COP29: ENERGY TRANSITION

The Conference of the Parties 29 (COP29), a pivotal event on the global agenda, marked a significant moment in the international effort to combat climate change. The conference provided a forum for exploring new avenues for achieving the established goals of a clean energy transition, greenhouse gas emission reductions, and adaptation measures. The conference participants reaffirmed their commitment to fulfilling the objectives set forth in the Paris Agreement, which aims to limit global warming. New commitments were made to reduce greenhouse gas emissions and increase the share of renewable energy sources (RES) in the energy mix of various countries. As the host of this significant event, Azerbaijan demonstrated its commitment to green energy and sustainable development through the presentation of ambitious plans and initiatives.

A Disparity Between Goals and Reality

Climate scientists project that global carbon dioxide emissions from fossil fuels will reach an all-time high this year. Nevertheless, there is currently no evidence to suggest that global carbon dioxide emissions from fossil fuels will reach a peak, despite the growth in clean energy. As indicated in the most recent report from the Global Carbon Budget project, emissions from energy combustion and industrial processes are anticipated to reach 37.4 billion metric tons of CO₂ equivalent in 2024, representing a 0.8% increase from the previous year. This projection coincides with preparations by world leaders and policymakers to take further action at COP29 to accelerate global efforts, following commitments by countries to "move away from fossil fuels" at COP28 in Dubai the previous year. Despite advancements in clean energy, the rising use of natural gas and oil is contributing to an increase in global emissions from fossil fuels. The Global Carbon Budget also indicated that emissions from coal are anticipated to increase, albeit at a more modest rate. The projected increase in fossil fuel emissions for 2024 contributes to the 1.4 percent rise observed in 2023 and further delays the anticipated and necessary peak in global emissions.

The anticipated growth in 2024 is attributable to a consistent increase in emissions from gas (up 2.4 percent), while emissions from coal and oil are projected to experience a slight rise of 0.2 and 0.9 percent, respectively. In 2024, coal will account for 41% of global emissions, while oil and gas will represent 32% and 21%, respectively. It is anticipated that international aviation and shipping will increase by 7.8 percent in 2024, although this growth will remain below the levels observed prior to the pandemic. In a recent report, Consultancy DNV indicated that emissions will reach their peak in 2024 as a result of the increasing deployment of five key clean energy technologies: solar photovoltaic (PV), wind, nuclear, heat pumps, and electric vehicles. In its latest Energy Transition Forecast, DNV reported that the reduction in energy-related CO₂ emissions in 2025 would be a modest 0.4 percent.

Analysts at S&P Global Commodity Insights posit that global greenhouse gas emissions may reach a peak within the next few years. Despite the fact that several major economies are able to meet or nearly meet their 2050 greenhouse gas targets, the report states that political and practical constraints prevent most countries from achieving their climate and carbon neutrality goals. In accordance with the baseline scenario proposed by Commodity Insights, global greenhouse gas emissions are expected to undergo a gradual decline following a peak of approximately 50 billion metric tons of CO₂ equivalent in the mid-2020s. This decline is projected to reach a level of approximately 30 billion metric tons of CO₂ equivalent by 2050.

Both Europe and Asia

During the conference, Vopke Hoekstra, European Commissioner for Climate Action, advocated for the implementation of proactive measures to accelerate the transition to renewable energy. He underscored the necessity of substantial investments and grid modernization to attain these objectives. Hoekstra posited that tripling global renewable energy use necessitates an expansion of the energy grid (an additional 25 million kilometres of transmission lines must be installed by 2030) as well as the mining and processing of critical minerals, which will result in a threefold increase in demand for lithium, cobalt, and other resources. Furthermore, he observed that despite the substantial public funding ($31 billion annually from the EU), additional investment is required. In 2023, the European Union witnessed a 8 percent reduction in greenhouse gas emissions, largely attributable to the accelerated growth of renewable energy sources. The Commissioner noted that more than half of Europe's electricity is currently generated from renewable sources. He posits that the reduction of global emissions by 10 billion tons by 2030 is achievable with robust collective action.

With regard to Asia, Chinese Vice Premier Ding Xuexiang addressed the conference, stating that his country aspires to achieve carbon neutrality by 2060. At recent COP climate conferences, China has been subjected to considerable pressure, particularly from developed countries, to reach peak emissions by 2030 and achieve net zero by 2060, given its capacity to increase renewable energy usage. Additionally, the Vice Premier indicated that China's forthcoming nationally determined contributions (NDCs) for 2035 will encompass all economic sectors and include a range of greenhouse gases beyond CO2.

Additionally, Ding underscored Beijing's role in providing climate finance to other developing nations. "Since 2016, China has provided and mobilised more than 177 billion yuan ($24.5 billion) in funds, effectively supporting other developing countries in combating climate change," he stated.

In light of the prevailing circumstances, Saudi Arabia, the world's foremost oil exporter, has inaugurated its inaugural carbon trading exchange in conjunction with COP29. The exchange platform, operated by the Saudi Regional Voluntary Carbon Market Company (RVCMC), constitutes a component of a national strategy to expand this market. The overarching message conveyed at COP is that the acceleration of global decarbonization hinges on the mobilization of substantial financial resources for climate projects on a large scale. Voluntary carbon markets with high integrity have the potential to play an instrumental role in bridging the climate finance gap in the coming decade. Nevertheless, the realization of the market's potential hinges upon the establishment of an institutional infrastructure that would facilitate the active participation of the private sector," stated RVCMC CEO Riham El-Ghizi.

