Uzbekistan has become the first country to receive a payment from the World Bank for reducing carbon emissions through a policy crediting program. The Innovative Carbon Resource Application for Energy Transition (iCRAFT) project was designed to support Uzbekistan in implementing energy efficiency measures, phasing out energy subsidies, and transitioning to cleaner energy sources.
The World Bank’s Transformative Carbon Asset Facility (TCAF) awarded Uzbekistan a $7.5 million grant for successfully cutting 500,000 tons of carbon emissions under the iCRAFT Project. These emission reductions were independently verified.
Marco Mantovanelli, the World Bank Country Manager for Uzbekistan, stated: “This initiative is the world’s first to leverage climate finance in support of policy reform. The iCRAFT project aims to transition from individual transactions to program-level carbon trade interventions. We are eager to see how this pilot can set a precedent for reforms in other sectors in Uzbekistan and for other countries to follow its example.”
The government of Uzbekistan has pledged to allocate part of the project funds to assist vulnerable households impacted by changes in energy tariffs. Additionally, these funds will support the country’s broader agenda for green transition and energy sector reform.
Jamshid Kuchkarov, Deputy Prime Minister and Minister of Economy and Finance of Uzbekistan, emphasized: “The first payment transferred under the iCRAFT Project marks a key step for Uzbekistan towards reducing energy subsidies and achieving cost recovery in the energy sector. It also contributes to the government’s broader efforts for a green economy to foster economic growth and reduce poverty.”
The Ministry of Economy and Finance and the Ministry of Energy are leading Uzbekistan’s energy sector reform that contributes to energy conservation and carbon reduction. Jurabek Mirzamakhmudov, Minister of Energy of Uzbekistan, remarked: “By generating carbon credits through the iCRAFT Project’s innovative approach, Uzbekistan is poised to further accelerate its clean energy transition and position itself as a regional leader in accessing international carbon markets.”
The iCRAFT Project is investing in developing appropriate infrastructure, systems, processes, and standard documents which will prepare the country to roll out similar initiatives with future support from other development partners and private investors.
The Project is setting up a monitoring, reporting, and verification (MRV) system aligned with Article 6 of the Paris Agreement. It also pioneers a climate finance transaction supporting Uzbekistan’s Nationally Determined Contribution (NDC) targets under the Paris Agreement.
Support comes from several agencies including the Agency for Strategic Reforms, Ministry of Investment, Industry, and Trade, and Uzhydromet.
This payment is one of several anticipated under an Emissions Reduction Payment Agreement (ERPA) between Uzbekistan's government and the World Bank as part of iCRAFT. Under this agreement, Uzbekistan could receive up to $20 million in grants for verified emission reductions or carbon credits generated through its energy subsidy reforms.
Uzbekistan aims to reduce 60 million tons of CO2 through iCRAFT while purchasing approximately 2.5 million tons of CO2. The remaining carbon credits may be sold on international markets using systems established by iCRAFT.
About TCAF:
The Transformative Carbon Asset Facility (TCAF) supports developing countries' implementation of their NDCs by creating innovative carbon methodologies that attribute emissions reductions beyond project-by-project mitigation activities. Funded by multiple governments including Canada, Germany, Norway among others as well as Climate Cent Foundation (Switzerland), TCAF combines capacity building with results-based climate finance (RBCF) enabling private sector investments in low-carbon technologies.