An agreement was signed with World Bank representatives on the sidelines of the annual meeting of the World Bank Group and the International Monetary Fund in Marrakech, Morocco

These funds will help implement a project supporting the country’s clean energy transition and energy efficiency.

The iCRAFT Project, funded by the World Bank’s Transformative Carbon Asset Facility (TCAF), is the Bank’s first initiative globally to support policy reforms through payments for emission reductions. It expands the focus of carbon finance operations to fundamental reform measures that will help Uzbekistan achieve its international climate commitments and improve the efficient use of energy resources. Thus, the project will serve as a model for similar future operations across the globe.

Uzbekistan is among the countries with the highest energy intensity. The result of this practice is not high tariffs for electricity and gas. Thus, the revenues received by energy enterprises from supplied services are insufficient to cover the costs of production and delivery of the respective energy carriers to consumers.

In turn, these low tariffs do not encourage energy conservation and the introduction of energy efficient technologies in households and the private sector. They also limit the ability of energy companies to provide quality services to users. The authorities have initiated reforms that will result in a gradual increase of energy tariffs to bring them in line with production costs.

The government has committed to use a portion of the project funds to protect vulnerable households from energy tariff adjustments. The project funds will also further finance the national green transition agenda and broader energy sector reform initiatives.

The iCRAFT Project, is the first climate and carbon finance transaction in Central Asia, under the Paris Agreement, an international treaty that aims to limit global temperature increases by lowering global greenhouse gas emissions. It will purchase – annually until 2027 – emission reductions achieved through efficient use of energy resources and incentivized by energy subsidy reforms.

The project will also help Uzbekistan access international carbon markets through the pilot international carbon trade transaction, providing further incentives for the country to pursue its green transition.

The World Bank and TCAF assist developing countries in meeting their international commitments to reduce emissions and adapt to the effects of climate change. The project implemented in Uzbekistan will potentially serve as a proof-of-concept for other member countries of the World Bank in the future.

The governments of Canada, Germany, Norway, Spain, Sweden, Switzerland, and the United Kingdom, as well as the Climate Cent Foundation (Switzerland), provided the necessary financial assistance for the activities of TCAF.