Azerbaijan’s economy is highly dependent on fossil-fuel exports, making its economic prospects vulnerable to rising emissions-cutting ambition around the world.
As decarbonisation reduces global fossil-fuel demand and prices, the country will not be able to earn as much money from its oil and gas resources.
In a recent study, we looked at the policy solutions Azerbaijan could implement, in order to shift towards cleaner energy and diversify its economy away from fossil fuels to benefit domestic consumers, while remaining competitive in global markets.
Our results suggest that, while being adversely impacted by decarbonisation efforts in countries around the world, it is in Azerbaijan’s self-interest to implement domestic mitigation policies.
With proper sequencing and design of such policies, including a combination of fossil-fuel subsidy reform, a price on carbon post-2030 and use of collected revenue to cut taxes elsewhere, the country could achieve nationally determined contribution (NDC) targets, boost income growth and increase economic diversification.
Moreover, ambitious mitigation efforts towards net-zero by 2060 would yield substantial health co-benefits that could almost fully outweigh the direct economic costs of cutting emissions.
Vulnerability of the status quo
Net fossil-fuel exporting economies, such as Azerbaijan, not only need to implement domestic decarbonisation policies, but also face the consequences of global mitigation efforts if global climate targets are to be met. The latter could substantially impact the country’s future revenue flows from fossil fuel exports.
During the early 2000s, Azerbaijan’s hydrocarbon-fueled economy contributed to rapidly rising incomes and the development of domestic infrastructure. Between 2000 and 2014, per-capita gross domestic product (GDP) in the country increased more than 10-fold, transitioning Azerbaijan from a low-income to an upper-middle-income economy, according to the World Bank.
However, over the past decade, GDP growth has slowed down, while the country’s diversification efforts have not led to major transformations in the structure of the domestic economy, with fossil-fuel activities still playing a central role. Fossil-fuel subsidies in the country remain large and they continue to distort domestic energy markets, according to the International Energy Agency.
Between 2016 and 2021, Azerbaijan ranked 115 out of 133 countries in terms of the “economic complexity” of its exports – a measure of how diverse a country’s export basket is – according to the Growth Lab at Harvard University.
The figure, below left, shows that its export basket is among the least complex in the world – even among oil and mineral exporting comparator countries, only Nigeria ranks lower than Azerbaijan.
In addition, the country is highly vulnerable to the future energy transition, being characterised by both high exposure and low resiliency, as shown in the figure below right.
Azerbaijan has the second least complex export basket in the world, leaving it highly vulnerable to an energy transition
Economic risks
Without pro-active domestic policies, our research suggests that Azerbaijan risks facing major economic losses from the global energy transition.
Mitigation efforts around the world can substantially reduce a country’s “resource rents” through declining global fossil-fuel demand and prices, as shown in the figure below.
Results from our study suggest that if countries around the world implement NDC-consistent climate policies, then GDP in Azerbaijan could decline by up to 3.3% in 2060, relative to a reference scenario, which reflects a continuation of the current trends, policies adopted by 2021 and the energy projects that are already in the pipeline.
Households’ welfare, a measure closely related to changes in real income, as well as their investments, might be impacted even more adversely – by 5.1% and 6.7%, respectively, in 2060.
The country would see significant and growing reductions in export earnings from fossil fuels, as shown in the second figure below. Resources such as labour and capital, freed by declining fossil-fuel extraction activities would be reallocated to cleaner sectors, such as services and manufactured goods, which would see a modest expansion in output and exports. However, this would only partly compensate for the reduction in fossil-fuel export revenues, as shown in the figure below.
Global climate action could significantly hit Azerbaijan’s economy

In our NDC mitigation scenario, most of the reduction in economic activity in Azerbaijan is associated with fossil-fuel extraction sectors, as shown in the lower two figures above. Supporting service activities, such as trade, are also impacted substantially. The construction sector would also see a contraction in value-added and investments, due to reduced volumes of investment in the economy overall.
In terms of the government balance sheet, if the rest of the world implements NDC-consistent mitigation policies, then Azerbaijan would see a decline in tax revenue of up to 4% in 2060.
