture country and is evident in its current measures and or hydrogen) as a fuel rather than coke or coal - policies targeted at the sector development. the traditional fuel used in blast furnace for iron However, some policies are now also emphasizing production - and will later incorporate carbon sustainable growth and decarbonization efforts. capture or hydrogen. As the country progresses towards decarbonization, further policy improvements CONCENTRATION OF INDUSTRIAL ASSETS IN would be introduced to accelerate the pace of INDUSTRIAL PARKS decarbonization. More detailed information is Industrial parks serve to geographically available in Section 6.2. Regulations and Policies. concentrate industrial assets, thereby easing future decarbonization efforts. For example, INCREASING ENERGY EFFICIENCY AND recycling heat and waste, CCUS, and electrification SWITCHING TO CLEANER FUELS at-scale become easier when industrial assets are Various state programs, including the 2015-2020 geographically concentrated and use shared Industry Development Plan, and the 2022-2026 infrastructure. Multiple industrial parks have Socio-Economic Development Plan, include been established in the past decade, with policies policies and measures to improve energy aimed at continuing this trend in an effort to efficiency. These policies have translated into produce 15% of the sector’s output within these concrete actions, such as the establishment of a parks (Table 13). new Direct Reduced Iron (DRI) facility, which will Table 11. Industry sector current measures Area Current measures Increasing energy efficiency • Support mechanisms for energy efficiency through various and switching to cleaner state programs fuels • Establishment of Direct Reduced Iron (DRI) plant as a low- carbon iron production route Concentration of industrial • Commission of industrial parks such as Sumgait Chemical assets in industrial parks Industrial Park, Sumgait Technologies Park, Aluminum Production Complex, and others SECTORAL PATHWAYS To achieve abatement, actions need to be taken OPERATIONAL UPGRADES across three main pathways: energy efficiency, In the downstream oil and gas and alumina operational upgrades, and electrification. refining segments, incorporating advanced technologies into operations would reduce ENERGY EFFICIENCY emissions. For example, in downstream oil and Enhancing energy efficiency will be one of the keys gas, the application of Leak Detection and Repair unlocks for decarbonizing the industry sector, (LDAR) significantly contributes to namely downstream oil and gas segment. By decarbonization by reducing fugitive methane increasing the output per unit of energy emissions through timely detection and repairs. consumed, industries would significantly reduce their emissions. This will be achieved through the ELECTRIFICATION modernization of equipment, machinery, and Many segments of the industry rely on high facilities. emission fuel combustion to operate, where 55 Azerbaijan’s Nationally Determined Contribution 3.0 electrification of equipment and machinery is key steam, respectively. Similar applications exist in to unlock full decarbonization potential. For alumina refining within the metals segment and instance, in food and beverage and chemicals downstream oil and gas. Electrification with industries, gas boilers would be substituted with increased penetration of renewables in the energy high-temperature heat pumps and electric boilers grid will translate to the decarbonization of fuel for generating low-pressure and high-pressure consumed by industrial assets. MITIGATION PLAN To reach decarbonization target by 2035, it is mitigation strategy that outlines specific actions essential to have a comprehensive emissions and measures for reducing emissions (Table 13). Table 12. Industry sector potential mitigation measures Themes Planned measures Planned measures by 2035 Energy efficiency • Improve energy efficiency in downstream oil and gas to obtain reduction in emissions Electrification • Replace gas boilers with electric boilers and heat pumps • Apply LDAR technology to curb downstream oil and gas Operational upgrades emissions Achieving decarbonization target by 2035 in the Technological advancements such as inert anode industry sector will require additional CapEx, technology, development of RES in the power considering the implementation of high-cost sector and grid upgrades, and capability building pathways and measures. The majority of the OpEx through upskilling and reskilling will be key to are driven by the chemicals and non-metallic unlocking sectorial decarbonization. minerals segments, which are aimed at significant electrification and advanced technology. 56 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.6. Waste As the country’s population and industrial waste disposal from such sites constituted 50% of activities continue to grow, managing waste total emissions in the waste sector, with 2.4 presents an important opportunity for MtCO₂eq in 2022. Furthermore, the wastewater environmental improvement. As of 2022, total treatment process contributed 2.4 MtCO2eq to generated municipal solid waste (MSW) and overall sector emissions, primarily from methane industrial waste amounted to 3.9 Mt, resulting in and N2O gases arising from the anaerobic 395 kg of waste generated per capita. Two decomposition and nitrification-denitrification primary sources of solid waste—household and processes integral to wastewater treatment industrial activities—contributed to 67% and (Figure 13). 28% of the total waste collected within the country, respectively. The remaining 5% was In addition to waste treatment and disposal, waste derived from other sectors, including agriculture, incineration is another form of waste fisheries, and forestry. This distribution highlights management that produces less CO2 emissions per the significant impact—and opportunities for kg of waste compared to open landfills. In 2022, improvement—of both domestic and industrial waste incineration at the Balakhani solid waste activities on overall solid waste management incineration plant generated 231.4 GWh of challenges. Additionally, wastewater, including electricity and emitted 0.01 MtCO2eq in GHG domestic and industrial effluents, generates GHG emissions, which is estimated to be approximately emissions when treated or disposed of in 84,000 tCO2eq less than what would have been anaerobic conditions. In 2022, approximately 260 produced in open landfills. These emissions are million m3 of wastewater was treated. combined with the power sector’s emissions, as they are produced while generating power. Overall, the waste sector was responsible for emitting 4.9 MtCO₂eq, accounting for Additionally, CO2 emissions from burning biomass approximately 7% of the country's total GHG materials, amounting to 0.5 MtCO2eq, were emissions in 2022. One of the primary excluded from the national total, as these biogenic contributors to these emissions is methane, which emissions mainly come from the incineration of is released during the anaerobic decomposition of paper, food, and wood waste. organic materials. Emissions from solid organic Figure 13. Waste sector GHG emissions breakdown in 2022 57 Azerbaijan’s Nationally Determined Contribution 3.0 The Tamiz Shahar OJSC was established to and sorting technologies and enhancing waste enhance solid waste collection and treatment in separation at the source through awareness Baku and in liberated territories. Furthermore, programs. Regarding wastewater, new treatment industrial waste is either sent to landfills or plants are planned for construction in the main directly sold to recycling companies. districts of Gadabay, Astara, Dashkasan, Tartar, and Gazakh under the National Water Supply and National Solid Waste Management Strategy Sewerage program (Table 13). includes implementing circular product designs Table 13. Waste sector current policy and measures Area Current measures • Implementation of circular product designs and sorting technologies Solid waste management • Increased awareness of waste management through programs and campaigns • Construction of new wastewater treatment plants in the Wastewater management main districts of Azerbaijan Additionally, the COP29 Declaration on Reducing management, circular economy practices, and Methane from Organic Waste calls on national international cooperation. It aims to deliver governments to cut methane emissions in the health, environmental, and economic benefits waste sector to help limit global warming to 1.5°C. while aligning with global climate goals and This initiative promotes organic waste leveraging partnerships and public awareness for sustainable waste management. SECTORAL PATHWAYS NDC 3.0 establishes a pathway to substantially such as securing international financial support, reduce waste sector emissions by 2035. To reach enhancing sorting initiatives, and upgrading this abatement level, a comprehensive plan is infrastructure to achieve sustainable practices in needed that focuses on immediate reductions. solid waste disposal and wastewater management. These pathways include implementing advanced waste management technologies and key enablers, ANAEROBIC DIGESTION PLANTS WASTEWATER TREATMENT CENTER Anaerobic digestion (AD) plants are pivotal role in Establishing advanced wastewater treatment the pathway by converting organic waste into centers that utilize anaerobic processes can biogas, which can be used as RES and digestate. capture methane for energy use and significantly However, this requires structural changes, such as reduce wastewater GHG emissions. This requires shifting behavior to more sustainable waste upgrading existing wastewater treatment management practices and increasing the infrastructure and technological investments in collection rate of MSW. anaerobic systems. 58 Azerbaijan’s Nationally Determined Contribution 3.0 MITIGATION PLAN Table 14 below outlines the planned mitigation wastewater treatment, including various measures for managing solid waste disposal and initiatives and actions. Table 144. Waste sector mitigation measures Themes Planned measures Planned measures by 2035 • Assess the feasibility and construction of AD plants near intersection of waste landfills AD plants • Increase the share of waste sorting in total generated waste through incentives and awareness programs Wastewater treatment • Construct new wastewater treatment centers to increase capacity and improve the efficiency of wastewater centers processing By 2035, most of the CapEx will be directed treatment plants. These investments are pivotal in toward building advanced sorting centers and reducing emissions and promoting sustainable technologies. Additionally, investments will focus waste management in the country. on developing AD facilities and wastewater Addressing key challenges and decarbonizing the treatment centers. OpEx will cover the continuous country’s waste sector through AD and operation and maintenance of these facilities, wastewater treatment presents a viable pathway including labor, energy, and equipment upkeep for to meeting its decarbonization goals. sorting centers and anaerobic and wastewater 59 Azerbaijan’s Nationally Determined Contribution 3.0

