This report by the IEA as part of the EU4Energy project assesses the energy sector and related economic challenges facing Azerbaijan. Oil and gas continue to dominate the country’s economy and provide most of its export and government revenue, but the long-term outlook for this economic model is uncertain as oil production is declining and major oil and gas importing countries have pledged to reduce greenhouse gas emissions to net-zero by mid-century.
The report proposes several ways to respond to this challenge 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. 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.