Master’s Student in Tax Law (English track), Baku State University
E-mail: [email protected]
UDC 347.73; 336.22
CARBON PRICING AND GREEN TAX INCENTIVES AS TOOLS FOR ECONOMIC
DIVERSIFICATION IN AZERBAIJAN: A POST-COP29 PERSPECTIVE
The global trend toward decarbonization has placed unprecedented pressure on fossil-fuel-dependent economies to reconstitute their fiscal and economic policies. Carbon pricing is recognized as one of the most powerful climate-related policy instruments to reduce emissions in a flexible manner [1]. For developing and transitional economies built around natural resource extraction, the global push for environmental taxation creates a fundamental tension: reconciling climate policy with the need for economic diversification. Azerbaijan provides a compelling example in this context. Oil and gas make up two-thirds of its GDP, ranking it among the top 10 countries most dependent on fossil fuels globally. Hydrocarbons account for 90% of export income and 60% of government revenue [2]. While the country’s development approach has resulted in noticeable prosperity, recent economic growth has mostly relied on the oil and gas industry. This reliance on fossil fuels has had environmental and social costs: pollution impacts Azerbaijan’s land, soil, and air, while progress in human capital development and other economic sectors has fallen behind [3]. The hosting of COP29 in Baku in November 2024 marked a significant milestone. Azerbaijan, often seen through the lens of its oil and gas wealth, is increasingly repositioning itself as an active participant in the global climate agenda, aligning its national development goals with climate mitigation efforts despite its hydrocarbon legacy [4].