Domestic mitigation is a win-win
Transitioning to a “green” economy is listed as one of the key pillars of the 2021 presidential order titled: “Azerbaijan 2030: National priorities for socio-economic development”.
The country has a target of reducing its greenhouse gas (GHG) emissions to 35% below 1990 levels by 2030 and 40% by 2050, based on its updated NDC from 2023. (Its emissions are currently around 5% above 1990 levels.)
At the same time, between 2010 and 2023 GHG emissions in the country have increased by more than 39%, complicating the ability to achieve the mitigation goals.
In addition, Azerbaijan’s 2050 commitment of cutting emissions by 40% relative to the 1990 level is not only conditional on international support, but could be also deemed as substantially less ambitious than the country’s fair contribution towards global climate goals. Recent research, separate from ours, suggests the latter would imply reducing emissions by around 65% by 2050.
Our research suggests that achieving the stated 2030 targets and further strengthening the country’s mitigation ambition in the long-run would bring important economic benefits.
Our estimates suggest that a combination of fossil-fuel subsidies reform, the introduction of a carbon price post-2030 and recycling of the additionally collected revenue via reduced taxes elsewhere – on labour, capital and land, for example – would allow the country to achieve domestic NDC targets while boosting economic growth and investment, as shown in the figure below.
If the country were to implement such policies, Azerbaijan’s GDP could increase by over 1% in 2040 and by over 2% in 2060, relative to the scenario where all countries achieve their NDCs, while Azerbaijan does not implement climate-mitigation policies, i.e. follows the baseline pathway. There would be an even more substantial increase in investment of almost 6% in 2060.
On the policy implementation side, our results suggest that the elimination of two-thirds of fossil-fuel subsidies in Azerbaijan would be sufficient to achieve the 2030 NDC target.
Additional mitigation efforts would be needed to comply with NDC targets post-2030, for example, carbon prices of around $40-$50 per tonne of carbon dioxide (/tCO2 post-2045).
Azerbaijan could boost its GDP through climate action

If additional revenue from energy-subsidy reform and carbon pricing were used to reduce taxes elsewhere, such as taxes on labour, capital and land, this would help to support non-fossil-fuel activities, contributing to the diversification of Azerbaijan’s economy, as shown in the third figure above.
The share of energy-intensive manufacturing in the country’s GDP would decline by around 0.6 percentage points starting from 2035, similar in magnitude to the reduction in the share of carbon-based electricity generation.
These two groups of activities would be primarily substituted by carbon-free electricity and service sectors, reducing Azerbaijan’s exposure to the global energy transition.
Importance of considering a bigger picture
Apart from reducing GHG emissions, domestic mitigation policies would also lead to changes in air pollution levels.
As suggested by earlier studies, reduced air pollution levels could result in lower mortality rates and reduce the overall costs of mitigation.
In addition to air pollution changes under the NDC and net-zero by 2060 mitigation scenarios, in our study we also consider a hypothetical case where, within a net-zero climate policy scenario, households reduce the use of wood biomass for domestic heating and cooking – by 50% and 60% respectively in 2030 and 2060, relative to business as usual. (In the figure below, we refer to this scenario as “NetZero with reduced wood burning by HHs”.)
Our results suggest that the improved air quality observed across mitigation scenarios allows for saving between 120 lives in Azerbaijan in 2030 (NDC scenario) and 1,300 in 2060 (net-zero scenario) lives in Azerbaijan.
When the case of reduced wood-burning by households is considered, the number of saved lives increases to 1,200 (net-zero in 2030) and 3,800 (net-zero in 2060).
When these mortality reductions are translated to monetary equivalents using the “value of statistical life” (VSL), the corresponding health co-benefits reach 0.2%-0.6% of households’ welfare in 2030 and 0.5%-2.2% of welfare in 2060, as shown in the figures below.
Health co-benefits could more than offset the cost of Azerbaijan reaching net-zero

Our findings show that households would be better off under the NDC scenario, with air pollution co-benefits increasing the boost to their welfare already generated by mitigation policies.
While there would be direct mitigation-related economic costs to households in the net-zero scenario, health co-benefits would offset 60% of this in 2030 and 80% in 2060.