5.3.6. Agriculture, Forestry, and Other Land Use (AFOLU) The AFOLU sector focuses on the production of continue to grow mainly based on land availability grains, fruits, vegetables, and various livestock and food needs of the population. products, including meat, dairy, and wool, and also encompasses land use, forestry, and soil Agricultural lands covered about 4.8 mln hectares management practices. As a sector, it is the in 2022. Across these lands, the total number of country’s largest employer providing jobs for 36% livestock was approximately 10.5 mln heads, as of 2022.15 Overall, in the past decades consisting of mainly cattle and sheep as of 2022 agricultural production has been growing at a (Figure 14). CAGR of 11% since 2000 and is expected to Figure 11. Total land fund and livestock breakdown as of 2022 In 2022, the agriculture sector emitted a total of of enteric fermentation emissions, underscoring

8.0 MtCO₂eq (Figure 15), with emissions their dominant role in agricultural emissions. stemming both from livestock and crop production activities releasing CO₂, CH4, and N₂O. Alongside these emissions, the sector also has a Out of all emissions, CO₂ emissions are largely stabilizing element in the form of the Land Use, linked to energy use in farm machinery, Land-Use Change, and Forestry (LULUCF) sector, particularly diesel consumption, while methane which acts as a carbon sequestration mechanism. and N₂O emissions mainly come from enteric In 2022, LULUCF contributed a net carbon fermentation in ruminant animals and the sequestration of 5.2 MtCO₂eq, with forest land anaerobic decomposition of manure. Enteric emission removals accounting for 3.6 MtCO₂ fermentation and energy-related emissions are across 1.04 million hectares. This sequestration the largest contributors, accounting for 64%16 and has played a significant role in offsetting the 16% of total sectoral emissions, respectively. overall emissions impact of the agriculture sector. Cattle and sheep are responsible for 67% and 27% 15 The State Statistical Committee of the Republic of the livestock sector, the total emissions figures may Azerbaijan be subject to revision 16 Upon a future census of the country's livestock and adjustments to the emission intensity estimates for 60 Azerbaijan’s Nationally Determined Contribution 3.0 Together with LULUCF, the net emissions of the AFOLU sector were 2.8 MtCO₂eq in 2022. Figure 15. AFOLU sector GHG emissions breakdown in 2022, MtCO 2eq Despite the growth in agricultural activity, forest 12.3%, forming a key part of the country’s broader land expansion under the Land Use, Land-Use emission stabilization efforts. The increase in Change, and Forestry (LULUCF) segment is forest land is supported by Azerbaijan’s 2022- expected to play a crucial stabilizing role in 2026 Socio-Economic Development Strategy, absorbing emissions. The projected expansion of which emphasizes forest area expansion and the approximately 30 thousand hectares of forest land promotion of sustainable agricultural practices to by 2026 will increase the total forest coverage to mitigate overall emissions. SECTORAL PATHWAYS Emission reductions in this sector will be realized carbon removals, primarily driven by the through a combination of abatement themes expansion of forest land within the LULUCF touching upon the major sources, such as livestock framework. and energy use, while significantly boosting METHANE REDUCTION increasing the portion of larger breed animals Addressing methane emissions from livestock, could help reducing methane emissions. particularly through advanced feed additives and ELECTRIFICATION OF MACHINERY dietary practices, will be key in the agriculture sector. However, since most of the livestock in the Transitioning from diesel-powered agricultural country are free-range and not managed in machinery and equipment to electric alternatives feedlots, the overall impact may be limited. will be another major step toward emissions Medium- and large-scale composting facilities will reduction. This shift will encompass not only also aid in controlling emissions from manure. mobile vehicles but also stationary equipment, Additionally, optimizing livestock size by such as water pumps, irrigation systems, grain 61 Azerbaijan’s Nationally Determined Contribution 3.0 builders and crop processing equipment, detailed land information system is considered an refrigeration systems for the storage of important measure to enhance the effectiveness of agricultural products, and other essential these practices and improve long-term machinery. However, the success of this transition sustainability outcomes. will depend on developing the necessary infrastructure to support the widespread LULUCF adoption of electric vehicles and machinery. Expanding forest land will play a pivotal role in the country’s decarbonization efforts, significantly SMART AGRICULTURAL PRACTICES enhancing carbon sequestration within the AFOLU Adopting improved farming techniques, such as sector. Beyond achieving target in AFOLU, LULUCF reducing fertilizer overuse, no-tillage, and offers an additional carbon removal capacity, precision agriculture, will help further lower providing extra sequestration potential that could emissions while boosting efficiency and support the decarbonization efforts of other sustainability across the sector. Additionally, sectors as well, contributing to broader national given the general challenge of soil erosion due to sustainability goals. country’s mountainous landscape, the establishment of a smart systems including MITIGATION PLAN To reach the decarbonization target by 2035, it is mitigation strategy that outlines specific actions essential to have a comprehensive emissions and measures for reducing emissions (Table 14). Table 14. AFOLU sector mitigation measures Themes Planned measures Planned measures by 2035 • Accelerate shift from traditional ICE machinery to electric Electrification of machinery machinery Methane reduction • Introduce manure composting facilities Forestry • Leverage relevant lands to recover back to or convert to forest land Achieving emission reductions in the AFOLU additional investments. Furthermore, annual sector will require targeted capital investments, operating expenses will be influenced by several particularly in grain-processing technologies and factors, with seaweed and 3-NOP additives being the electrification of machinery. The shift to the most significant contributors to operational electric machinery will also necessitate the costs as they are key to reducing methane development of EV infrastructure, including emissions. The successful implementation of these charging stations and battery storage, requiring measures is contingent on ensuring they do not negatively impact agricultural productivity. 62 Azerbaijan’s Nationally Determined Contribution 3.0

5.4. Infrastructure Requirements Successful implementation of decarbonization and other minor components (e.g., methane initiatives requires addressing infrastructure transportation and storage and waste sorting requirements, including power grid upgrades, facilities). These infrastructure enablers will help electric vehicle charging infrastructure (EVCI), unlock decarbonization across sectors (Figure 16). Figure 1612. Impact of infrastructure requirements across sectors POWER TRANSMISSION AND DISTRIBUTION the energy mix. This includes installing inverters GRID UPGRADES to integrate renewable energy into the grid, As sectors transition from high emission fuels to applying smart grid technologies to match supply electricity to meet their energy needs, the power and demand, and managing the impacts of grid will have to develop to deliver this increased distributed power generation, such as reversed demand to end consumers. The COP29 Global power flows. Additionally, transformers will be Energy Storage and Grids Pledge commits to crucial for managing voltage levels across both deploying 1,500 GW of energy storage and transmission and distribution (T&D) networks, enhancing grid capacity by 25 million kilometers ensuring stability as capacity increases and more by 2030, aiming to support the transition to clean decentralized renewable sources are integrated. energy and achieve global net-zero emissions by Secondly, the grid will need to handle larger loads. 2050. This initiative emphasizes international This requires modernization, capacity increases, collaboration, social inclusion, and working with and the rollout of new substations, transformers, private sector capabilities. It also recognizes the and lines. Demand-side management (DSM) will importance of i) modernizing grid infrastructure also be vital for managing local peaks, and efficient and cost-effective energy storage technologies in power storage systems will help align supply with integrating renewables and ii) enhancing energy demand. security. Upgrades to the grid will need to be phased in line Required grid upgrades are separated into two with the electrification of sectors, ensuring that main areas. Firstly, improvements will be power T&D do not become bottlenecks. necessary to increase the uptake of renewables in 63 Azerbaijan’s Nationally Determined Contribution 3.0 ELECTRIC VEHICLE CHARGING OTHERS INFRASTRUCTURE (EVCI) Other infrastructure, such as methane Increasing uptake of EVs in the coming decades transportation and storage and waste sorting will mitigate the effects of high-emission fuel facilities, will also be key in enabling combustion in both transportation and decarbonization, albeit at a smaller scale. agriculture. To facilitate this transition, mass rollout of EVCI is required to position electric At the same time, AD plants are expected to serve vehicles as a convenient and accessible alternative as a primary decarbonization lever in the waste to vehicles with ICEs (contingent on the sector. For these plants to have a reliable and availability of distribution grid capacity for sufficient source of feedstock, waste sorting increased electricity demand). facilities will need to be established. To meet the target, new facilities with increased capacity will To reach a targeted share of electric vehicles, need to be commissioned prior to 2030. scaling of EVCI would need to accompany it. 64 Azerbaijan’s Nationally Determined Contribution 3.0 65 Azerbaijan’s Nationally Determined Contribution 3.0 6. Enabling Conditions for Implementing Mitigation Plans To achieve a successful decarbonization program, Moreover, the deployment of advanced global the following conditions need to be satisfied: technologies and equipment upgrades is crucial, ensuring proper finance mechanisms, setting including their transfers, conditional on feasibility robust regulations, enhancing existing and maturity levels. As supporting measures, R&D technologies and innovation, developing projects, education programs, and international capabilities, establishing effective governance, collaborations are essential to improve and adopting an Enhanced Transparency technological capabilities and ensure access to Framework (ETF). cutting-edge solutions. Reaching the target of 40% reduction by 2035 will Combating climate change, enhancing require substantial investments across sectors sustainability, building additional capacity, and that focus on infrastructure, renewables, and advancing technologies necessitate advanced technologies. Subject to the country’s comprehensive plans to bolster workforce sustainable socio-economic development, these through education, technical assistance, upskilling investments should be supported by a mix of and re-skilling, and advisory services, targeting international and local financing mechanisms, diverse demographics. such as Foreign Direct Investment (FDI), Public- Private Partnerships (PPPs), Power Purchase A robust and adaptable governance mechanism Agreements (PPAs), and Multilateral and ETF will ensure adequate progress is made in Development Banks (MDBs), including implementing decarbonization pathways by concessional finance and grants, to propel setting clear targets, monitoring progress, economic growth, job creation, and development addressing solutions, and adjusting investment of advanced capabilities. strategies. A comprehensive policy framework The country’s transitioning away from fossil fuels encompassing cross-sectoral and sector-specific toward RES and a sustainable economy unlocks measures is essential to ensuring long-term revenue potential – which can also be leveraged to emissions reduction and climate resilience while further support the transition – attracts supporting the implementation of NDC 3.0. investment, creates high-value jobs, and encourages innovation.

