Uzbekistan Receives World Bank Support to Cut Fossil Fuel Subsidies and Reduce Emissions
Uzbekistan and World Bank sign $46.25 million agreement for clean energy transition project
During the 2023 World Bank Group and International Monetary Fund Annual Meetings in Marrakech, Morocco, the government of Uzbekistan and the World Bank signed an agreement to allocate $46.25 million for the Innovative Carbon Resource Application for Energy Transition Project (iCRAFT). This project aims to support Uzbekistan’s clean energy transition, energy efficiency, and energy subsidy reforms.
The iCRAFT Project, funded by the World Bank’s Transformative Carbon Asset Facility (TCAF), is the Bank’s first initiative globally to support policy reforms through payments for emission reductions. It focuses on fundamental reform measures that will help Uzbekistan achieve its international climate commitments and improve the efficient use of energy resources. The project will serve as a model for similar initiatives worldwide.
Uzbekistan is known as one of the most energy and emissions-intensive countries in the world. The government has implemented energy subsidy reforms to gradually adjust tariffs and bring prices in line with costs. However, low prices discourage energy efficiency and conservation efforts, resulting in limited capacity for improvement in service delivery. The project funds will help address these challenges and also protect vulnerable households from energy tariff adjustments.
“We welcome Uzbekistan’s sustained efforts to reform its energy sector and build a green economy,” said Tatiana Proskuryakova, World Bank’s Regional Director for Central Asia. “The new project is a critical first step in the gradual elimination of energy subsidies, which encourage waste and divert government resources from other priorities such as health, education, and social protection. Effective policy reforms in the energy sector would strengthen Uzbekistan’s economy while substantially reducing greenhouse gas emissions.”
The iCRAFT Project is the first climate and carbon finance transaction in Central Asia under the Paris Agreement, an international treaty aimed at limiting global temperature increases by reducing global greenhouse gas emissions. Each year until 2027, the project will purchase emission reductions achieved through the efficient use of energy resources and incentivized by energy subsidy reforms. Moreover, the project will enable Uzbekistan to access international carbon markets, providing further incentives for the country to pursue its green transition.
“The government of Uzbekistan is proud to implement this innovative project,” noted Jamshid Kuchkarov, Deputy Prime Minister of Uzbekistan and the WBG Governor. “Thanks to the project-supported activities, we will reduce emissions of around 60 million metric tons of CO2 over the project lifetime. Under the project, approximately 2-2.5 million tons of CO2 will be purchased, and the country will be able to sell the remaining emissions reductions on international carbon markets using the systems, infrastructure, and processes established and tested through this project.”
The World Bank and TCAF are committed to assisting developing countries in meeting their international commitments to reduce emissions and adapt to the effects of climate change. The project in Uzbekistan serves as a proof-of-concept for other member countries of the World Bank in the future.
