Azerbaijan 2021 Energy Policy Review
Oil and gas continue to dominate Azerbaijan’s economy and provide most of its export
and government revenue. While these resources have sharply raised the country’s living
standards since the late 1990s and remain plentiful, the long-term outlook for this
economic model is uncertain. Oil production is declining and major oil and gas importing
countries have pledged to reduce greenhouse gas emissions to net-zero by mid-century,
implying little demand three decades from now for oil or gas without carbon capture
This report assesses the energy sector and related economic challenges facing Azerbaijan.
It proposes several ways to respond by increasing the efficiency and diversity of
domestic energy supply and use. The overriding recommendation is a gradual transition
to competitive markets with significant private sector participation and energy prices
that reflect the cost of production. The withdrawal of subsidies should be accompanied
by support measures for those most in need. Such a transition would attract new market
entrants and new investments, helping to develop Azerbaijan’s significant solar and
wind potential, and limiting greenhouse gas emissions.
These recommendations are in line with efforts already underway in Azerbaijan. Prompted
by the oil price shock in 2014-15, the government has recently drafted proposals for
electricity and gas market reforms, as well as laws on energy efficiency and renewable
energy. The country’s first specific energy strategy is also nearing completion. The
report encourages Azerbaijan to move swiftly to adopt all these proposals and implement
them effectively to ensure secure and sustainable energy in the future.
Available from July 08, 2021
In series:IEA Energy Policy Reviewsview more titles