Role of Natural Gas Consumption in the Reduction of CO2 Emissions: Case of Azerbaijan

Azerbaijan signed the Paris Agreement in 2016 and committed to cut greenhouse gas (GHG)
emissions by 35% in 2030. Meanwhile, natural gas has been a vital component in the total energy
mix of Azerbaijan economy and accounted for almost 65% of the total energy consumption. In the
overall electricity mix, natural gas-fired power plants generate 93% of the country’s electricity. Since
global energy consumption is responsible for 73% of human-caused greenhouse-gas emissions, and
CO2 makes up more than 74% of the total, this study investigates possible mitigation effects of the
natural gas consumption on CO2 emissions for Azerbaijan. Author employed several cointegration
methodologies, namely Bound testing Autoregressive Distributed Lag (ARDL) approach, Fully
Modified Ordinary Least Squares (FMOLS), Dynamic Ordinary Least Squares (DOLS), and Structural
Time Series model (STSM). Author of this paper found that when the share of natural gas increases 1
percent in the total energy mix, CO2 emission per capita decreases approximately 0.14 percent as a
result of the ARDL, FMOLS, and DOLS models. All three models provide cointegration between the
share of natural gas in the total energy mix and reduction in CO2 emissions.