6.1. Finance Mechanisms To achieve 40% reduction by 2035 will require international financing through multilateral significant investments across sectors. These development banks (MDBs) and climate investments will focus on infrastructure, adaption investment funds, including highly concessional of renewables, low-carbon and green energy finance and grants, will be critical to supporting solutions, and development of advanced the country to reach decarbonization target. The technologies. scale of and the need for the financial support for this NDC 3.0 sheds additional light on the vital As a source of financing, Azerbaijan will rely on a importance of climate finance in general and the mix of international support and investors, New Collective Quantified Goal (NCQG) set under government support and local investors through COP29 in particular, once again. This aligns with mechanisms such as FDI, PPPs, and PPAs. Securing COP29 Presidency’s Vision on “Enhancing 66 Azerbaijan’s Nationally Determined Contribution 3.0 Ambition and Enabling Action”, which links while providing highly concessional and grant- ambitious climate action plans, like this NDC 3.0, based funding for disaster-stricken developing and similarly ambitious climate finance together countries. Moreover, Baku Initiative for Climate as the two equally important pillars. Public finance Finance, Investment, and Trade (BICFIT) will from developed to developing country parties will focus on the intersection of climate finance, be crucial in achieving net-zero goals. investment, and trade by promoting green investment, supporting policy development, and In line with COP29 Presidency’s Action Agenda, facilitating expertise sharing through dialogue. the Climate Finance Action Fund (CFAF) initiative, to be funded by voluntary contributions from Azerbaijan also reserves the right to pursue hydrocarbon producers, whether states or cooperation under the Article 6 of the Paris corporations, aims to drive public and private Agreement to unlock financial support sector efforts in mitigation, adaptation, and R&D, opportunities. 67 Azerbaijan’s Nationally Determined Contribution 3.0

6.2. Regulations and Policies The commitment to decarbonization requires a sectoral and sector-specific policy and regulatory comprehensive policy framework to achieve long- measures (currently enforceable and planned) term emission decreases while sustaining climate that will support the implementation of NDC 3.0 resilience. This section outlines the key cross- (Figure 17). Figure 17. Existing and planned policies and regulations to support Azerbaijan’s decarbonization pathway CROSS-SECTORAL REGULATIONS AND “Azerbaijan 2030: National Priorities for POLICIES socioeconomic development” and the “2022-2026 Major steps have already been taken regarding Social and Economic Development Strategy” regulations and policy to strengthen Azerbaijan’s highlight the importance of efforts to keep GHG climate actions. A number of cross-sectoral emissions at a level consistent with international policies are in place to support decarbonization standards. They prioritize green energy, with across sectors. This cover preventing increased use of renewable energy and green environmental damage by economic and other technologies, and a cleaner ecological associated activities, energy entities, and air environment with increased green areas and pollution. circulation of unused land. 68 Azerbaijan’s Nationally Determined Contribution 3.0 The “Law on Environmental Protection” focuses footprint through innovation and efficiency on preventing harmful impacts of economic and improvements. This stimulates the development other associated activities on ecological systems, of RES, energy-efficient technologies, and supporting reduced GHG emissions, and achieving sustainable infrastructure. Revenue generated sustainable development goals. This legislation from carbon taxes or allowances can be reinvested provides a legal basis for decarbonization efforts into decarbonization efforts, such as funding and targets to reduce emissions, ensuring that public transportation projects, supporting clean economic activities are aligned with technology R&D, and subsidizing low-carbon environmental conservation. products and services. These funds can also mitigate the socio-economic impacts of The “Law on Protection of Atmospheric Air” aims transitioning to a low-carbon economy. to limit irreversible environmental damage from air pollution and highlights initiatives and efforts Additionally, harmonizing carbon pricing to protect air quality. strategies with other countries could further strengthen the global response to climate change. Impacting power and oil and gas sectors, the “Law on Energy” encourages energy entities to take SECTOR-SPECIFIC REGULATIONS AND measures to reduce the amount of GHG emissions POLICIES released into the environment, prevent the Major sector-specific regulations to address pollution of land and water sources by high- decarbonization efforts have already been emission fuel products, and mitigate the impact of introduced, mainly relating to increasing the other waste that harms the environment. renewable energy share in the power sector's technology mix and boosting energy efficiency in To achieve the target, Azerbaijan plans to design the transportation, industry, buildings, AFOLU, and implement regulatory frameworks to and waste sectors. The country is also planning to accelerate GHG emissions reduction across design and introduce sector-specific frameworks sectors, such as improving the environment in to accelerate the transition. liberated territories and introducing carbon pricing mechanisms. Power sector The priority directions of the “State Program on Several initiatives have been implemented that the Great Return to the liberated territories” and primarily focus on transitioning from “Action Plan for the Creation of a 'Green Energy' conventional gas turbines to more efficient CCGTs. Zone in the Territories Liberated from Occupation These initiatives also include the construction of for 2022-2026” include constructing sustainable new hydropower and solar plants in accordance settlements, providing infrastructure, improving with the “State Program on the Great Return to the the ecological environment, and applying liberated territories” and “Law on the Use of environmentally friendly technologies in the Renewable Energy Sources in Electricity liberated territories. Production.” Additionally, the “Law on the Use of Renewable Energy Sources in Electricity The country is also exploring various carbon Production” defines legal, economic, and pricing mechanisms, including allowances, taxes, organizational foundations and support and incentives. Allowances, or cap-and-trade mechanisms for using RES in electricity systems, set emission caps and create respective generation and regulates the relations arising in market mechanisms, encouraging companies to this field. innovate and reduce emissions cost-effectively. Carbon taxes provide financial disincentives for Several frameworks for the power sector have emitting GHGs, while incentives and subsidies also already been approved (and are currently promote the adoption of low-carbon technologies. being detailed for implementation), paving the way in this sector. Regarding scaling renewable Balanced carbon pricing mechanisms can drive energy in the energy mix, the country is domestic industries toward greener practices by committed to developing its renewable energy incentivizing companies to reduce their carbon potential, as stated in the “Socio-economic 69 Azerbaijan’s Nationally Determined Contribution 3.0 development strategy in 2022-2026,” by aiming to Transportation sector increase the installed capacity of renewable power to 30% in the country's overall energy The Cabinet of Ministers’ decision on adapting the balance by 2030. In accordance with the “Action Euro-4 environmental norms for motor vehicles Plan for the establishment of a ‘green energy’ zone has been implemented to improve environmental in 2022-2026 in the liberated territories,” priority emission standards. Expansion of electric vehicles areas of Eastern Zangazur and Karabakh were has already begun, with policies to incentivize approved for sourcing electricity entirely from purchases through tax reductions and subsidies. local RES (which have a technical potential of As a result of an amendment made to the Tax Code, around 10 GW) and the application of green starting from 2019, the import and sale of electric technologies. Additionally, amendments are vehicles and chargers are exempt from VAT, with planned to the “Land Code” and the “Law on the the import duty tariff set to 0% for a factory Use of Renewable Energy Sources in Electricity production period of up to three years. Production” to grant permission for agricultural Moreover, increasing the procurement and land to be designated as an area for RES without production of electric vehicles is planned. Electric changing its category and without hindering its bus use in public transport is also expected to use for its intended purpose. grow over the years, with a target to operate 500 Buildings sector electric buses in 2025 and 1,100 by 2026, both by the state operator (BakuBus) and private Efficient use of energy resources and energy operators within the route network. To supply efficiency are regulated by the “Law on the Azerbaijan’s electric vehicle bus fleet through Efficient Use of Energy Resources and Energy local production, a facility with an annual Efficiency.” The “Energy Management System,” production capacity of 500 buses is expected to be per the ISO 50001 standard, mandates the constructed in cooperation with international appointment of energy management and companies. Additionally, the country aims to mandatory energy audits to be conducted every increase the fleet's share of electric vehicles by three years in non-residential entities with a set supporting charging infrastructure in the wider annual energy consumption level. Baku metropolitan area, liberated territories, and other regions, with close support from Azerishig Additionally, building codes are updated regularly OJSC and Azerenergy OJSC. Moreover, charging regarding specifications for design standards to stations for buses will be installed at four ensure energy efficiency, including, for example, transportation exchange centers located at the decisions on thermal production in the buildings final stops of bus routes. and thermal insulation of equipment and pipelines, according to relevant decisions. Industry sector Oil and gas sector In accordance with the “Model Statute on Industrial Parks” framework, established Oil and gas players in Azerbaijan are signatories of industrial parks must adhere to guidelines the Oil & Gas Decarbonization Charter (OGDC) promoting innovation and sustainable advanced launched during COP28. This charter aims to technologies. These practices aim to positively achieve Zero-Routine Flaring by 2030 (ZRF) impact the environment and job creation and among other measures. Furthermore, OGDC contribute to reducing greenhouse gas emissions. signatories commit to reaching Net-Zero in all operations by 2050. AFOLU sector Additionally, to reduce GHG emissions in the oil Within the “Strategic Roadmap for the production and gas sector, the “Law on the Management of and processing of agricultural products,” Greenhouse Gases Emitted into the Atmosphere” mechanisms for the sustainable use of agricultural has been drafted, which will regulate procedures lands and water resources, as well as the for managing GHG emissions. assessment of the environmental impact of land- 70 Azerbaijan’s Nationally Determined Contribution 3.0 use change, are established and being improved Waste sector upon. The “State Strategy for Hazardous Waste The country also plans to adopt the “State Management” ensures the implementation of Program for the Development of Agricultural necessary actions, such as waste reduction and Production and Processing Areas in 2025-2030,” recycling, to reduce environmental risks caused which will accelerate the transition from by hazardous waste accumulated over the years. traditional farming to high-value-added intensive farming, with development along agricultural Additionally, new landfills for large settlements production value chains, leading to a reduction in and treatment centers for wastewater are GHG emissions from the AFOLU sector. planned. Successful implementation of these efforts will create a waste management system for the collection, disposal, and neutralization of solid waste, ensuring that this process is carried out in an organized manner and thereby contributing to the sector's decarbonization.

