The World Bank allocated $46.25 million to Uzbekistan for reducing emissions and accessing global carbon markets.

Representatives from Uzbekistan and the World Bank signed an agreement in Marrakech (Morocco) during the annual meetings of the World Bank Group and the International Monetary Fund. The agreement includes funding of $46.25 million for the project "Innovative Carbon Financing for Transforming Uzbekistan's Energy Sector" (iCRAFT).
This initiative, supported by the World Bank's Transformational Carbon Asset Fund (TCAF), marks the bank's first global effort to promote reforms in the energy sector.

Currently, Uzbekistan faces high energy intensity and greenhouse gas emissions. This is due to substantial subsidies in energy production and transmission, leading to low electricity and gas tariffs. As a result, energy companies struggle to generate sufficient revenue to cover production and delivery costs.

The combination of low tariffs and these conditions hinders the adoption of energy-efficient technologies and energy-saving methods in households and the private sector. It also limits utilities in providing high-quality services to their users. The authorities in Uzbekistan have begun reforming electricity tariffs to align them with production costs, in order to gradually rectify this situation.
The government plans to allocate some of the funds received from the iCRAFT project to protect vulnerable households from tariff adjustments. The initiative will support the implementation of the national program for transitioning to a "green" economy and other measures aimed at reforming the energy sector.

Tatyana Proskuryakova, the World Bank's Regional Director for Central Asia, praised Uzbekistan's commitment to energy sector reforms and the development of a "green" economy. She emphasized that the project represents the initial phase of a gradual phase-out of energy subsidies. This step is expected to bolster the country's economy while significantly reducing greenhouse gas emissions. The iCRAFT project is a landmark international initiative in Central Asia, financing emission reduction efforts through market mechanisms in line with the Paris Agreement. This international treaty aims to limit global temperature rise.
Under the project, efforts will be directed towards purchasing emissions through more efficient energy resource use and energy subsidy reforms by 2027. Additionally, the project will facilitate Uzbekistan's entry into international carbon markets through a pilot international "carbon credit" trading agreement, promoting the country's transition to a "green" economy.

Uzbekistan's Deputy Prime Minister and World Bank Group Manager Jamshid Kuchkarov expressed enthusiasm for the innovative project. He anticipates a potential reduction in carbon dioxide emissions of approximately 60 million tons.

The World Bank and TCAF actively assist developing countries in meeting their international commitments for emission reduction and adapting to the impacts of climate change. Uzbekistan's new project serves as an example for other World Bank member countries with similar interests and aspirations.