The World Economic Forum has published its latest report on the Energy Transition Index (ETI). Azerbaijan ranks 44th in the index, which is the highest result among countries of the Commonwealth of Independent States (CIS). Compared to the previous report, Azerbaijan has improved its position by 13 places. The report also notes that, compared to 2015, Azerbaijan has achieved an overall increase of 2 percent. The country’s overall ETI score stands at 58.1 percent, which is higher than the global ETI average for 2020 (55.1 percent).

For comparison, the corresponding ETI scores are 52.4 percent in Moldova, 50.5 percent in Russia, 49.8 percent in Tajikistan, 48.3 percent in Kazakhstan, 43.3 percent in Ukraine, and 42.7 percent in Kyrgyzstan. Based on the index results, Azerbaijan has also outperformed energy-rich countries such as Qatar, Egypt, Jordan, Saudi Arabia, Tunisia, Kuwait, Iran, United Arab Emirates, and Venezuela.

It should be noted that the ETI is constructed on the basis of two main sub-indices: the overall performance of energy systems and readiness for the energy transition.

According to Ayaz Museyibov, financial analyst at the Center for Analysis of Economic Reforms and Communication (CAERC), the report evaluates key criteria for building safe, sustainable, accessible, and inclusive energy systems for future generations and envisages a transition to renewable and alternative energy systems.

In the new World Economic Forum report, countries’ energy systems are assessed across 40 indicators on a scale from 0 to 100 percent. The report covers 115 countries, representing more than 90 percent of the world’s population, 93 percent of global energy supply, and over 98 percent of nominal global GDP. The index is based on data from 20 internationally recognized and reputable data providers.

Ayaz Museyibov notes that, under the performance assessment sub-index, achievements are evaluated across three main dimensions:

• economic development and growth,
• energy access and security,
• environmental sustainability.

Within each of these dimensions, numerous indicators—such as the competitiveness of the energy industry, its contribution to GDP, air pollution, per capita carbon emissions, the quality and security of energy supply, and access to energy—are assessed with equal weight. In terms of overall energy system performance, Azerbaijan achieved a score of 67 out of 100, placing it among the top 30 countries in the report.

The readiness for energy transition sub-index of the ETI is formed across six key dimensions:

• capital and investment,
• regulation and political commitment,
• institutions and governance,
• infrastructure and an innovative business environment,
• human capital,
• energy system structure.

These dimensions comprise numerous sub-indicators, including access to capital resources in the energy sector, commitment to international obligations, transparency and political stability, the rule of law, stable financing, trade logistics, transport infrastructure, an innovative business environment, quality of education, career opportunities in renewable energy sectors, and dependence on fuel resources. All of these are used with equal weight in country assessments. Under this sub-index, Azerbaijan scored 49 out of 100.

Overall, one notable finding of the report is that oil-importing countries outperform oil-exporting countries across a number of parameters, primarily due to factors such as environmental sustainability, capital and investment in new energy infrastructure, and commitment to energy transition processes. The main reason for this trend is domestic pressure in energy-importing countries to prioritize renewable energy resources. In this context, although resource-exporting countries generally score lower on this sub-index, Azerbaijan performs better than the major oil-exporting countries of the Middle East and also holds a leading position within the CIS.

The report also highlights that global demand for energy systems has increased significantly in recent years. Compared to 2000, while economic growth (in GDP terms) has reached 60 percent, global energy demand has increased by 40 percent. For this reason, establishing accessible and sustainable energy systems under equal conditions for all has become critically important. Especially in the context of the coronavirus pandemic, economic, financial, regulatory, and infrastructural resilience and stability are considered essential prerequisites for transitioning to efficient energy systems.

Current trends demonstrate a direct reinforcing link between the transition to efficient energy systems and economic development: the energy transition is a driver of economic growth, just as sustainable economic development plays a vital role in advancing the energy transition. As a parameter of the transition to new energy systems, energy security is of particular importance, especially given that natural gas—unlike oil—is distributed across a limited geographical area and has a less adequate value chain. From this perspective, the global shift toward new energy systems is considered highly significant.

As spending on renewable energy increases, the value of energy generated from these sources rises substantially. Nevertheless, the report recommends that countries focus on environmental sustainability, regulatory policies, and investments in technology and finance. At the 2020 World Economic Forum, stakeholders from different regions of the world also emphasized the importance of achieving sustainable economic development. In this context, although Azerbaijan’s main source of economic financing is linked to the exploitation of hydrocarbon resources, the country joined the global initiative under the United Nations Framework Convention on Climate Change related to the Paris Agreement in 2016. Overall, through the successful steps taken in this direction, Azerbaijan has demonstrated that the development of new renewable energy systems, environmental protection, and achieving sustainable development are national priorities.