6.3. Technology and Innovation Green economy transition necessitates the stakeholders to commit to using digital deployment of various state-of-the-art technologies to mitigate and adapt to climate technologies that are being developed globally. change while addressing the environmental Their adoption will depend on factors such as impact of these technologies, promoting digital economic feasibility (conditional on receiving inclusion, and enhancing data-driven decision- adequate support and financial resources), making. Working with digital technologies sufficient maturity (including necessary capacity emphasizes collaboration, sustainable innovation, building and technology transfer), and other and the integration of digital sustainability into implementation measures within the context of national climate policies to support global climate sustainable development (e.g., human capital goals. capabilities) for large scale use. Key examples include electric vehicle charging, anaerobic R&D INITIATIVES digestion plants, and battery storage A key component of the R&D strategy is enhancing infrastructure. collaboration with various academic and research institutions. For example, SOEs and private To meet its decarbonization target, Azerbaijan is corporations are partnering with leading actively pursuing multiple projects and programs universities and research centers to advance to enhance technological capabilities through R&D research and deploy cutting-edge technologies in initiatives, expand the high-skilled workforce renewable energy, a crucial driver for achieving through education programs, and increase public Net-Zero goals. Other initiatives include awareness through community engagement and establishing research grants and scholarships to outreach activities. Additionally, the country is support climate-focused studies, such as the State exploring opportunities to leverage emerging Program for the education of young people at technologies—such as hydrogen and carbon prestigious higher education institutions in removal technologies—and other potential foreign countries for 2022-2026, with a specific technological breakthroughs for decarbonization. focus on STEM subjects. The recipients of these Close collaboration with international companies grants and scholarships are determined in is also being established to ensure knowledge cooperation with the Ministry of Science and exchange and technology transfers. Education and the Azerbaijan National Academy of Sciences. Moreover, the COP29 Declaration on Green Digital Action calls on national governments and TECHNOLOGY TRANSFER MECHANISMS 71 Azerbaijan’s Nationally Determined Contribution 3.0 To accelerate the deployment of advanced Organization (UNIDO) aims to enhance industrial technologies, Azerbaijan is actively pursuing efficiency. partnerships with international technology providers with a focus on renewable energy, INNOVATION SUPPORT including battery storage, CCUS, clean hydrogen, Alongside R&D and education, a strong focus on and full-cycle waste management. Notable innovation is a key element in the rapid adoption collaborations with Masdar, ACWA Power, of essential technologies. To foster a vibrant Lightsource BP, among others, aim to develop ecosystem for climate tech start-ups, the large-scale wind and solar power projects. These Azerbaijani government has established initiatives will enhance Azerbaijan’s renewable accelerators like SABAH.HUB, which supports energy capacity and facilitate the transfer of start-ups working on climate-related advanced technologies. technologies. These accelerators offer mentorship, funding, and networking The country is also closely collaborating with the opportunities, helping start-ups scale their International Renewable Energy Agency (IRENA) operations and bring innovations to market. to stimulate investments in renewable energy. This partnership seeks to attract funding for Recent collaborations between climate tech start- advanced renewable energy technologies and ups and larger entities facilitated by these improve Azerbaijan’s green energy infrastructure. accelerators have been at the forefront of Initiatives like the Energy Transition Investment innovation. For instance, the Baku Investment Day Forum are designed to engage global and regional brought together key sponsors from the stakeholders in renewable energy projects. government, state-owned enterprises, and the private sector, along with 100 climate tech start- Moreover, to secure access to state-of-the-art ups. technologies and expertise, Azerbaijan is pursuing bilateral and multilateral agreements with energy Additionally, sector-specific initiatives, such as the and technology companies and international Baku Harmoniya Initiative developed in organizations. Notable examples include collaboration with the UN Food and Agriculture memorandums of understanding (MoUs) with ENI Organization (FAO), seek to empower farmers by and Microsoft, focused on developing renewable introducing sustainable agricultural practices like energy projects and improving operational methane capture from livestock and precision efficiency. Additionally, collaboration with the agriculture technologies. United Nations Industrial Development

6.4. Capability Building The country’s commitment to combating climate human development by catalyzing investment in change and enhancing sustainability emphasizes education, skills, health, and well-being, the critical role of capability building in achieving particularly for children and youth. It will also its targets. As the country transitions toward Net- establish continuity between COP meetings and Zero, developing a skilled workforce to implement improve environmental literacy through and maintain advanced technologies will be education standards. essential. Key dimensions of Advancing workforce for the Green Transition, Transforming ADVANCING WORKFORCE FOR THE GREEN Educational Programs, and Providing Technical TRANSITION Assistance and Advisory Services, form the Within the green transition, advancing workforce backbone of Azerbaijan’s strategy. Moreover, as will be critical for driving decarbonization the host of COP29, Azerbaijan has introduced the pathways, meeting the growing demand for Baku Initiative on Human Development for specialized green jobs, and filling in newly Climate Resilience which will aim to enhance generated roles across all sectors. In the power 72 Azerbaijan’s Nationally Determined Contribution 3.0 sector, for example, the transition to renewable from environmental science to sustainable energy, will increase demand for technicians, development practices, ensuring that students clean energy R&D specialists, and production gain a comprehensive understanding of climate operators. Similarly, roles such as methane issues and solutions from an early age. By capture technicians and renewable energy system emphasizing education, the initiative aims to engineers in the oil and gas sector will become cultivate a generation of informed, proactive essential. In the waste sector, positions like citizens equipped to address climate challenges. anaerobic plant operators and waste sorting Innovative technologies, such as virtual reality specialists will emerge. (VR) and augmented reality (AR), are also being introduced to enhance the learning experience The country recognizes the importance of these and raise awareness about climate change. These green job opportunities and will strategically immersive tools allow students to explore climate invest in capability building by ensuring scenarios and visualize sustainable solutions in an contribution to education, skills, health, and well- interactive way, making climate education more being, particularly for children and youth. Several engaging and impactful. initiatives are also planned to integrate an environmental literacy learning and assessment The Ministry of Science and Education is framework into the Programme for International developing educational training programs, Student Assessment (PISA). resources, and extracurricular activities that cover key topics such as “Environmental protection: Training programs and educational initiatives are Problems and their solutions,” “How does essential for equipping the workforce with the environmental pollution affect human health?”, skills needed for these new roles, supporting the “Why should we save energy?”, “What does green decarbonization transition and long-term energy mean?”, “The role of green energy policy in economic resilience. Examples include vocational Azerbaijan in the world green economy,” and “The training centers that offer certifications for role of forming climate literacy in students.” These students and come fitted with modern initiatives aim to provide students with a technologies that provide hands-on training in comprehensive understanding of environmental renewable energy systems, such as solar panel issues and their global and local impacts while systems and wind turbines. promoting climate literacy and awareness about Over time, technological advancements and green energy solutions. productivity gains may necessitate upskilling and To further embed climate education in the reskilling in certain sectors. Continuous national curriculum, training materials on topics adaptation and upskilling initiatives will ensure such as “Global and local green energy—green that the workforce remains agile and prepared for energy policy in Azerbaijan,” “Building ‘0’ the evolving demands of the green economy. emission energy sources in our liberated areas,” TRANSFORMING EDUCATIONAL PROGRAMS “Environmental protection,” and “Effects of environmental pollution on our health” will be Educational initiatives are central to the strategy incorporated into general education textbooks. for promoting environmental stewardship and These materials aim to give students a deeper preparing future generations for a green economy. understanding of green energy strategies and Comprehensive public awareness campaigns will their broader implications for environmental educate citizens about climate change, its impacts, sustainability. and the importance of sustainability. These campaigns will use a variety of media channels, Moreover, in collaboration with the State Agency including social media, community outreach for Vocational Education, agreements on programs, and public service announcements, to international technology transfer will also be maximize reach and effectiveness. implemented to provide technical training for industrial workers and advanced training in high Furthermore, the country is actively integrating technologies. This initiative will include exchange climate education into school curricula at all programs for vocational education specialists and levels. This effort encompasses subjects ranging 73 Azerbaijan’s Nationally Determined Contribution 3.0 access to pioneering technologies through subjects effectively. Teachers are also receiving bilateral and multilateral agreements. guidance on evaluating student-led initiatives related to climate change, ensuring that students In addition to classroom instruction, regional are encouraged to contribute their ideas and hackathons are organized for students. These solutions to address the challenges posed by a hackathons focus on developing innovative changing climate. solutions to environmental challenges, green energy projects, the effects of environmental PROVIDING TECHNICAL ASSISTANCE AND pollution on human health, and the importance of ADVISORY SERVICES RES. Key topics for these hackathons include Technical assistance and advisory services are “Environmental protection: Problems and crucial for successfully executing climate projects. innovative approaches to their solutions,” “Green As part of its plans, Azerbaijan aims to involve energy in Azerbaijan: Projects, perspectives,” consultancy services to support the design, “Effects of environmental pollution on human development, and implementation of climate health,” and “Are we able to save energy?” These initiatives. These consultancy services will guide hackathons foster creativity and problem-solving project planning, technology selection, and skills, encouraging students to actively engage adherence to best practices. To complement this, with pressing environmental issues. workshops and seminars will be organized to facilitate knowledge exchange on the latest Recognizing the essential role educators have in advancements in climate technologies and project climate education, training programs for teachers management strategies. These events will gather at all levels are being prioritized. Specialized experts, stakeholders, and practitioners to share training sessions are organized for higher insights and experiences, focusing on topics such education instructors, equipping them with the as energy efficiency improvements and methodologies and practical materials necessary sustainable urban planning. to teach environmental and climate-related