Moreover, reaching net-zero in 2060 while reducing wood burning by households would bring additional health benefits, with substantially greater economic value than the costs of mitigation.
Policy implications
Several important policy insights follow from our analysis.
First, while being exposed to the declining global fossil-fuel demand and prices that are expected to accompany decarbonisation efforts in countries around the world, our research suggests it is in Azerbaijan’s self-interest to implement domestic mitigation policies.
Our findings support earlier studies that suggest lower risks of “stranded fossil-fuel assets” and overall economic costs for those that move to diversify their economy early, compared to latecomer countries in the context of climate mitigation.
Second, electricity and gas prices are currently well below their economic costs, due to the presence of implicit subsidies. Considering the current windfall earnings from energy sector revenues, Azerbaijan is well-positioned to proceed with the subsidies’ phase-out, as international experience shows that successful pricing reforms are often implemented when fiscal pressures are low.
Our research suggests that a gradual but steady phaseout of fossil-fuel subsidies by 2030, followed by the introduction of economy-wide carbon pricing of at least $25/tCO2 by 2035 is the economically most efficient path to incentivise a clean-energy transition and improve energy efficiency.
From the policy perspective, such a transition would entail a gradual deregulation of gas, electricity and fuel prices, as well as a strengthening of regulators and market mechanisms in price setting – areas where Azerbaijan has achieved limited progress in recent years.
Third, our results support the important role of decisions on the use of revenues collected during the implementation of mitigation policies, either through the elimination of fossil-fuel subsidies or carbon-pricing.
We find that recycling revenue through a reduction in other taxes, rather than direct transfers to households or subsidies to renewable energy, is more economically efficient.
Finally, our results suggest that broader environmental impacts and co-benefits from decarbonisation are an important part of the equation when weighing the economic impact of mitigation policies. This includes reductions in air pollutant emissions, which further lead to improved air quality and declining mortality.
When properly accounted for, such co-benefits could substantially reduce the overall cost of mitigation and even result in net welfare gains in Azerbaijan. Complementary policies on the reduction of wood-burning in the country could result in even more substantial health co-benefits.
The post Guest post: How COP29 host Azerbaijan could boost growth through climate action appeared first on Carbon Brief.
Guest post: How COP29 host Azerbaijan could boost growth through climate action
Climate Change
New Zealand moves to protect business with law curtailing climate litigation
New Zealand’s parliament has adopted a controversial new law blocking a whole avenue of climate litigation and shutting down its most advanced corporate lawsuit, which has been blamed by the government for shaking business confidence and investment.
The Climate Change Response (Tort Liability) Amendment Bill, expected to take effect in the coming days after it is formally signed by the Governor-General, prevents all current and future civil claims for climate loss or harm under tort law.
Justice minister Paul Goldsmith said last week that the aim was to give businesses “certainty around their climate change obligations”, noting it would not alter the government’s responsibilities under the Climate Change Response Act 2002 nor business obligations under the Emissions Trading Scheme.
“Our response to climate change is best managed by the Government at a national level and not through piece-meal litigation in the courts,” he added in a statement.
Such litigation, he said, “risks developing a new regime that contradicts the framework Parliament has already enacted” to tackle climate change.
Goldsmith singled out a key domestic climate lawsuit brought by Northland iwi leader and activist Mike Smith against six big companies: dairy firms Fonterra and Dairy Holdings, energy firms Genesis Energy and Z Energy, New Zealand Steel and coal mining firm BT Mining. A seventh original defendant, Channel Infrastructure, was dropped after it permanently decommissioned its Marsden Point oil refinery.
Smith argued that these companies had caused him harm under public nuisance and negligence law, as well as a third breach of a duty to cease contributing to climate change that has yet to be tested domestically. He did not seek financial compensation, instead asking for the companies to immediately stop emitting or contributing to net greenhouse gas emissions.
In one of the most advanced corporate climate accountability lawsuits in the world, a trial had been scheduled for April 2027 after the Supreme Court unanimously allowed the case to continue.
