TASHKENT, Uzbekistan, November 25. Adjusting prices, particularly by removing energy subsidies and introducing carbon pricing, is a keystone policy for triggering the green transition in Uzbekistan, latest country outlook by the World Bank says, Trend reports.
As per the WB’s Country Climate and Development Report, removing energy subsidies in Uzbekistan's gas, electricity, and heating markets is an essential component of a green transition, as well as introducing carbon pricing through a carbon tax, which will spur the investments needed to reach net zero emissions.
“These policies not only provide the market incentives to trigger behavioral change but also generate fiscal space which can be directed to reinforce these incentives and support the transition. Macroeconomic modelling suggests that these two policies combined can create as much as 5 percent of GDP worth of additional fiscal space over the transition period”, the report says.
WB’s analysts state that these resources can be used to leverage private finance by providing smart subsidies for green investment, to support accelerated transition in difficult sector such as residential energy efficiency, and to finance essential low-carbon public goods, both physical infrastructure and the strengthening of education and labor market frameworks to build human capital for the green transition in the country.
“Given the scale of resources required, Uzbekistan’s private sector will need to be the primary financing source for the green transition. With many competing public spending needs, the government budget cannot accommodate all the investment needs of the transition. Ushering in greater private financing, both domestically and through FDI, and developing green finance, will be critical”, WB analysts explained.
The Bank believes that key policy areas to support green finance include constructing clear regulation and supervisory frameworks for green finance, rolling out new instruments that provide market-based incentives for green investments, and developing insurance and other instruments to better manage disaster- and climate-related risks.
Meanwhile, Uzbekistan and the World Bank have signed an agreement on the provision of financing in the amount of $46.2 million to reform the country’s energy sector.
The funds are said to be used to implement the project Innovative Carbon Financing for the Transformation of the Energy Sector of Uzbekistan (iCraft), aimed at producing clean energy, improving energy efficiency, and reforming energy subsidies.