6.5. Governance A governance mechanism will be developed to It also involves overseeing critical ensure progress towards decarbonization efforts infrastructure improvements and making via setting targets and ensuring alignment across necessary adjustments to regulations and governmental entities, businesses, civil society, policies as they develop. and NGOs. Establishing clear decision-making mechanism, defining roles and responsibilities, • Proactively identifying gaps in reaching implementing disciplined monitoring, and decarbonization targets, developing, and fostering inclusive collaboration, will help to implementing solutions and mitigation effectively manage decarbonization transition. plans to address them. Additionally, the governance mechanism will • Reviewing and adjusting investment remain adaptable over time, ensuring sufficient strategies, while developing suitable flexibility to respond to changing needs and financing mechanisms. conditions. • Fostering strong partnerships with non- The governance mechanism will ensure: governmental entities, including private • Regular monitoring of progress across sector, NGOs, universities, and sectors to maintain national alignment. international organizations to enhance This includes tracking sector specific and knowledge exchange, and drive overarching decarbonization pathways technological advancements. and targets in line with the commitments. 74 Azerbaijan’s Nationally Determined Contribution 3.0

6.6. Implementation Challenges Several challenges may arise while implementing adoption adds complexity to the country’s decarbonization pathway, including financial and decarbonization strategy. technological challenges in achieving decarbonization goals. Addressing these CHALLENGE 3: MATURITY OF TECHNOLOGIES challenges and uncertainties will require The maturity of certain technologies, including substantial and coordinated research, cost effectiveness and the level of development for development, and deployment strategies. large-scale deployment, presents uncertainties that can lead to high costs, performance issues, CHALLENGE 1: DECARBONIZATION and potential delays in implementation of FINANCING decarbonization pathways. Specific technology Achieving decarbonization goals requires maturity risks for Azerbaijan include the investment in new technologies, infrastructure deployment of EVs and the installation of electric and capability building. Adequate financing for the heat pumps, which require evolution in lifespan, transition is therefore critical in addressing global efficiency, and cost-effectiveness for its increased climate change. Limited access to international penetration despite being commercially available financing can cause delays in the implementation in the market. of necessary measures. To address the mentioned challenge, structured funding approach by CHALLENGE 4: SKILLED WORKFORCE utilizing different financing mechanisms needs to AVAILABILITY be deployed. The deployment of advanced low-carbon technologies requires a skilled workforce CHALLENGE 2: AVAILABILITY OF KEY specialized in areas such as renewable energy and TECHNOLOGIES smart grid systems. Challenges in developing Technologies essential for meeting goal may not sufficiently skilled labor can potentially slow the be sufficiently available for widespread rollout of critical decarbonization technologies, deployment, such as alternative fuel for aviation. although efforts for training workforce with The uncertainty around the timeline for these specialized skills are underway. technologies to become available for large-scale 75 Azerbaijan’s Nationally Determined Contribution 3.0

6.7. Inclusivity for Climate Action

6.7.1 INITIATIVES FOR WOMEN, YOUTH, AND VULNERABLE GROUPS Significant strides are being made in climate infrastructure and information systems, adapting action and environmental stewardship through communication channels, and designing comprehensive initiatives that engage the whole infrastructure that meets the needs of those with society, promote gender equality, ensure the auditory, visual, and mobility impairments. inclusion of persons with disabilities, enhance Specific programs provide vocational training, rural livelihoods, and integrate youth-centric enabling persons with disabilities to engage in the climate policy. green economy, particularly in sectors such as agriculture and renewable energy. Youth engagement in climate action and environmental stewardship is being actively Rural communities, including women, are being fostered through comprehensive education and empowered through the promotion of climate- empowerment initiatives. The Ministry of Ecology smart agricultural practices, along with targeted and Natural Resources and the Ministry of Youth training and support initiatives aimed at and Sports have introduced youth-centered enhancing livelihoods. Since 2021, the FAO, has climate education programs, such as the “Youth been providing training, knowledge sharing, and Climate Envoys” initiative. Launched in 2023, this network-building opportunities to women program trains young climate leaders to develop farmers. Additionally, by facilitating the creation sustainable solutions and green energy initiatives, of women-led agricultural cooperatives, this fostering their participation in both national and project grants access to markets, resources, and global climate dialogues. Additionally, the innovative farming technologies, significantly “Climate Weeks Initiative” empowers young improving rural livelihoods. people to engage in climate action and raises- awareness across ten regions in the country17. The Youth Climate Advisory Board, supported by Through these initiatives, the Ministry of Science relevant stakeholders, will play a crucial role in and Education and other stakeholders integrates ensuring youth engagement in the design and climate change and environmental education into implementation of loss and damage responses. the school curriculum and community outreach Mitigation efforts should prioritize advocating for programs, engaging youth in environmental an equitable and urgent phase-out of high stewardship and decision-making processes. emission fuels, with youth voices playing a central role in designing policy for renewable energy Gender equality and the inclusion of women and transitions. To support this, the Ministry of Youth girls are high priorities for the country. Since and Sports, Ministry of Education, Ministry of 2018, local organizations have been actively Ecology and Natural Resources, universities, and promoting gender equality within the country’s international organizations are launching green economy. capability-building programs. These programs will empower youth through climate education, The country is committed to inclusive climate leadership training, and project development action, actively involving persons with disabilities workshops. Moreover, youth involvement is through targeted initiatives and partnerships. The essential in shaping strategies to reduce emissions Union of Disabled People Organizations (UDPO) in from social infrastructure, including schools, Azerbaijan collaborates with relevant UN hospitals, and sanitation systems. institutions to ensure individuals with disabilities are integral participants in climate action.18 Joint Climate finance will be youth-responsive, initiatives include developing accessible dedicating a portion of funds to youth-led projects 17 "New Climate Weeks Initiative Builds Youth Climate Engagement Across Azerbaijan." 18 “Union of Disabled People Organizations.” UDPO Azerbaijan 76 Azerbaijan’s Nationally Determined Contribution 3.0 and ensuring young people have access to representation in transition planning, necessary resources. For example, the Youth incorporating their perspectives in workforce and Climate Advisory Board, under the oversight of the energy transition policies. Ministry of Ecology and Natural Resources, will implement youth-led monitoring mechanisms. Action for climate empowerment involves These mechanisms will enable young people to integrating climate change education into school participate in tracking and reporting on the curricula at all levels, preparing young people for progress of NDC 3.0 commitments, ensuring climate challenges. Supporting youth-led transparency and accountability. awareness campaigns, especially in regions with limited climate education, is also crucial. The A just transition requires investment in training Youth Climate Advisory Board will back these programs that prepare young people for green initiatives, ensuring that young people are jobs, ensuring they have the necessary skills for a empowered to take meaningful climate action. low-carbon economy. The Ministry of Youth and Sports, along with other key ministries and international partners, will ensure youth

6.7.2 INITIATIVES FOR PUBLIC HEALTH The Ministry of Health of Azerbaijan and the WHO have reported that climate change has adversely affected public health, with increased pollution, irregular rainfall, and rising temperatures leading to heightened risks of waterborne diseases and respiratory issues. “Safe Drinking Water and Sanitation” program, in partnership with local institutions like the Azerbaijan Medical University and the State Water Resources Agency, focuses on improving water purification systems and implementing community-based water management strategies. Additionally, initiatives like the EU-funded “Clean River for Healthy Living” program aim to monitor and improve air quality in urban areas, thereby reducing the health risks associated with pollution.19

6.7.3 INITIATIVES FOR FOOD SECURITY CLIMATE-RESILIENT AGRICULTURAL water management. This initiative aims to boost PRACTICES land productivity, addressing the vulnerabilities The country is advancing climate-smart of Azerbaijan's land to climate change and soil agriculture through strategic collaborations, degradation.20 significantly enhancing productivity while promoting sustainability in the agricultural sector. The FAO has been actively involved in scaling up climate action within agrifood systems, supporting efforts to align agricultural strategies with the broader objectives of the UNFCCC. The FAO focuses on integrating agrifood systems into national plans, aiming for adaptation and mitigation of climate change impacts. Additionally, the organization’s regional framework for Europe and Central Asia plays a crucial role in supporting climate-smart agriculture initiatives. In line with these efforts, a project launched in 2022 focuses on reinforcing best practices in soil, nutrient, and 19 “Clean Rivers for a Healthy Future in Azerbaijan.” 20 United Nations Azerbaijan 77 Azerbaijan’s Nationally Determined Contribution 3.0 SUSTAINABLE WATER MANAGEMENT top priority under Sustainable Development Goal Efficient water management is crucial for both (SDG) 6, “Clean Water and Sanitation.” The “UN- agricultural productivity and providing clean Azerbaijan Sustainable Development Cooperation drinking water. The FAO is assisting Azerbaijan in Framework for 2021-2025” emphasizes the development and implementation of irrigation environmental protection, particularly in systems that minimize water wastage while improving access to clean drinking water and ensuring a sufficient water supply for crops. These sanitation services in rural areas. In 2023, high- programs have been vital in regions facing level strategic discussions in Agdam city focused droughts and irregular rainfall patterns, helping on the national water policy and strategies to farmers maintain consistent yields.20 Additionally, ensure efficient water management for both ensuring access to safe drinking water remains a agricultural and drinking water needs.

