Armenia's economy is fueled by imported natural gas. The country's power, heating, and transport sectors rely heavily on natural gas, and the energy intensity of Armenia's gross domestic product (GDP) is higher than the global average. Natural gas represents up to 63 percent of Armenia's total energy supply, one of the world's largest shares, and all of it is imported, mostly from the Russian Federation, creating a high vulnerability to external shocks. The high share of natural gas puts Armenia below the global average in terms of greenhouse gas (GHG) emissions, at 3.8 tonnes of carbon dioxide equivalent (tCO2e) per capita in 2019, driven by the energy sector (two third of emissions) followed by theagriculture sector. Decarbonization provides energy security at zero or even negative costs, when considering the full economic costs of fossil fuels, and acts as an insurance against the uncertainty around future gas prices. Energy security risks provide a clear incentive for Armenia to develop domestic renewable resources. As gas has historically been imported at relatively low costs (the current price of $180 per 1,000 standard cubic meters is substantially below international gas price benchmarks), an increase in natural gas prices to meet international benchmarks would immediately make the low-carbon transition a no-regret decision. A scenario in which Armenia diversifies its gas imports and pays international gas prices would lead to a higher energy system cost than a decarbonization scenario in which Armenia transitions from a gas-powered to a solar-powered economy and reduces emissions to its target of 2.07 tCO2e per capita by 2050.
Authors
- Disclosure Date
- 2024/11/08
- Disclosure Status
- Disclosed
- Doc Name
- Armenia - Country Climate and Development Report
- Pages
- 89
- Product Line
- Advisory Services & Analytics
- Published in
- United States of America
- Rel Proj ID
- AM-Armenia Country Climate And Development Report -- P180764
- Unit Owning
- ECA Regional Director (SCADR)
- Version Type
- Revised
- Volume No
- 1
Table of Contents
- Table of Contents 3
- Acknowledgements 4
- Acronyms and Abbreviations 5
- Executive Summary 7
- Why climate mitigation and adaptation matter for Armenia 7
- MAIN MESSAGES 7
- Armenia Transformation Strategy 2050 9
- Getting the prices right and protecting vulnerable households 15
- Boosting private sector innovation and investments 15
- Strengthening the institutional and policy environment 16
- 1. Development and Climate in Armenia 19
- 1.1. Development context a need for new growth drivers to reduce 19
- MAIN MESSAGES 19
- Armenia Transformation Strategy 2050 21
- 1.2. Climate change context impacts on natural capital growth and poverty 21
- 1.3. Climate policy context risks and opportunities from the global energy 25
- Box 1 Air pollution a critical concern in Armenia 27
- 2. Climate commitments policies and capacities 29
- 2.1. Armenias major commitments and policies on climate change 29
- MAIN MESSAGES 29
- 2.2. Institutional framework for climate change action 31
- 2.2.1. Institutional capacity and coordination 32
- 2.2.2. Sectoral integration of climate agenda 32
- 2.2.3. Public financing for climate 33
- 2.3. Engaging the private sector 34
- 2.4. Leveraging citizen engagement to mobilize sustained climate action 35
- 3. Policies and investments to address climate and 36
- 3.1. Net zero pathways for the energy system 36
- System costs CAPEX investment System costs annual investment 36
- MAIN MESSAGES 36
- Box 2 Scenarios for the quantitative energy system analysis 36
- 3.1.1. Armenia is on track to achieve its 2030 NDC target but miss the 2050 per-capita 37
- 3.1.2. Additional mitigation efforts are necessary to achieve the 2050 NDC target under 39
- 3.1.3. Full decarbonization by 2060 requires further accelerating emissions reductions 39
- Box 3 Eliminating fugitive emissions from the natural gas grid to enable the use of low-carbon gases under the NZS 41
- 3.1.4. Energy-security and other co-benefits of decarbonization 45
- 3.1.5. Managing the social and financial risks of the transition 46
- Box 4 Phasing out traditional firewood use for heating in Armenia 47
- 3.2. Pathways for adaptation 49
- 3.2.1. Investing in water conservation and efficiency CSA practices land restoration 49
- 3.2.2. Policy and institutional reforms to promote adaptation 53
- 3.3. An integrated resilient low-carbon development pathway 56
- 4. Implications for poverty inclusion and the 59
- 4.1. The macroeconomic impacts of adaptation 59
- MAIN MESSAGES 59
- 4.1.1. Macroeconomic benefits of adaptation investments 60
- 4.1.2. Managing fiscal and financial sector risks from climate change 61
- 4.2. The macroeconomic implications of decarbonization 62
- Box 5 Macroeconomic modeling and scenarios impact on economic growth financial stability and debt sustainability 64
- 4.3. Financing the transition 65
- 4.3.1. Fiscal policies with a focus on carbon pricing 65
- 4.3.2. Policies to catalyze private investment 67
- 4.4. Inclusive transition 70
- 4.4.1. Impacts of climate change and decarbonization on poverty 70
- 4.4.2. Reducing the poverty and distributional implications of physical and transition impacts 72
- 4.4.3. Transition impacts on jobs and workers 72
- 4.5. Aligning climate and development policies 73
- 5. From assessment to action 75
- References 84
- Appendix Leveraging trade and trade policy for the green transition 87
