The World Bank gives Uzbekistan $46 million for the world's first project to reduce emissions through payments
An agreement has been signed on the implementation of the world's first project with the assistance of the World Bank, which finances climate change policy measures. It will also be the first international transaction in Central Asia carried out within the framework of the mechanisms provided for by the Paris Agreement.
Within the framework of the Annual Meetings of the World Bank Group and the International Monetary Fund, currently taking place in Marrakech (Morocco), representatives of the Government of Uzbekistan and the World Bank signed an agreement on the provision of financing in the amount of $46.25 million. These funds will be used to implement the project "Innovative Carbon Financing for the Transformation of the Energy sector of Uzbekistan" (iCraft). The project will contribute to the production of clean energy, improve energy efficiency and reform energy subsidies.
The iCraft project, funded by the World Bank's Carbon Asset Transformation Fund (TCAF), is the Bank's first global initiative to support reforms in the energy sector, stimulating the reduction of greenhouse gas emissions through payments for specific results in this area. The project will help Uzbekistan fulfill its international obligations in the field of climate change and effectively use energy resources. It is expected that iCraft will serve as a model for similar projects implemented in the future in various regions of the world.
Uzbekistan is among the countries with the highest level of energy intensity and greenhouse gas emissions. This situation is explained by high subsidies for the generation and transmission of energy in the country. The result of this practice is low electricity and gas tariffs. Thus, the revenues received by energy enterprises from the services provided are insufficient to cover the costs of production and delivery of the corresponding energy carriers to consumers.
In turn, low tariffs do not contribute to a thrifty attitude to energy and the introduction of energy-efficient technologies in households and in the private sector. They also limit the ability of energy companies to provide quality services to users. The authorities have initiated reforms that will result in a gradual increase in energy tariffs to bring them in line with production costs.
The Government undertakes to use part of the funds provided under the iCraft project to protect vulnerable households from tariff increases. In particular, the project will assist in the implementation of the state program for the transition to a "green" economy and other measures to reform the energy sector.
"We welcome Uzbekistan's consistent efforts to reform the energy sector and develop a green economy," World Bank Regional Director for Central Asia Tatiana Proskuryakova said during the signing ceremony of project agreements in Marrakech.
"The new project is the first step in the gradual abolition of subsidies leading to the waste of energy resources and the diversion of budget funds spent on subsidies from other priority areas, including health, education and social protection of the population. Effective reforms in the energy sector will strengthen the economy of Uzbekistan and will significantly reduce greenhouse gas emissions."
The iCraft project is the first international deal in Central Asia to finance efforts to reduce greenhouse gas emissions within the framework of market mechanisms provided for by the Paris Agreement, an international treaty aimed at limiting global temperature rise by reducing emissions.
In particular, within the framework of the project, it is planned to purchase emissions from the country until 2027, the reduction of which will be possible thanks to more efficient use of energy resources and the reform of energy subsidies.
The project will also help Uzbekistan gain access to international carbon markets through a pilot international trade deal on so-called "carbon credits". These measures will accelerate the country's transition to a "green" economy.
"The Government of Uzbekistan welcomes the opportunity to implement this innovative project. According to forecasts, during its implementation, we will be able to reduce emissions by about 60 million tons of carbon dioxide," Deputy Prime Minister of Uzbekistan and World Bank Group Governor Jamshid Kuchkarov said. "Of these 60 million tons, about 2-2.5 million tons of carbon dioxide will be purchased from the country as part of the project. Uzbekistan will be able to sell the remaining carbon units on international carbon markets using the systems, infrastructure and mechanisms created and tested during the project."
The World Bank and TCAF assist developing countries in fulfilling their international commitments to reduce emissions and adapt to the effects of climate change. The implementation of the new project in Uzbekistan will serve as an example for other interested World Bank member countries.
The governments of Canada, Germany, Norway, Spain, Sweden, Switzerland and the United Kingdom, as well as the Climate Cent Foundation (Switzerland) provided financial assistance for TCAF activities, according to the World Bank website.
ORIENT news
