The Effect of Shifting to Renewables on Social Welfare in Azerbaijan in the Context of Sustainable Economic Development

The transition of the energy sector in Azerbaijan from oil and gas to renewable energy has significant implications for social welfare and sustainable development. Traditionally, oil and gas revenues have underpinned Azerbaijan’s economy and public budgets, improving living standards and reducing poverty. However, declining hydrocarbon prospects and climate commitments have prompted new policies: Azerbaijan’s national priorities emphasize green growth and clean energy (e.g., increasing renewable share to 30% by 2030). This article synthesizes recent post-2020 studies on how the energy transition affects Azerbaijan’s social welfare (income, employment, health, equity). The results of this study show that a managed energy transition can enhance Azerbaijan’s social welfare and sustainable development. Renewable energy projects create jobs, improve health, and diversify the economy, supporting long-term well-being. For example, wind and solar projects employ far more workers per unit of capacity than oil and gas, which can alleviate unemployment and support rural communities. Cleaner energy also lowers health costs and poverty by reducing greenhouse gases and energy bills. However, the transition poses challenges: weak legal frameworks and skill gaps in renewables threaten to slow gains. The key to success is aligning transition policies with social goals: training workers for green industries, ensuring energy affordability, and using oil revenues wisely (e.g., funding education, infrastructure, and clean tech). Thus, strategic investments in renewable energy – by reducing energy subsidy expenditures, increasing natural gas export capacity, diversifying tax revenues, and enhancing public financial sustainability – strengthen Azerbaijan’s economic resilience. Further progress will depend on encouraging public-private partnerships and establishing robust financial and legal frameworks. Our review indicates that if Azerbaijan follows through on its renewable goals and green growth policies, it can mitigate the “resource curse” risk and achieve sustainable economic development.