Corporate lobbying in the shadows
Smith described the passing of the bill as “deeply concerning”, particularly as it coincided with the Supreme Court hearing another of his climate lawsuits. In that case, Smith v Attorney-General, he argues that the government’s response to climate change and its impacts on Māori communities in particular breaches rights to life and culture.
“That timing raises profound questions about the separation of powers and the rule of law,” said Smith. “Whatever one’s view of the merits of these cases, it is deeply troubling when parliament intervenes to remove a legal pathway while the courts are actively considering fundamental questions about climate responsibility, rights and the crown’s obligations.”
The bill – which says that no person (including the government) can be found liable in tort for emissions-related climate change effects – followed major lobbying efforts by the companies defending themselves in Smith’s lawsuit. They outlined a proposed legal amendment in a briefing note to the government in 2024.
The centre-right government has been fiercely criticised over its lack of transparency in relation to this lobbying activity. The national ombudsman recently found that the Prime Minister’s Office effectively withheld information requested by the Environmental Law Initiative about meetings, discussions and conversations regarding Smith’s case.
Green groups fail to stop bill
The bill sparked huge concern among environmental campaigners in New Zealand and elsewhere. Greenpeace Aotearoa called it a “shocking abuse of executive power” and the vast majority of submissions to a parliamentary inquiry said it should be rejected.
But in the end, it was adopted with little resistance, moving relatively smoothly through parliament, passing its third reading by 67 votes to 53. Sam Bookman, climate law lecturer at Melbourne Law School, told Climate Home News he was not surprised by this, given that the coalition government has a secure majority.
A complaint has been made to the UN special rapporteur on climate change and human rights by Smith, the National Iwi Chairs Forum Pou Tikanga and youth coalition Climate Clinic Aotearoa over what they see as the government’s heavy-handed approach. Smith is also challenging the new law in yet another lawsuit.
“Pathetic”: New Zealand plans to barely cut emissions between 2030 and 2035
Bookman thinks it “very unlikely” that such a challenge will succeed, noting that New Zealand’s constitution is firmly anchored in parliamentary sovereignty.
But the expert in climate law does not see the bill as the end of legal action in the country, noting that New Zealand has a “sophisticated climate litigation landscape with a growing number of specialist and experienced lawyers and NGOs”.
The country is also approaching its next general election in November, and some opposition parties have pledged to restore access to the courts if elected.
Amanda Larsson, global project lead on agriculture for Greenpeace International, said: “This law deserves to be tested, and I strongly encourage the international climate litigation community to unite and help defend New Zealanders’ fundamental right to hold polluters accountable before this becomes a global blueprint.”
Copycat legislation on the rise
New Zealand’s move is part of a small but growing legislative effort to shut down climate litigation around the world.
In the US, Republican politicians introduced legislation in the House and Senate in April that would shield fossil fuel firms from climate liability lawsuits. Similar laws have already been passed at state level in Tennessee, Utah, Iowa and Louisiana.
The German state of Bavaria has put forward a similar proposal to the Federal Council, aiming to block private climate claims as well as the recognition and enforcement of foreign judgments imposing such liability. There are also proposals to limit available remedies and actions in the Netherlands and Belgium.
UN General Assembly backs “climate obligations” set by world’s top court
Bookman said he expects more efforts to counter climate damages litigation and advised plaintiffs to think about how to respond, including drawing on broader support in opposing them.
“Even though it’s very hard for plaintiffs to win these types of cases, companies are very eager to avoid the expense, embarrassment and political accountability that come even with unsuccessful lawsuits,” he said.
The post New Zealand moves to protect business with law curtailing climate litigation appeared first on Climate Home News.
New Zealand moves to protect business with law curtailing climate litigation
Climate Change
Indonesia’s nickel production cuts are not enough to create a sustainable industry
Bhima Yudhistira Adhinegara is the Executive Director of the Center of Economic and Law Studies (CELIOS), an Indonesia-based economic think tank. Muhammad Zulfikar Rakhmat is the Director of the China-Indonesia desk at CELIOS.
Indonesia produces around 60% of the world’s nickel, a metal used to manufacture batteries for electric vehicles (EVs) – more than any other country in the world. But in 2026, the government sharply reduced how much of its nickel can be extracted from the ground.