6.7.4 INITIATIVES FOR JUST TRANSITION A just transition refers to the process of shifting towards a low-carbon and sustainable economy in a way that is fair, equitable, and inclusive for all members of society, particularly workers, communities, and vulnerable groups who may be affected by this transition, leaving no one behind. INCLUSIVE WORKFORCE DEVELOPMENT Since 2020 the Azerbaijan government and the Azerbaijan Trade Unions Confederation (ATUC) in partnership with the International Labour Organization (ILO) focus on workforce retraining and upskilling through the “Green Jobs Initiative.” This program offers certification in renewable energy, energy efficiency, and green construction, targeting workers in carbon-intensive industries, such as oil and gas.21 Training centers have been established in various cities, ensuring a smooth transition into emerging green sectors. 21 Employment Policies for Sustainable Development: Azerbaijan. International Labour Organization 78 Azerbaijan’s Nationally Determined Contribution 3.0 SOCIAL PROTECTION AND SUPPORT SYSTEMS Since 2020, the Azerbaijan Social Protection Fund, in collaboration with the ILO, has been focusing on creating robust social protection frameworks to support workers during the transition to a green economy. This includes unemployment benefits, retraining programs, and job placement services for those affected by the decline of fossil-fuel-based industries. Policy advocacy projects by the Center for Economic and Social Development (CESD) contribute to developing tailored social protection legal frameworks that ensure equitable opportunities for all.22

6.8. Sustainable Development Goals (SDGs) The urgency of the climate crisis necessitates various government bodies. The Council is tasked profound systemic transformations. It is essential with aligning national policies with the SDGs, to embrace the challenges while recognizing the overseeing their implementation, monitoring opportunities to enhance resilience and improve progress, and engaging stakeholders. The country social well-being through sustainable, low-carbon completed its first Voluntary National Review on economic development. In this context, Azerbaijan SDGs in 2017 and continues to update it regularly, acknowledges and underscores the necessity of with the latest submission in 2024, reaffirming its advancing the integrated goals of the Paris commitment to the 2030 Agenda. Agreement and the UN 2030 Sustainable Development Agenda. This includes 17 To embed the SDGs within the decision-making Sustainable Development Goals (SDGs) aimed at processes of the Cabinet and national policies, the achieving a better and more sustainable future for Council has mapped SDG targets to government all by addressing global challenges such as initiatives. Achieving these goals is a priority in poverty, inequality, climate change, and each governmental entity’s strategic plan, serving environmental degradation. as a key performance indicator. The Council has also developed a comprehensive engagement The Azerbaijan United Nations Sustainable strategy to involve both domestic and Development Cooperation (UNSDCF) 2021-2025 international stakeholders in the SDG outlines key priorities for sustainable implementation process and in the preparation of development, aligned with the UN SDGs. Focus annual progress reports. Furthermore, the areas include reducing inequality, promoting country has integrated the SDGs into its national inclusive economic growth, advancing gender vision, aligning them with the Azerbaijan 2030: equality, and strengthening climate resilience. The National Priorities for Socio-Economic document emphasizes climate action through Development, which outlines the country’s long- greener energy transitions, enhancing education, term goals. Additionally, specific SDG goals, such and promoting inclusive social services. It also as poverty reduction (SDG 1), quality education highlights partnerships between UN, the (SDG 4), gender equality (SDG 5), clean energy government, and civil society to build capability (SDG 7), and climate action (SDG 13), among and implement SDG-driven initiatives by 2025. others, are being actively pursued through targeted national policies and initiatives, Formed in 2016, Azerbaijan’s National showcasing Azerbaijan's commitment to a Coordination Council for Sustainable sustainable future. Development consists of representatives from 22 "World Social Protection Report 2024-26: Universal Social Protection in a Time of Transformation." International Labour Organization 79 Azerbaijan’s Nationally Determined Contribution 3.0

6.9. Monitoring, Reporting, and Verification As a party of the Paris Agreement, the received or provided. Emissions will be reported decarbonization efforts will be guided by the in line with IPCC guidelines, ensuring accurate Enhanced Transparency Framework (ETF), which historical tracking. In addition to CO2, the will serve as a cornerstone in monitoring and reporting will include other GHGs such as reporting progress. Adopting ETF aims to enhance methane and nitrous oxide, providing a transparency, accountability, and efficiency in comprehensive view of the country’s total climate governance, providing a solid foundation emissions. for informed decision-making. The ETF will also enable to craft evidence-based policies using In line with COP29 Presidency’s Action Agenda, accurate and timely climate-related data, ensuring the Baku Global Climate Transparency Platform that pathways and target are both effective and (BTP) will support in preparing and submitting responsive to emerging needs. Biennial Transparency Reports, foster collaboration and knowledge exchange on the ETF The ETF will play a critical role in reporting not and enhance the mobilization of capacity-building only emissions, but also other key aspects such as resources. capacity-building efforts and climate-related financial flows. This holistic approach ensures The NDC governance mechanism will play a effective and transparent implementation of pivotal role in overseeing ETF process, decarbonization pathways and enables the consolidating data from across sectors. It will also monitoring of investments in both mitigation and guarantee the timely submission of BTRs and adaptation projects. Starting from December maintain full compliance with the Paris 2024, BTRs will be submitted every two years to Agreement’s enhanced reporting standards. the UNFCCC. These reports will verify emissions at Furthermore, the reporting system will both the sectoral and national levels, monitor continuously align with the latest UNFCCC progress, and provide transparency on climate- guidelines to ensure that its climate reporting related financial and other support, whether remains transparent, accurate, and robust. 80 Azerbaijan’s Nationally Determined Contribution 3.0 81 Azerbaijan’s Nationally Determined Contribution 3.0 7. Methodology and Clarifying Information

7.1. Approach Timestamps selection In the context of NDC 3.0, we defined the following timestamps to set decarbonization targets: o Reference year: 1990 is used as a benchmark for measuring progress against emissions targets. o Baseline year: 2022 serves as most recent emissions profile allowing for reliable future projection. o Target year: 2035 is the timestamp by which intermediate decarbonization goals are achieved. o = Approach to defining decarbonization targets To determine decarbonization pathways for each sector, the following four steps approach was used: o Step 1 (Sector structure and baseline): This step involves defining the structure, including main segments and emission activities for key sectors such as power, buildings, and transportation, and establishing the baseline emissions from different sources. o Step 3 (Potential decarbonization themes and scenarios modelling): In this step, all decarbonization themes - electrification generated by RES, biofuels, operational upgrades, equipment changes, and energy efficiency - are identified to develop different decarbonization scenarios for each sector. Important milestones and bottlenecks are also considered. Step 1: Data Collection: This step involves gathering data on various aspects of each sector, such as market trends, energy consumption patterns, sources of emissions, existing technologies, and regulatory frameworks. Data is collected from reliable sources, including government reports, industry publications, academic research, and international literature. Sector Analysis: This involves a comprehensive assessment of each sector's structure, including its sub-sectors, key players, supply chains, and operational frameworks to map out the entire ecosystem to understand how different entities interact and contribute to the sector’s overall emissions. This step also includes identifying major stakeholders, such as regulatory bodies, industry leaders, and others who influence the sector's dynamics. Defining Activity Levels: Activity levels within each sector directly or indirectly influence emissions, e.g., barrels of oil and gas production, electricity demand, livestock. These activity levels serve as important inputs for establishing the baseline emissions and energy consumption. Emissions baseline establishment: 82 Azerbaijan’s Nationally Determined Contribution 3.0 Baseline serves as a starting point for building emissions projections and tracking progress towards decarbonization goals. It involves calculating the total GHG emissions from each sector’s primary sources of these emissions. Step 2: Identifying key drivers and projecting activity levels: In this step, key drivers (e.g., GDP, population, production plans) impacting the activity levels growth for an individual sector are identified. These drivers are further leveraged to develop projections of activity level up to 2035. Projecting emissions: Using the activity level projection and associated emissions intensities, the emissions profiles are developed by 2035 for each sector. Within projecting emissions trends, the set of implemented or firmly planned abatement projects (as per IPCC guidelines) are accounted for to adjust the emissions projections by 2035. Step 3: This step explores various potential abatement themes and technologies relevant to key sectors and specific to the country’s context. Identifying feasible decarbonization themes: The decarbonization theme is defined by a key abatement technology that is a core of a theme, e.g., RES , such as solar and onshore wind. All potential decarbonization themes are considered to address their technical applicability and effectiveness in reducing emissions. 83 Azerbaijan’s Nationally Determined Contribution 3.0

