Uzbekistan became the first nation to receive a payment from the World Bank for reducing carbon emissions through a policy crediting initiative. The Innovative Carbon Resource Application for Energy Transition (iCRAFT) project is designed to help Uzbekistan implement energy efficiency measures, phase out energy subsidies, and transition to cleaner energy sources. The World Bank’s Transformative Carbon Asset Facility (TCAF) awarded Uzbekistan a $7.5mn grant for reducing 500,000 tons of carbon emissions under the iCRAFT Project. These emission reductions have been independently verified.
Part of the project funds will be allocated by the Uzbek government to support vulnerable households affected by changes in energy tariffs. Additionally, these funds will contribute to Uzbekistan’s broader agenda for green transition and energy sector reform, providing multiple benefits from the iCRAFT project.
The Ministry of Economy and Finance and the Ministry of Energy are leading Uzbekistan’s energy sector reform efforts, focusing on promoting energy conservation and reducing carbon emissions. Jurabek Mirzamakhmudov, the Minister of Energy of Uzbekistan, highlighted Uzbekistan’s potential to become a regional leader in accessing international carbon markets: “By generating carbon credits through the iCRAFT Project’s innovative approach, Uzbekistan is well-positioned to accelerate its clean energy transition.”
The iCRAFT Project is investing in developing the necessary infrastructure, systems, processes, and standard documents to prepare the country for future similar initiatives with the support of other development partners and private investors.
The Project is also establishing a monitoring, reporting, and verification (MRV) system in line with Article 6 of the Paris Agreement, aiming to reduce global greenhouse gas emissions. It is pioneering a climate finance transaction to support Uzbekistan’s Nationally Determined Contribution (NDC) targets under the Paris Agreement and its clean energy transition.
The Project receives ongoing support from the Agency for Strategic Reforms, the Ministry of Investment, Industry, and Trade, and the Agency for Hydrometeorological Services (Uzhydromet).
This payment is the first of several expected under the Emissions Reduction Payment Agreement (ERPA) between the government of Uzbekistan and the World Bank as part of the iCRAFT Project. Uzbekistan could receive up to $20mn in grants for verified emission reductions or carbon credits generated through its energy subsidy reforms.
Uzbekistan aims to reduce 60mn tons of CO2 through the Project, with iCRAFT set to purchase approximately 2.5mn tons of CO2. The country will have the opportunity to sell the remaining carbon credits on international carbon markets, using the systems and processes established by the iCRAFT Project.
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