Production quotas were reduced by around 40% this year compared to 2025. Weda Bay, the largest nickel mine on Earth, had its allowance cut by more than 70% and exhausted its full-year quota by the end of May, halting mining entirely; it cannot resume large-scale extraction until next year unless regulators grant an extension.
The policy has sparked a vivid debate in Indonesian policy circles: how can the country shift its strategy from a decade of mining vast quantities of cheap nickel to producing a high-value and low-carbon material that the rest of the world wants for EV batteries.
The cuts aren’t a silver bullet to clean up Indonesia’s nickel industry, whose smelters are powered by coal – the most polluting fossil fuels. But alongside stricter enforcement of environmental rules, it is one side of efforts to produce more sustainable nickel for a premium.
Restricting Indonesia’s nickel output
Production quotas were introduced to stop the collapse of nickel prices because of oversupply in the market. Prices had fallen more than 40% in 2023 alone and kept sliding as Indonesian supply kept growing, hitting a four-year low of around $13,900 a ton in late 2025.
Critics called the recent tightening of production quotas proof that Indonesia’s nickel strategy has failed, arguing that the industry shouldn’t need to throttle its own output to survive. But when assessed against what the policy was supposed to do – push up nickel prices – it has worked. Prices jumped to $20,000 a ton in May, the highest since 2024.
Chinese industry groups representing companies that have invested billions to mine and refine the country’s nickel were furious, warning Indonesia’s president Prabowo Subianto that the cuts put $50 billion worth of investment at risk. But much of that Chinese capital is sunk into smelters and processing plants built specifically to run on Indonesian ore, and cannot simply be moved elsewhere. That gives Jakarta more room to hold its ground than the warning suggests.
Stronger environmental enforcement
Since the start of the year, Indonesia’s forestry task force has seized more than four million hectares of land from mines and plantations operating illegally in protected forests, collecting over two trillion rupiah ($113 million) in fines.
This included 148 hectares seized from Weda Bay for lacking a forestry permit. The share of nickel produced from illegal small-scale mining also fell from about a quarter in 2022 to roughly 10% by 2024.
The crackdown responds to serious environmental damages in the nickel industry. On Obi Island, a waste pond collapsed after heavy rain in June 2025, flooding three villages and killing a resident. Internal company tests found chromium-6 – a carcinogen – in the water, in quantities far above the legal limit. The footprint of another mine near Raja Ampat, which is home to some of the world’s richest coral reefs, grew 60-fold in just eight years.

The market is responding to early cleanup efforts. Low-carbon nickel now sells for a real premium, roughly $18,800 to $19,300 a ton compared with $17,900 to $18,300 otherwise, as carmakers seek to source cleaner materials to comply with the European Union’s new emissions rules for imports.
In turn, this is incentivising the industry to do more to green its operations. Vale Indonesia’s smelter in South Sulawesi now runs almost entirely on hydropower, for example.
None of this addresses coal use, however. Major Indonesian nickel producers still emitted an estimated 15 million metric tons of greenhouse gases in 2023. Indonesia may be cracking down on illegal mining and rewarding cleaner producers but it is still running its mines on the dirtiest fuel available.
Unequal benefits
For Indonesia to truly benefit from producing cleaner and high-value nickel, it needs to reap the economic benefits too. Although the industry has boosted the country’s economic growth, the reality on the ground tells a different story.
Konawe in Southeast Sulawesi is home to a major smelting complex. Growth in the district jumped from 6% to 22% between 2015 and 2023, driven almost entirely by the nickel industry, according to a study by the Lowy Institute study. At the same time, poverty levels increased slightly and unemployment remained unchanged.
In Halmahera, another epicentre of the nickel industry, spending by the poorest fifth grew just 5% between 2019 and 2022, compared with 28% for the wealthiest fifth, according to a separate study.
Part of the reason for this inequality is the system for transferring mining royalties to district authorities where the mines are located. In theory, they are entitled to the largest share. But in practice, payments are delayed, companies routinely dispute what they owe and royalties are pooled and distributed across a larger area.
