Uzbekistan Receives Payment for Carbon Emission Reductions through World Bank's iCRAFT Project

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.

Uzbekistan has become the first country globally to receive a payment from the World Bank for reducing carbon emissions under a policy crediting program. This groundbreaking initiative, the Innovative Carbon Resource Application for Energy Transition (iCRAFT), supports 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 reductions were independently verified.

Marco Mantovanelli, World Bank Country Manager for Uzbekistan, praised the country’s achievement: “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 Uzbek government has committed to using a portion of the project funds to support vulnerable households impacted by changes in energy tariffs. Additionally, these funds will bolster the country’s green transition and energy sector reforms, yielding multiple benefits from the iCRAFT project.

Jamshid Kuchkarov, Deputy Prime Minister and Minister of Economy and Finance of Uzbekistan, emphasized the importance of this climate finance transaction: “The first payment under the iCRAFT Project marks a key step towards reducing energy subsidies and achieving cost recovery in the energy sector. It also supports our broader efforts to foster economic growth and reduce poverty through a green economy.”

Uzbekistan’s energy sector reforms, led by the Ministry of Economy and Finance and the Ministry of Energy, focus on energy conservation and carbon reduction. Jurabek Mirzamakhmudov, Minister of Energy, stated, “By generating carbon credits through the iCRAFT Project’s innovative approach, Uzbekistan is set to accelerate its clean energy transition and position itself as a regional leader in accessing international carbon markets.”

The iCRAFT Project is investing in infrastructure, systems, processes, and standard documents to prepare the country for future initiatives with support from development partners and private investors. It also includes setting up a monitoring, reporting, and verification (MRV) system in line with Article 6 of the Paris Agreement, which aims to curb global temperature rise by reducing greenhouse gas emissions. This pioneering climate finance transaction supports Uzbekistan’s Nationally Determined Contribution (NDC) targets under the Paris Agreement and its clean energy transition.

The project benefits from ongoing support from the Agency for Strategic Reforms, the Ministry of Investment, Industry, and Trade, and the Agency for Hydrometeorological Services (Uzhydromet).

This payment is the first of several anticipated under the Emissions Reduction Payment Agreement (ERPA) between Uzbekistan and the World Bank as part of the iCRAFT Project. 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 the project, with iCRAFT set to purchase approximately 2.5 million tons of CO2. The country will have the opportunity to sell the remaining carbon credits on international carbon markets, utilizing the systems and processes established by the iCRAFT Project.