7.2. Information Necessary for Clarity, Transparency, and Understanding of NDC 1. Quantifiable information on the reference point (including, as appropriate, a base year): a. Reference year(s), base Reference year: 1990 year(s), reference period(s) or other Baseline year: 2022 starting point(s); b. Quantifiable information Azerbaijan’s net GHG emissions were 82.7 MtCO2eq in 1990 on the reference (reference year), 69.3 MtCO2eq in 2022 (baseline year). indicators, their values in the reference year(s), Refer to Section 5: Targets, Decarbonization Pathways and base year(s), reference Mitigation Plans for sectoral GHG emissions, including period(s) or other baseline year and future projections by 2035. starting point(s), and, as applicable, in the target year; c. For strategies, plans and Not applicable actions referred to in Article 4, paragraph 6, of the Paris Agreement, or polices and measures as components of nationally determined contributions where paragraph 1(b) above is not applicable, Parties to provide other relevant information; d. Target relative to the The Republic of Azerbaijan aims to achieve 40% net GHG reference indicator, emission reduction level in 2035 compared to 1990 net GHG expressed numerically, emission level, subject to enhanced financial resources/ for example in additional international financial support (e.g., concessional percentage or amount of loans, private sector investment), technology availability, reduction; technology transfer, increased technology maturity level, capability-building support, and availability of absorptive capacity of forests and other ecosystems. e. Information on sources of Data sources used to calculate emissions level are described in data used in quantifying Appendix, section 8.A. Data Sources. the reference point(s); f. Information on the The national GHG emissions and removals may be updated circumstances under and recalculated to reflect continuous improvements of the which the Party may GHG inventory, additional data sources and recalculations update the values of the based on guidelines and methodology changes, and updates in reference indicators. sectoral activity and emission projections. 84 Azerbaijan’s Nationally Determined Contribution 3.0 Any updates will be documented and reported in the next Biennial Transparency Report and National Communication and reflected in the updated Nationally Determined Contribution (NDC), ensuring transparency and accuracy in tracking progress towards climate goals. 2. Time frames and/or periods for implementation: a. Time frame and/or From 2022 to the end of 2035 period for implementation, including start and end date b. Whether it is a single- Single-year target year or multi-year target, as applicable 3. Scope and coverage: a. General description of the Absolute economy-wide emissions target expressed as a target; single-year target. b. Sectors, gases, categories, Sectors covered: and pools covered by the nationally determined • Power contribution, including, • Oil and Gas (Upstream and Midstream) • Buildings as applicable, consistent • Industry with Intergovernmental • Transportation Panel on Climate Change • Agriculture, Forestry, and Other Land Use (AFOLU) (IPCC) guidelines; • Waste Greenhouse gases covered: Carbon Dioxide (CO2), Methane (CH4), Nitrous Oxide (N2O), and Fluoridated gases (F-gases) (i.e., Hydrofluorocarbons (HFCs), Perfluorocarbons (PFCs), Sulphur Hexafluoride (SF 6), Nitrogen Trifluoride (NF3)). Refer to Section 5.1. Scope and coverage for further details. c. How the Party has taken While domestic aviation and maritime is in scope, emissions into consideration from international aviation and international maritime are not paragraphs 31(c) and (d) in scope of NDC 3.0. of decision 1/CP.21; d. Mitigation co-benefits Refer to Section 3.3 “National Adaptation Plan (NAP)” for resulting from Parties’ mitigation co-benefits actions. adaptation actions and/or economic diversification plans, including description of specific projects, measures, and initiatives of Parties’ adaptation 85 Azerbaijan’s Nationally Determined Contribution 3.0 actions and/or economic diversification plans. 4. Planning process: Information on the planning processes that the Party undertook to prepare its NDC and, if available, on the Party’s implementation plans; a(I) Domestic institutional Refer to Section 3.4. “Stakeholder Engagement” and Section arrangements, public 6.7. “Inclusivity for Climate Action”. participation and engagement with local communities and indigenous peoples, in a gender-responsive manner; a(II) Contextual matters, including, inter alia, as appropriate: a(II)a National circumstances, Refer to Section 3. “Azerbaijan National Context”, covering such as geography, geographic, population, climate profile and Section 4. climate, economy, Economic Context and Emissions Profile for economic sustainable development, landscape. and poverty eradication; a(II)b Best practices and Refer to Section 2.2. “NDC 3.0 Report Content Changes experience related to the Compared to NDC 2” and Section 3. “Azerbaijan National preparation of the Context”. nationally determined contribution; a(II)c Other contextual Not applicable aspirations and priorities acknowledged when joining the Paris Agreement; b. Specific information Not applicable applicable to Parties, including regional economic integration organizations and their member States, that have reached an agreement to act jointly under Article 4, paragraph 2, of the Paris Agreement, including the Parties that agreed to act jointly and the terms of the agreement, in accordance with Article 4, paragraphs 16 18, of the Paris Agreement; 86 Azerbaijan’s Nationally Determined Contribution 3.0 c. How the Party’s Azerbaijan is committed to actively engage the outcome of preparation of its first Global Stocktake and incorporate its results into the nationally determined implementation of NDC. This includes emphasizing adaptation contribution has been strategies to enhance resilience for vulnerable communities informed by the and ecosystems while ensuring inclusivity, refer to Section 6.7. outcomes of the global Inclusivity for Climate Action. Increased financial and stock take, in accordance technological support should be sought through engagement with Article 4, paragraph of international support and investors, government support 9, of the Paris Agreement; and local investors, refer to Section 6.1. Finance Mechanisms. Expanding renewable energy capacity and improving energy efficiency are crucial, refer to Section 5. Targets, Decarbonization Pathways and Mitigation Plans. Strengthening monitoring and reporting mechanisms for transparency and accountability will ensure progress in NDC implementation, refer to Section 6.9. Enhanced Transparency Framework. Refer to Section 1. High-Level Summary for detailed information. d. Each Party with a nationally determined contribution under Article 4 of the Paris Agreement that consists of adaptation action and/or economic diversification plans resulting in mitigation co-benefits consistent with Article 4, paragraph 7, of the Paris Agreement to submit information on: d(i) How the economic and NDC 3.0 incorporates a holistic approach to addressing the social consequences of economic and social consequences of climate change response response measures have measures, ensuring that the transition is inclusive and been considered in equitable. developing the nationally determined contribution; Refer to Section 5. Targets, Decarbonization Pathways and Mitigation Plans for environmental impact of decarbonization measures. Refer to Section 6.2. Regulations and Policies for planned regulations to support decarbonization measures. Refer to Section 6.3. Technology and Innovation for impact on technological capabilities. Refer to Section 6.4. Capability Building for details on capabilities and job impact. Refer to Section 6.7. Inclusivity for Climate Action for further details on inclusivity and empowerment. d(ii) Specific projects, Refer to Section 3.3 “National Adaptation Plan (NAP)” for measures and activities mitigation co-benefits actions. to be implemented to contribute to mitigation co-benefits, including 87 Azerbaijan’s Nationally Determined Contribution 3.0 information on adaptation plans that also yield mitigation benefits, which may cover, but are not limited to, key sectors, such as energy, resources, water resources, coastal resources, human settlements and urban planning, agriculture and forestry; and economic diversification actions, which may cover, but are not limited to, sectors such as manufacturing and industry, energy and mining, transport and communication, construction, tourism, real estate, agriculture, and fisheries. 5. Assumptions and methodological approaches, including those for estimating and accounting for anthropogenic greenhouse gas emissions and, as appropriate, removals: a. Assumptions and Azerbaijan will account for its 2035 commitment on the basis methodological of total net national emissions. Net emissions in the target approaches used for year will be compared against net emissions in the reference accounting for year to calculate the percentage emissions reductions anthropogenic GHG achieved. emissions and removals corresponding to the Current approach and common metrics are in accordance with Party’s NDC, consistent IPCC methodology and guidelines of 2019 for the inventory of with decision 1/CP.21, GHG emissions and removals. paragraph 31, and accounting guidance adopted by the CMA; b. Assumptions and Azerbaijan will report on implementation progress of the NDC methodological 3.0 in its Biennial Transparency Report using appropriate approaches used for assumptions and methodological approach, reported in every accounting for the 2 years. implementation of policies and measures or Refer to Section 6.9. Enhanced Transparency Framework and strategies in the NDC; Section 7.3. Revision and Update Mechanism for details. c. If applicable, information Refer to 5(a) above on how the Party will take into account existing methods and guidance under the Convention to 88 Azerbaijan’s Nationally Determined Contribution 3.0 account for anthropogenic emissions and removals, in accordance with Article 4, paragraph 14, of the PA, as appropriate; d. IPCC methodologies and Methodologies: IPCC Guidelines 2019. metrics used for estimating anthropogenic Metrics: Global Warming Potential (GWP) for a 100-year GHG emissions and period, as outlined in IPCC 6th Assessment Report (AR6) are removals; applied. e. Sector-, category- or activity-specific assumptions, methodologies and approaches consistent with IPCC guidance, as appropriate, including, as applicable: e(I) Approach to addressing Not applicable emissions and subsequent removals from natural disturbances on managed lands; e(II) Approach used to account Azerbaijan reflects emissions and removals resulting from for emissions and changes in the carbon pool of harvested wood products using removals from harvested a production approach. wood products; e(III) Approach used to address Not applicable the effects of age-class structure in forests; f. Other assumptions and methodological approaches used for understanding the NDC and, if applicable, estimating corresponding emissions and removals, including: f(I) How the reference Refer to 2.2. NDC 3.0 Report Content Changes Compared to indicators, baseline(s) NDC 2 for details on reference and baseline year. and/or reference level(s), including, where Refer to 7.1. Approach for approach and methodology used. applicable, sector-, Refer to section 8.A. Data Sources and 8.B. Key Assumptions in category- or activity Appendix for data sources used in calculations. specific reference levels, are constructed, including, for example, key parameters, assumptions, definitions, methodologies, data sources and models used; f(II) For Parties with NDCs Not applicable that contain non-GHG components, information on assumptions and methodological 89 Azerbaijan’s Nationally Determined Contribution 3.0 approaches used in relation to those components, as applicable; f(III) For climate forcers Not applicable included in NDCs not covered by IPCC guidelines, information on how the climate forcers are estimated f(IV) Further technical Not applicable information, as necessary; g. The intention to use Azerbaijan expresses interest and may consider or reserve the voluntary cooperation right to use voluntary cooperation under Article 6 of the Paris under Article 6 of the Agreement to partially fulfill the mentioned commitments. Paris Agreement, if applicable. Refer to Section 6.1 Finance Mechanisms. 6. How the Party considers that its NDC is fair and ambitious in the light of its national circumstances: a. How the Party considers NDC 3.0 represents a significant increase in Azerbaijan’s that its NDC is fair and ambition and reflects strong commitment for urgent action on ambitious in the light of climate change. its national circumstances; Section 2.2. NDC 3.0 Report Content Changes Compared to NDC 2 describes more ambitious GHG target compared to last submission. b. Fairness considerations, See Section 6.7. Inclusivity for Climate Action for details. including reflecting on equity; c. How the Party has NDC 3.0 is compliant to of Article 4, paragraph 3 of Paris addressed Article 4, Agreement. paragraph 3, of the Paris Agreement; Section 2.2. NDC 3.0 Report Content Changes Compared to NDC 2 describes more ambitious GHG target compared to last submission. d. How the Party has NDC 3.0 target is economy-wide absolute emission reduction addressed Article 4, target and in compliance with Article 4.4 of Paris Agreement. paragraph 4, of the Paris Agreement; Refer to Section 5. Targets, Decarbonization Pathways and Mitigation Plans for details. e. How the Party has Not applicable addressed Article 4, paragraph 6, of the Paris Agreement. 90 Azerbaijan’s Nationally Determined Contribution 3.0 7. How the NDC contributes towards achieving the objective of the Convention as set out in its Article 2: a. How the NDC contributes NDC 3.0 represents Azerbaijan’s contribution to the objective towards achieving the of the Convention as set out in Article 2. objective of the Convention as set out in Refer to Section 5. Targets, Decarbonization Pathways and its Article 2; Mitigation Plans. b. How the NDC contributes NDC 3.0 not only conforms to the goals set out in Article 2.1(a) towards Article 2, of the Paris Agreement, aiming to constrain the global average paragraph 1(a), and temperature increase to well below 2°C above pre-industrial Article 4, paragraph 1, of levels and pursuing additional efforts to limit it to 1.5°C above the PA pre-industrial levels. 91 Azerbaijan’s Nationally Determined Contribution 3.0

