Opinion | Jack of all trades, master of none: Azerbaijan seeks renewables to sustain the status quo

Increasing investments in renewables may seem like a positive change, battling the climate crisis and diversifying Azerbaijan’s oil-dependent economy. Yet, without a decrease in fossil fuel investments and renewables mostly exported, there may not be a change after all. 

Azerbaijan, an authoritarian petro-state, is hosting COP29, the global conference to grapple with the climate crisis. The challenge calls for the phase-out of fossil fuels and the tripling (at least) of renewables by 2030. Yet, oil and gas production is on the rise, with renewable energy growth slated for export rather than the phase-down or replacement of fossil fuels so as not to disturb the status quo of rentier capitalism.

Earlier this year, Azerbaijan’s climate action was assessed as ‘critically insufficient’, with plans to increase fossil fuel production, scrapping its 2030 emissions target. 

While current renewable energy plans include 7 GW of green energy capacity by 2030 — a significant increase from the previous target of 4 GW by 2027 set two years ago — 71% of it (5 GW) and  80% of the previously planned capacity (3.2 GW) have been designated for export. Despite the seemingly more ambitious renewable energy plans, the overwhelming majority of the gigawatts was and is planned for export, with the negative social and environmental effects associated with renewable energy, including land use and biodiversity loss, felt domestically, and the primary product and benefit of green energy enjoyed overseas.

In addition, there are other international partnerships in development for the export of green energy and hydrogen.

In September, Azerbaijan, Romania, Hungary, and Georgia launched a joint venture to build a power cable at the bottom of the Black Sea to export green energy to Europe. Previously, in May, Azerbaijan signed a preliminary deal with Kazakhstan and Uzbekistan to merge energy systems to export green energy to Europe through another undersea cable at the bottom of the Caspian Sea. In 2022, Azerbaijan also signed an agreement with Australia’s Fortescue Future Industries to develop 12 GW of wind and solar, and green hydrogen energy for export.

Meanwhile, the oil and gas sector is metastasising. Azerbaijan plans to double gas exports to the EU by developing a new field in the Caspian Sea. The nation’s economy is symptomatic of the Dutch disease, with the oil and gas sector accounting for 51% of revenues and 90% of exports with disproportionately little employment creation.  

Oil and gas dependence forms political and socioeconomic factors, such as reliance on oil and gas revenue over direct citizen taxation and increased patronage networks, which correlate with authoritarianism.

Similar to oil and gas, renewable energy and green hydrogen can generate substantial rent based on land with relatively little costs and labour input. As oil and gas resources are increasingly finite, renewable energy poses an alternative pathway to maintain the political economy of extraction and rentier capitalism. Current plans for green energy growth are likely to feed into the resource curse, replacing oil only in textbook definitions of the phenomenon.

If the green hydrogen and green energy export projects are realised, renewables will diversify revenue streams on paper with little positive to negative effect on decarbonisation, yet the mechanisms of rentier capitalism — extraction and export — will remain, reinforcing the existing political and economic systems.

Why is Azerbaijan investing in both oil and gas and renewable energy sectors? Why are renewables being developed for export and not domestic consumption? 

For one, Azerbaijan is not immune to growthism — the obsession with endless economic growth for the sake of growth, celebrated by GDP growth percentages, notwithstanding social and environmental needs or boundaries. For instance, there is a business opportunity to build an undersea cable to export electricity. As long as there is demand and projected profit, the project will proceed in development despite the less invasive and more efficient options available to achieve the end goal of energy security and decarbonisation. Growthism is akin to cancer, with no tissue immune, be it oil and gas or renewables.

Moreover, it is a foolproof mechanism, with national institutions having 30 years of training in renting national resources for export. Domestic decarbonisation is a formidable task requiring immense political will and institutional capacity. The Soviet legacy of weak government institutions is most suited for the myopic implementation of the set policies (i.e., GDP growth). Integrating renewables into the existing energy sector requires institutional agency, flexibility, and collaboration — the three qualities inhibited by Azerbaijan’s oil-dependent economy.

While the exported energy may contribute to reduced emissions in consumer countries, given the accessibility of renewable energy, direct production and consumption in the area seems more prudent, economically and environmentally.

For one, undersea cables are likely to experience electricity losses during transportation, as well as greater economic and environmental costs. Green hydrogen production requires an immense amount of wind and solar energy,  better used to directly power homes, and vast volumes of water, more needed by local communities. Hydrogen is a potent leak-prone gas better used near production sites and is efficient only in industries with no other green alternative such as steel, cement, and plane or ship fuel production. Extraction of resources in one country and benefit by another is a new face to extractivist colonialism, with the repercussions nestled in the former.

Renewable energy growth in Azerbaijan will bring revenue and GDP growth, sustaining the existing political economy of extractive and rentier capitalism, but not decarbonisation. Domestic decarbonisation requires a substantial change in the political economy, which is unlikely without a global shift from growthism and neo-colonial greenwashing to economic practices respecting planetary boundaries and prioritising human, social, and environmental needs.

As long as the law of supply and demand holds, the invisible hand of foreign investments supported by no domestic barriers to supply and no foreign limits on demand will reinforce rentier capitalism. As a result, renewables are likely to repeat the fate of fossil fuels in the region, with no significant change to the growth in greenhouse gas emissions.