World Bank Report Urges Armenia to Prioritize Climate Action for Energy Security

Armenia is particularly vulnerable to climate-driven risks like floods, droughts, and landslides, which are expected to escalate without intervention.

The World Bank Group’s latest Armenia Country Climate and Development Report (CCDR) calls for immediate, targeted climate action to enhance Armenia's energy security, reduce pollution, and set a course for sustainable growth. With the right investments, the report suggests Armenia could secure a future less reliant on fossil fuels, and more resilient to the adverse effects of climate change while opening avenues for private-sector investment.

Armenia is particularly vulnerable to climate-driven risks like floods, droughts, and landslides, which are expected to escalate without intervention. These environmental stresses are not only a hazard to public safety but also threaten key economic sectors. The CCDR report warns that Armenia’s economy, highly dependent on fossil fuels, has been slow to transition to cleaner energy sources, resulting in severe pollution and public health issues. The cost of pollution is estimated to impact Armenia’s GDP by 10.6 percent annually, affecting quality of life and life expectancy.

Without climate adaptation measures, Armenia’s economy could contract by up to 3% by 2060, with poverty potentially rising by 2.7 percentage points by 2030. On the other hand, climate-resilient investments could expand the economy by 0.5 to 1% each year. These investments, the CCDR highlights, should focus on decarbonizing the energy sector and addressing Armenia’s severe water stress, especially in critical areas like the Ararat Valley and Lake Sevan, which are vital for agriculture, hydropower, and drinking water.

Over $8 billion in investment is needed through 2060, according to the report, to make Armenia resilient to climate shocks. This funding could largely be mobilized by private investments, especially through climate-focused public-private partnerships (PPPs), with the right policy framework in place. According to Ivana Fernandes Duarte of the International Finance Corporation, “private investment in solar energy, storage, critical infrastructure, and agriculture resilience could be instrumental in accelerating Armenia’s sustainable transition.”

Key Climate Actions for Armenia’s Future

The CCDR outlines two priority areas to help Armenia secure long-term growth and resilience:

Decarbonizing the Energy Sector

Reducing Armenia’s heavy reliance on imported natural gas—currently 63% of the country’s energy—requires scaling up renewable energy investments. The report calls for accelerated development of solar and wind capacity, power grid upgrades, and investments in energy-efficient buildings. Electrifying road transport and heating, and expanding the use of renewable sources are seen as essential to lowering greenhouse gas (GHG) emissions and ensuring energy independence. With over $6 billion needed for these transformations, the report points to a critical role for private sector involvement.

Enhancing Water and Agriculture Sustainability

Armenia’s agriculture sector, employing one-quarter of the workforce, is highly dependent on stable water supplies, which are at risk due to climate change and upstream diversions in neighboring countries. The CCDR recommends improving water efficiency and infrastructure, adopting climate-smart agricultural practices, and implementing early warning systems to mitigate agricultural loss. Achieving water security and supporting sustainable agriculture will require about $2 billion in investments, creating a more stable future for Armenia’s farmers and food supply.

Essential Policy Reforms for Effective Climate Action

The World Bank report emphasizes that, alongside investments, Armenia must pursue critical fiscal and institutional reforms to support climate goals:

Carbon Pricing and Fiscal Reforms: Introducing a carbon tax could generate significant revenue to support climate initiatives while cushioning vulnerable populations from energy price hikes. The revenue could subsidize energy transition investments and provide financial support to communities most impacted by climate change and rising costs.

Mobilizing Private Capital through Climate PPPs: By fostering climate-focused PPPs in sectors like solar energy, transport, and water management, Armenia could attract more private investment and share the burden of climate adaptation costs. Armenia’s strong track record in energy sector PPPs positions it well to scale up such efforts across other essential sectors, according to the report.

The CCDR aims to guide policymakers, the private sector, and citizens on Armenia’s path toward sustainable development. By prioritizing climate action, Armenia could transform its economic model, reduce its vulnerability to climate shocks, and improve public health and welfare for future generations. The report also highlights the need for global cooperation and funding to support Armenia’s ambitious climate goals, with the World Bank offering support to secure the necessary funding and expertise for impactful climate action.