7.3. Revision and Update Mechanism A dynamic and responsive approach to updating increased ambition, involving newly NDC is crucial for reflecting evolving developed or matured technologies. circumstances and achieving targets. The Response to International Developments mechanisms for revision and update are structured to ensure that the NDC remains aligned The country will continuously adapt its NDC in with national priorities, international response to international developments by: commitments, and the latest scientific and technological advancements. The following • Aligning with Global Ambitions: framework outlines the key aspects of this Adjusting NDC targets to reflect increasing ambition in global agreements and process: initiatives. Regular Review Cycle • Collaborating with International The country will undertake a comprehensive Partners: Engaging with international review of its NDC every five years, in line with the partners to share knowledge, get support in technical assistance on leveraging new GST process established under the Paris technologies, and leverage financial Agreement. This review cycle allows for the resources for enhanced climate action. incorporation of new data, technological advancements, and changes in national • Monitoring International Policies: circumstances. As part of this process, regular Keeping track with international policy NDC updates will be published to ensure developments and best practices to inform transparency and keep the public and national strategies and actions. stakeholders informed. The key components of Transparent Reporting and Communication the review process include: Transparency is essential to the NDC revision and • Assessment of Progress: Evaluation of update mechanism, ensuring accountability and progress made towards achieving current building trust. The country will: NDC targets, including mitigation and adaptation actions. • Ensure Transparent Reporting: Submit BTRs to the UNFCCC every two years, in • Stakeholder Engagement: Inclusive line with the requirements of the ETF, to consultations with key stakeholders, ensure compliance with international including government bodies, local and reporting standards. global NGOs, and SOEs, to gather insights and recommendations. • Maintain Public Awareness: Provide regular updates on NDC progress through • Gap Analysis: Identification of any gaps in public communication channels to keep current strategies and actions, and citizens and key stakeholders informed of exploration of potential areas for key developments. 92 Azerbaijan’s Nationally Determined Contribution 3.0 93 Azerbaijan’s Nationally Determined Contribution 3.0 8. Appendix A. Data sources Sector Area Data Sources and Notes Electricity generation • List of power plant by types: Gas, Hydro, Wind, Solar, Solid Waste Incineration (Ministry of Energy) • Baseline year actual electricity generation and generation capacity: MWh, MW, historical (Ministry of Energy and The State Statistics Committee of the Republic of Azerbaijan) Power • Gas plants fuel consumption: m³, historical (Ministry of Energy) • Azerbaijan GDP growth forecasts: %, historical (Ministry of Economy) • Plan on construction of new power plants and projected decommissioning dates of existing plants: number of plants, historical (Ministry of Energy) Upstream • Baseline and projected emission volume by sources: CO₂, historical (SOCAR) • GHG emission abatement levers and implementation timeline Oil and gas (SOCAR) Disclaimer: Current and projected emission levels are estimated based on analyses conducted in 2023 and are currently being revised to increase accuracy level along with abatement levers and their abatement potential Domestic aviation • Total fuel consumption (aviation): ton, historical (The State Statistics Committee of the Republic of Azerbaijan) Road transportation • Total number of fleets, including passenger cars, buses, trucks, and Transportation other: historical (The State Statistics Committee of the Republic of Azerbaijan) • Total fuel consumption, ton, historical (The State Statistics Committee of the Republic of Azerbaijan) Domestic railways • Total fuel consumption (railways): ton, historical (The State Statistics Committee of the Republic of Azerbaijan) Domestic maritime • Total fuel consumption (maritime): ton, historical (The State Statistics Committee of the Republic of Azerbaijan) Residential and • Total number of dwellings: historical (The State Statistics Commercial/Institutional Committee of the Republic of Azerbaijan) dwellings • Natural gas consumption for residential and commercial customers: m³, historical (SOCAR) • Total electricity consumption: MW, historical (Ministry of Energy) Buildings • GDP and GDP projections, USD, historical and projection, (Ministry of Economy) • Total area of residential buildings: m², historical (The State Statistics Committee of the Republic of Azerbaijan) • Population: number of people, historical and projection (The State Statistics Committee of the Republic of Azerbaijan, Ministry of Economy) 94 Azerbaijan’s Nationally Determined Contribution 3.0 Sector Area Data Sources and Notes Downstream oil and gas • Decarbonization programs: Levers, abatement potential, operations technologies (SOCAR) Industry • GHG emissions, CO₂eq, historical (Ministry of Ecology) Industry • Activity level, tons of product, historical (Ministry of Ecology, Ministry of Economy) • Activity levels, tons of products, projections (companies’ announcements) Petroleum Refining • Decarbonization programs: Levers, abatement potential, technologies (SOCAR) Livestock • Growth rate for livestock, number of livestock: historical (Ministry of Agriculture) • Baseline GHG emission inventory: CO₂eq (Ministry of Ecology and Natural Resources) Agricultural machinery • Inventory of agriculture machinery, number of machineries: historical (Ministry of Agriculture) AFOLU • Baseline GHG emission inventory: CO₂eq (Ministry of Ecology and Natural Resources) Aggregate sources and non- • Rice cultivation area and import volume of nitrogenous fertilizers: CO2 emissions sources on ha, ton (The State Statistics Committee of the Republic of land Azerbaijan, Ministry of Agriculture) • Baseline GHG emission inventory: CO₂eq (Ministry of Ecology and Natural Resources) Solid waste • Total waste generation activity levels broken down by industrial and municipal waste, tons, historical (The State Statistics Committee of the Republic of Azerbaijan) • Baseline GHG emission inventory: CO₂eq (Ministry of Ecology and Waste Natural Resources) Wastewater • Baseline GHG emission inventory: CO₂eq (Ministry of Ecology and Natural Resources) 95 Azerbaijan’s Nationally Determined Contribution 3.0 96