BAKU, Azerbaijan, November 11. Additional investments in the amount of $114 billion in renewable energy sources development in the Caucasus & Central Asia (CCA) would allow the region to achieve emission reduction targets in 2023-2030, Trend reports, citing the latest publication from the International Monetary Fund (IMF).
According to the report, these investments account for 27 percent of 2021 GDP or 3 percent of GDP per year on average during the eight-year period.
This amount will contribute to fuel subsidy reduction by two-thirds, which would raise the effective carbon rate to $20 per metric ton of CO2 in 2030, the IMF noted.
“Such a strategy implies a smaller increase in energy prices and would create more jobs and faster growth, raising the 2030 real per capita GDP by 7 percent in CCA,” the report said.
However, as the IMF pointed out, this will also maintain imbalances in energy prices, limit energy efficiency gains, weaken fiscal positions and macroeconomic stability, and leave fewer resources at the disposal of future generations, who would see a 15 percent increase in total public debt in 2030 in CCA countries.
“Thus, a smoother transition for the current generation could set future generations on a path of slower long-term growth,” the report added.
Meanwhile, the IMF also sees a possibility of a carbon tax concept introduction in the CCA countries in order to phase out fuel subsidies, meaning a tax of $4 per ton of carbon emissions. At the same time the report noted that, if the strategy of investing in renewables is implemented successfully, this will no longer require the carbon tax.
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