THE COST OF CLEAN AIR

An event at the Ministry of Ecology and Natural Resources in Azerbaijan signals a significant shift in the country's environmental policy. The inaugural meeting of the Working Group was held, marking the commencement of public consultations on the new draft law entitled "On Climate". Representatives of key state bodies met to establish the foundations for future legislation capable of bringing order to the fight against climate change, reducing greenhouse gas emissions and adapting the economy to new realities. The enhancement of the regulatory framework in qualitative terms is no longer a mere declaration of intent for Azerbaijan, but rather a pressing practical task on the road to green development. Interestingly, until 20 September of this year, members of the public, including experts and representatives of civil society institutions, are invited to submit comments via the ministry's official email address. This will allow them to play an active role in shaping the country's future climate strategy.

The document is a logical and consistent step after the global climate summit COP29, held in Baku, which cemented Azerbaijan's status as one of the key regional leaders of the green transition. The proposed draft establishes the framework for a comprehensive climate subsystem within the Single Digital Ecology platform. The bill covers a wide range of key areas, including automated collection of reports and risk assessment, as well as the registration of specific environmental projects. The central instrument of this entire structure is a mechanism that has not previously been discussed in such detail in Azerbaijani legislation: namely, the monitoring of the carbon market and the creation of a National Carbon Registry.

Strict reporting

For many, the dry phrase “carbon registry and market” sounds like advanced mathematics, although its essence should be clear to everyone. Imagine that the state sets a clear permissible limit on air pollution for large plants and enterprises—a kind of standard for safe living on the entire planet. However, not all enterprises can restructure their production overnight: some inevitably exceed the norm because of outdated equipment, while others, by contrast, install solar panels, plant forests and reduce their emissions far below the established threshold. For every saved tonne of harmful emissions, such an environmentally responsible enterprise receives a special bonus card from the state—a carbon unit.

It is precisely to record these processes that the draft law provides for the launch of a National Carbon Registry. This is a strict digital bank where every step is recorded: how much pollution a specific plant emitted, how many bonuses an eco-company honestly earned, and to whom those bonuses were transferred. A polluting plant cannot simply continue to emit smoke—it will have to go to the carbon market and buy the missing cards for real money from those who protect nature. The air above a dirty chimney will not immediately become cleaner, but it will simply be unprofitable for a company to keep handing its profits to competitors. It is far cheaper to spend money once on new treatment filters. Moreover, the state will reduce the total number of allowable cards on the market every year, gradually forcing absolutely all businesses to switch to clean technologies. And the electronic system itself will ensure that no one cheats and sells the same air-cleaning service twice.

At the same time, businesses should not fear immediate harsh sanctions. As international experience shows, the introduction of such systems always assumes an adaptation period. Within the registry, enterprises will first go through an audit and test-monitoring stage, allowing them to prepare for the new rules of the game without undue shocks. Furthermore, new niches are opening up for entrepreneurs: growing forest areas, start-ups in waste processing and investment in alternative energy are turning from abstract noble ideas into a highly profitable business capable of selling its carbon units to large industrial players.

Turning to international experience, it is worth noting that such practice has long proven its economic and environmental viability in many developed regions. A vivid example is the European Union with its developed emissions trading system, where every tonne of carbon equivalent is under strict digital control. Similar registries and laws operate in the United Kingdom, South Korea and Kazakhstan, allowing business not only to meet environmental standards under threat of fines, but also to earn from green technologies by selling saved quotas. Special attention in the draft law is paid to strict control and a system of liability for violations. Punishment and fines for enterprises will depend on the nature of the offence: the size of the exceeded emissions limit, repeated violations, as well as attempts to submit false reporting or conceal data. Tough measures will be taken in accordance with administrative legislation on facts identified during digital monitoring. For business this means that trying to deceive the state system will become far more expensive than honestly installing new filters or buying the missing carbon units. In the European Union, for example, a strict fine of €100 is imposed for every tonne of excess CO₂, and the enterprise is still obliged to cover the quota debt the following year. In countries with a direct carbon tax, such as Canada or Sweden, concealing data is treated as a tax crime with substantial penalties. On emerging national markets, violators are often forced to buy additional carbon units on the exchange at double or triple the standard coefficient, while in export-import operations within cross-border mechanisms, undeclared carbon footprint incurs additional charges and may lead to the cancellation of trade permits. All these strict measures are supplemented by public blacklists of violators, which forces businesses to protect their reputations.

Big benefit

For Azerbaijan, the adoption of this draft law will bring a number of tangible practical advantages. Firstly, the country will gain a fully transparent environmental accounting system, which will significantly increase its investment attractiveness. Foreign investors with a focus on sustainable development are more willing to invest in economies that have clear climate rules. Secondly, the document accelerates the technological modernisation of industry and energy, encouraging enterprises to abandon outdated solutions. Finally, it strengthens the state's authority as a responsible participant in the global climate agenda, opening access to international environmental funds and grants.

In the context of the ongoing public consultations, civil society institutions and experts are encouraged to submit a range of valuable recommendations. In order to facilitate the transition to environmentally friendly standards, it is recommended that clear tax incentives and subsidies be introduced for small and medium-sized businesses. This will ensure that the transition does not become a ruinous financial burden for smaller enterprises. It is also advisable to spell out in detail mechanisms for protecting the interests of local people in areas where large carbon projects are implemented. For example, this could include the planting of new forests on a mass scale. Finally, the public may recommend including in the draft law a requirement to publish regular, open and accessible reports, so that every citizen can see with their own eyes how the climate system is working and how much cleaner the air in their home region is becoming.

The draft law "On Climate" is not merely a compilation of departmental rules and technical instructions. In essence, the country is laying the foundations for a digital infrastructure on which the economy of the future will be built. This will be a modern, technologically advanced and safe infrastructure for people. And how effective this tool proves to be now depends on each of us—because it is precisely through open public dialogue that the rules by which Azerbaijan will live and breathe in the coming decades are being formulated.