BAKU, Azerbaijan, July 22. Azerbaijan's
Ministry of Ecology and Natural Resources has proposed to establish
a National Carbon Registry.
A new draft law "On climate" has been prepared, which will
regulate climate policy in Azerbaijan within a single legal
framework.
The draft law of Azerbaijan "On climate" has been placed in the
"Announcements" section of the official website of the Ministry of
Ecology and Natural Resources for public discussion.
The draft law "On climate" defines the legal, economic, and
organizational foundations of Azerbaijan's climate policy. The
document regulates the planning and implementation of measures to
ensure low-emission and sustainable development, reduce greenhouse
gas emissions, and adapt to climate change in accordance with the
country's Constitution and international treaties to which it has
acceded.
The draft law covers the formulation of the state's climate
policy, emission reduction, climate change adaptation measures, the
application of carbon pricing mechanisms, the issuance and use of
emission quotas, the registration of carbon units and carbon
projects, the creation of the National Carbon Registry, the
organization of a national inventory, monitoring, reporting and
verification system, as well as the collection and management of
climate data.
According to the draft, the law will apply to state and local
government bodies, state and non-state legal entities, and in
certain cases to individuals. At the same time, carbon pricing
mechanisms will not be applied to emissions arising in the field of
state defense, security, and emergencies.
The document defines sustainable development, scientific
justification, transparency and accountability, precaution, the
"polluter pays" principle, just transition, public participation,
and the application of market-based mechanisms as the main
principles in the field of climate action.
The draft law also defines the main directions of state policy.
These include the establishment of institutional foundations for
climate policy, strengthening scientific and technological
potential, preparation of strategic documents on emission
reduction, phased introduction of carbon pricing, transition to a
low-emission economy, integration of climate risks into state
planning, implementation of international commitments, and
promotion of climate finance.
According to the draft, the functions of the National Competent
Authority will be performed by the Ministry of Ecology and Natural
Resources. The Ministry will prepare Nationally Determined
Contributions (NDC), a Long-term Low-Emission Development Strategy,
form a carbon budget, determine the methodological foundations of
the monitoring and reporting system, organize a national inventory,
and ensure the implementation of international climate
commitments.
The operator functions are expected to be performed by the
National Hydrometeorological Service under the Ministry of Ecology
and Natural Resources. The operator will manage the National Carbon
Registry, keep records of emission quotas and carbon units, accept
emission reports, register carbon projects, and ensure the security
of the registry.
The draft law gives legal entities and individuals the right to
participate in the ETS, develop carbon projects, acquire carbon
units, conduct transactions in international carbon markets, and
voluntarily cancel carbon units. At the same time, they will be
obliged to calculate emissions in accordance with the established
methodology, comply with monitoring and reporting requirements,
submit emission reports, ensure the accuracy of data and, in cases
where the ETS is applied, timely surrender the established
quotas.
According to the draft law, a five-year carbon budget will be
applied in the country in order to reduce emissions. The carbon
budget will determine the maximum amount of emissions that can be
emitted in the country during that period. The implementation of
the carbon budget will be ensured through the ETS, carbon tax, and
other economic mechanisms, and additional economic and fiscal
measures will be developed if there is a risk of exceeding emission
limits.
The document also defines the legal basis for carbon pricing.
Accordingly, economic incentives will be created to reduce
emissions, and carbon pricing will be implemented through the
Emissions Trading System (ETS) and carbon tax. Parallel application
of both the ETS and carbon tax on the same emission volume will not
be allowed. Funds received from the auction of quotas and the
carbon tax within the ETS can be directed to financing emission
reduction, climate change adaptation, and fair transition
measures.
The draft also defines in detail the mechanism for implementing
the ETS. The system will determine the total emission limit, quotas
will be distributed through auction, free allocation, or a mixed
method, participants will prepare a monitoring plan, submit an
annual emission report, and will have to transfer quotas equal to
verified emissions to the National Carbon Registry. Transactions
outside the registry will not have legal consequences.
According to the draft, ETS participants who fail to surrender
their emission quotas within the specified period will pay a fine
of an amount to be determined by the Cabinet of Ministers for each
ton of carbon dioxide equivalent. In cases of repeated or serious
violations, their right to conduct transactions in the National
Carbon Registry may be temporarily restricted or suspended.
The draft law also regulates the activities of the carbon
market. The National Carbon Registry will be a state information
system that will record the release, transfer, use, and
cancellation of carbon units. Registration of carbon projects will
be possible only if additional emission reductions, measurability,
verifiability, exclusion of double counting, management of leakage
risks, and social and environmental safeguards are in place. Carbon
credits will be created only based on the results of emission
reductions or removals verified by an accredited independent
body.
The document separately regulates the monitoring, reporting, and
verification system. Emission reports will be verified by an
independent accredited verifier. Without a positive verification
opinion, ETS settlements will not be made, carbon credits will not
be issued, and other market mechanisms will not be applied.
The draft also envisages the preparation of a National
Adaptation Plan. The plan will identify climate risk assessments,
priority sectors and regions, adaptation measures, funding sources,
implementation mechanisms, and responsible institutions. Climate
risks will also be taken into account when developing public
investment programs.
The draft law also covers just transition issues.
The impact of carbon pricing mechanisms on employment, incomes,
and vulnerable social groups will be assessed, and measures will be
taken to support vocational training, retraining, diversification
of economic activity, social protection, and small and medium-sized
enterprises.
In addition, banks, insurance organizations, investment
companies, and other entities operating in the financial sector
will be required to identify, assess, and disclose climate risks.
Criteria such as energy efficiency, emission intensity, use of
low-carbon materials, waste reduction, and climate sustainability
will be taken into account in public procurement.
The draft also envisages the creation of a climate information
subsystem within the "Digital Ecology" information system to manage
emissions, carbon projects, carbon registry, climate finance, and
monitoring data on a single electronic platform. In addition,
transparency of information on climate policy will be ensured,
public hearings will be held, and their results will be presented
to the public.
The draft law also provides for administrative and criminal
liability for violation of obligations. Failure to submit emission
reports, providing false information, failure to comply with the
monitoring plan, failure to fulfill obligations under the ETS and
carbon tax, illegal issuance of carbon credits, and violation of
the rules of the National Carbon Registry will entail
administrative liability. If fraud, document falsification, market
manipulation, and other criminal acts are detected, the materials
will be sent to law enforcement agencies.
According to the document, the ETS, carbon tax, and monitoring
systems can be implemented in stages or on a pilot basis. During
the pilot phase, emission reporting and data submission obligations
will remain in force, and based on the results, a decision will be
made on the full implementation of the system or redefinition of
its parameters.