The Natural Resource Governance Institute has found that decentralisation handed local governments power to approve new mines faster than they could build their capacity to manage them. Higher output raises national income on paper, but local governments remain constrained by fiscal rules and infrastructure costs that scale with mining.
None of this makes the 2026 quota cuts a mistake. Indonesia has every right to defend its pricing power over a resource it controls. But limiting extraction isn’t going to fix underlying issues around environmental enforcement and revenue-sharing. That requires rules that are consistently enforced, royalties that reach communities living by the mines, and a plan to wean smelters off coal.
The post Indonesia’s nickel production cuts are not enough to create a sustainable industry appeared first on Climate Home News.
Indonesia’s nickel production cuts are not enough to create a sustainable industry
Climate Change
Risk of “catastrophic” oil spill reaching Kimberley coast found in Woodside’s Scott Reef gas drilling plans
SYDNEY, Monday 24 August 2026 – New analysis of Woodside modelling released by Greenpeace Australia Pacific and Environs Kimberley has revealed the oil and gas corporation’s plans to drill at Scott Reef could cause an oil spill up to 30 times bigger than the 2009 Montara disaster, impacting the Kimberley coastline and reaching as far as Indonesia.
The new analysis details the “catastrophic” oil spill risk put to environmental regulators for approval by Woodside in its Browse to North West Shelf Project (Browse) plans, the worst-case scenario being a blowout directly below Scott Reef, polluting whale migratory pathways and covering isolated turtle nesting ground with oil condensate.
An FOI application (F348) revealed the federal environment department (DCCEEW) asked offshore oil and gas regulator NOPSEMA to look into the oil spill risk in 2025. NOPSEMA’s response to the application refused access to its report, and one document shows DCCEEW sought further advice this year.
Greenpeace and Environs Kimberley are calling on the Federal Government to publicly release the NOPSEMA report given the risk of an uncontrolled release of oil condensate from directly below Scott Reef.
Hannah Schuch, Senior Campaigner at Greenpeace Australia Pacific, said: “Woodside is aware that drilling at Scott Reef risks a massive oil spill that would have severe, far-reaching consequences. It appears environmental regulators are aware too.
“The state and federal governments need to take this risk from Woodside’s drilling plans seriously, as they could end up allowing the worst oil spill in Australian history.
“The pygmy blue whales that migrate up and down the WA coast with their newborns each year could be swimming and feeding in toxic, oil-slicked water. Woodside’s proposal to drill at Scott Reef is an environmental disaster waiting to happen, and the WA and federal governments have one surefire way to prevent catastrophe — reject Browse.”
Martin Prichard, Executive Director at Environs Kimberley, said: “A catastrophic oil spill by Woodside would be disastrous not just for marine life in the area but also for the Kimberley’s $500 million tourism industry.
“The state and federal governments will see five marine parks on the Kimberley coast included in the risk area of a catastrophic Woodside oil spill.
“The Montara oil spill was disastrous for West Timor with the toxic oil destroying seaweed farmers’ livelihoods. The Kimberley dodged a bullet with Montara, we were lucky the spill didn’t head our way. Myself and a crew flew over the Montara oil spill and followed it as far as we could. It was like a scene from a disaster movie.”
After the WA Environmental Protection Authority deemed Browse “unacceptable” due, in part, to oil spill risk, Woodside submitted a mitigation plan based on technology that has never been used “in anger”, a weakness stated in an independent expert review of the plan.
Professor Richard Steiner, independent oil spill expert, said: “A large offshore spill is impossible to effectively contain or recover. Historically, only 2-6% of total spill volume is recovered and the ecological injury from the release of toxic hydrocarbons in the sea can be severe, extensive, and long-term.
“Here in Alaska, government research concludes that several marine populations injured by the 1989 Exxon Valdez oil spill, including whales, fish, and seabirds, are still not recovering today, 37 years later. We should expect similar long-term ecological impacts in Western Australia if there were to be a major oil spill. The only sure way to avoid the risk of a catastrophic marine oil spill is to not develop oil and gas projects in marine environments.”
-ENDS-
Media contact
Emma Sangalli on emma.sangalli@greenpeace.org or 0431 513 465
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