At the inauguration of the platform, an auction was conducted involving 22 companies from Saudi Arabia and other countries. The auction offered 2.5 million high-quality carbon credits from 17 projects that had been certified by Verra, Gold Standard, and Puro.earth. The majority of the credits originated from projects situated in the Global South, including those in Bangladesh, Brazil, Ethiopia, Malaysia, Pakistan, and Vietnam. This constituted the third auction of carbon credits held by RVCMC, following events in Nairobi and Riyadh. In the previous year, the RVCMC conducted a second auction in Kenya, during which 2.2 million metric tons of carbon credits were sold. This event serves to illustrate the kingdom's dedication to enhancing its standing within the carbon market. Middle Eastern nations such as Saudi Arabia and Turkey are actively increasing their involvement in voluntary carbon markets.

Azerbaijan's RES Initiatives

At COP29, Azerbaijan reaffirmed its ambitious plans to develop renewable energy sources with the objective of increasing their share in the country's energy balance by more than threefold by 2030. Energy Minister Parviz Shahbazov observed at the conference that, despite notable advancements in the previous year, including the installation of 473 GW of new renewable energy capacity and investments amounting to $570 billion, a comprehensive transition to green energy necessitates a more than twofold increase in these figures.

Minister Shahbazov asserts that the collective commitment made by countries worldwide to enhance renewable energy and energy efficiency at COP28 represents a significant milestone in combating climate change and achieving the goal of limiting global warming to 1.5°C. Nevertheless, COP29 should concentrate on fulfilling these commitments, overcoming obstacles, and reinforcing global efforts to accelerate the transition to clean energy. Shahbazov underscored the significance of collaborative endeavours with the European Commission, COP28, the International Energy Agency (IEA), and the International Renewable Energy Agency (IRENA) in alignment with the Global Renewable Energy and Energy Efficiency Commitment.

As estimated by the IEA and IRENA, the requisite investment for the attainment of an additional 11,000 GW of renewable energy production capacity and a global energy efficiency growth rate exceeding 4 percent per annum is estimated at $31.5 trillion. The Minister cautioned that even if all national objectives are fully achieved by 2030, a shortfall of 30 percent would still exist by that year, necessitating an additional intensification of energy transition efforts.

The government of Azerbaijan has set forth an ambitious plan to implement a series of national and international projects through to 2030. The overarching objective is to transform the country into a model of environmentally sustainable growth, becoming a leading supplier of clean energy in the process. The plans include the construction of a 240MW solar power plant in East Zangezur in collaboration with BP. This will support the decarbonization of one of the world's largest oil and gas terminals, Sangachal. By 2030, the addition of 2,250MW of solar and wind capacity is projected to elevate the share of renewable energy in Azerbaijan's power sector to 35.5 percent, a significant increase from the previous target of 30 percent.

Additionally, the Minister emphasized the strategic objective of developing an additional 5GW of capacity for export to Europe via both the Caspian-Black Sea-Europe and Azerbaijan-Turkey-Europe corridors, while concurrently implementing the Azerbaijan-Central Asia Green Energy Corridor to facilitate the supply of renewable energy from Kazakhstan and Uzbekistan. "These interconnected green energy corridors will enable Azerbaijan to make a significant contribution to the energy transition for countries spanning Asia to Europe," concluded Minister Shahbazov.

A significant occurrence at COP29 was the ceremonial laying of the foundation stone for the Shafag solar power plant in the Jabrayil district. This large-scale project is being implemented in collaboration with BP. It is anticipated that this largest solar power plant in the region will generate approximately 500m kWh of electricity annually, thereby reducing carbon dioxide emissions by between 260,000 and 330,000 tonnes annually. The implementation of virtual power transmission arrangements (VPTA) will facilitate the transfer of power generated from this plant to the Sangachal terminal, thereby contributing to the decarbonization of the oil and gas sector.

Concurrently, Azerbaijan is engaged in the active expansion of its cooperative endeavours with other nations within the renewable energy sector. At the 2022 Conference of Parties (COP29), agreements were concluded with Bulgaria, Italy, Saudi Arabia, Kazakhstan, and Uzbekistan.

Under the Paris Agreement, Azerbaijan and the International Atomic Energy Agency (IAEA) have entered into a Memorandum of Understanding pertaining to matters of energy planning. Furthermore, agreements were established to guarantee Saudi Arabia's involvement in the Green Energy Development and Transmission Project, which encompasses Azerbaijan, Kazakhstan, and Uzbekistan, in addition to several other significant documents, including: The Strategic Partnership Agreement on Green Energy Development and Transmission, the Implementation Programme on Green Energy Development and Transmission, the Roadmap for Energy Cooperation between Azerbaijan and Saudi Arabia, and the Memorandum of Understanding between the Saudi Electricity Company (SEC) and Azerenerji for the exchange of knowledge and experience within the electricity sectors were also established.

Additionally, Azerbaijan is establishing collaborative relationships with prominent energy enterprises, which will facilitate access to cutting-edge renewable energy technologies while enhancing operational efficiencies within its energy infrastructure. In particular, a development agreement was concluded between SOCAR and Bulgaria's Asarel Energy. Additionally, SOCAR entered into a cooperation agreement with Italy's Italgas, with the objective of sharing expertise and technologies that will facilitate the acceleration of energy transition efforts, as well as digitalization and decarbonization initiatives regarding infrastructure.

The case of Azerbaijan demonstrates that the transition of energy systems presents not only technical challenges but also political ones. The successful integration of traditional and new energy sources is a realistic prospect. In sum, the decisions made today indicate that the world is prepared for extensive changes within its energy sector. However, significant work remains ahead. The overarching objective must be to collectively surmount the challenges at hand while acknowledging that climate change does not concern a single nation or group exclusively, but rather poses a genuine threat to humanity as a whole.