Armenia Country Climate and Development Report

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Table of Contents

• Why climate mitigation and adaptation matter for Armenia 4
• Armenias economy is fueled by imported natural gas. 4
• Decarbonization would also improve air quality and reverse severe land and forest degradation. 4
• Armenias pre-existing water stress underlines the urgency of investments in climate adaptation. 5
• Investing in climate adaptation also brings benefits in terms of food security and avoided increases in poverty. 5
• Smart climate action can have a positive effect on growth. 6
• Climate action presents opportunities for Armenia for greener more productive and more sustainable growth driven by a more innovative private sector. 6
• Achieving these opportunities will require investments and a concerted package of policy actions. 6
• Policy priority 1 mitigation 7
• To achieve its 2050 emission target of 2.07 tCO2e per capita Armenia needs to raise its near-term ambition and rapidly accelerate policy implementation. 7
• Armenia will need to invest 3 billion in the electricity sector to transition from a natural gas-based to a solar-powered economy. 7
• The transition entails risks of stranded assets in gas distribution and gas-fired power generation. 8
• Investing an additional 200 million to electrify road transport and expand public transport could substantially reduce transport sector emissions and urban air pollution. 8
• Investing an incremental 2.8 billion to scale up energy efficiency and electrification programs in the industry building and digital sectors could significantly reduce energy demand by 2040. 8
• Policy priority 2 adaptation 9
• Investing around 1 billion in water efficiency storage and water resource management would support sustainability and growth in the agriculture sector. 9
• Policies and institutional reforms would strengthen water resource management and boost adaptation. 9
• Policy priority 3 enabling reforms and institutions 10
• A resilient low-carbon transition will require 8 billion in additional adaptation and mitigation investments compared to the REF scenario by 2060 representing 2.5 percent of GDP per year on average. 10
• Building on the countrys strong track record of attracting private capital in the energy sector Armenia could prioritize reforms to mobilize private capital for climate mitigation. 11
• Armenias private sector also has a triple role to play in supporting adaptation by providing finance adapting its own operations and offering goods and services to help others adapt. 11
• Getting the prices right and protecting vulnerable households 12
• To afford the energy transition lower-income households will need government support especially for transport and heating services. 12
• Boosting private sector innovation and investments 12
• Government reforms can help the private sector adapt and innovate in response to the global sustainability shift which is key to a successful transition. 12
• Climate-focused PPPs can be used to leverage private investment in low-carbon and resilient infrastructure. 12
• International debt financing will be needed to enable private investment at scale and this has implications for project development and risk allocations. 13
• Strengthening the institutional and policy environment 13
• To deliver its climate commitments Armenia needs to undertake a series of institutional and policy reforms. 13
• Transitioning to a green economy requires consistency and coordination across sectors with the Ministry of Finance and Central Bank playing a central role. 13
• Integrating a sector-by-sector understanding of climate risk adaptation plans and investment needs into the budget process will help accelerate adaptation investments. 13
• Table S2 summarizes priority actions to remove key bottlenecks that slow down Armenias resilient low-carbon transition. 13