The Government of Azerbaijan has made important advances in recent years to improve energy efficiency both across the country’s economy and in key sectors. A new legal framework and supporting legislation have been adopted, and a new Department for Energy Efficiency has been created to help unlock Azerbaijan’s significant energy efficiency potential in buildings, industry, transport and beyond. There is growing awareness that longstanding reliance on subsidised natural gas creates risks for the country’s long-term development prospects, particularly as multiple factors – i.e. climate change, declining gas reserves, population and GDP growth, and rising global oil and gas market volatility – simultaneously exert pressure on the economy.

While the country’s advances are encouraging, significant additional efforts will be required to ensure it stays on track to improve its energy efficiency. For instance, natural gas and electricity subsidies remain high, creating strong disincentives for energy efficiency investments. The new legal framework for energy efficiency needs to be enhanced with additional secondary legislation, while policymakers need to ensure measures are being implemented effectively. Formally adopting the draft NEEAP and its many measures would also be an important step, along with capacity building and awareness raising to ensure policy success and buy-in from market participants and the wider public, especially consumers affected by rising energy prices resulting from subsidy reforms and/or global energy market fluctuations.

Fortunately, Azerbaijani policymakers, market participants and other energy efficiency stakeholders have access to a growing body of global best practices on energy efficiency, as governments across the globe have been testing established policy levers such as MEPS and stimulus measures such as bulk procurement to improve energy efficiency. Applying the lessons learned from these and other programmes can allow Azerbaijan to deploy energy efficiency mechanisms quickly and at scale in upcoming decades to transition towards more efficient and rational use of its energy reserves while exploiting opportunities for GHG emissions reductions and economic growth. The creation of a dedicated energy efficiency agency would support the government’s efforts, especially in policy and strategy formulation and implementation.

Furthermore, hosting the COP29 climate conference in November 2024 gives Azerbaijan a unique opportunity to place energy efficiency at the forefront of its wider energy system reform programme and reduce emissions in line with its global commitments. To help it achieve these objectives, the data and recommendations contained in this report and its summary roadmap can offer valuable insights and starting points for the country to make further progress in a range of areas.