How ‘world’s first oil town’ is wrestling with fossil fuel legacy

Just a few miles from the site of the next UN climate conference in Baku, Azerbaijan, is a district that for more than a century was known as Black City. Every house and factory was thickly stained with soot, from the oil that was extracted and refined here, by the shores of the Caspian Sea.

Baku was the world’s first oil town: pioneering wells were dug in the 1840s, followed by refineries from 1859. Alfred Nobel and his brothers came in that decade and established what became a major industry, contributing a sizeable portion of their fortune to establishing the Nobel prize. People take pride that oil produced here helped win the second world war, as the supplying Russia’s army fighting Adolf Hitler on the eastern front.

There are still oil wells in Baku, their piston pumps nodding in rhythm while the flares of refineries stand out clearly against the night-time skyline. Today, fossil fuels make up 90% of Azerbaijan’s exports: the petrostate pioneer is still one of the top 10 most oil- and gas-dependent economies in the world.

Gone, though, are the black-stained buildings that gave the city its nickname. In the past two decades, an intensive cleanup operation has turned central Baku into White City. Soviet-era blocks have been reclad in gleaming beige facades. So convincing is the 19th-century styling that it is hard to believe most of it is barely 10 years old – the only clues are on a few streets where the transformation has yet to be completed, and the neat new fronts contrast with a back view of flaking concrete.

Azerbaijan is hoping to effect the same transformation in the energy sector, first on its own, and then on the rest of the world’s oil-drenched economies. President Ilham Aliyev has declared his country “in the active phase of green transition”, with targets to generate 30% of electricity from renewable sources by 2030, up from about 7% today. The government is building vast solar farms in the plains near Baku, and has ambitious plans for an interconnector to export low-carbon power to Georgia, and then under the Black Sea to Romania and Hungary.

“We cannot deny the existence of the fossil fuel industry, because it is a major source of income for many countries. And it’s not something that can be abandoned overnight,” Yalchin Rafiyev, Azerbaijan’s lead negotiator at Cop29, told the Guardian.

“The most important thing is how the fossil fuel countries and companies perceive the real challenge related to the climate, and how do they act in a responsible manner?”

Azerbaijan is already making a shift – oil now accounts for a declining share of its exports. However, gas exports have more than made up for the shortfall, and vast investment is now turning an oil country into a gas giant. Azerbaijan plans to increase its gas output by a third in the next decade.

Aliyev has presented this as his contribution to saving Europe from Vladimir Putin’s aggression in nearby Ukraine, telling EU ministers this spring that it was a “gift from the gods” and that Azerbaijan had a “responsibility” to help Europe.

For an oil-producing country to host a Cop is not unusual. Last year’s host country, the United Arab Emirates, home to the world’s seventh largest gas reserves, raised many eyebrows by appointing Sultan Al Jaber, the chief executive of its national oil company, Adnoc, as Cop28 president.

Many other fossil fuel-producing countries have held the presidency: the UK in 2021, Qatar in 2012, Canada in 2005, and Brazil in 1992 when the UN framework convention on climate change was forged. Next year, Brazil will hold Cop30 in Belém in the Amazon. This is despite recently becoming a member of the oil cartel Opec+ and setting a target of increasing output from 3.7m barrels a day to 4.8m by 2028.

Laurie van den Burg, a public finance lead at the campaign group Oil Change International, said there was a “cognitive dissonance at the heart of international climate diplomacy” that was exemplified by the host nation. “One on the one hand, pledging to submit national climate plans in line with the 1.5C limit, while at the same time ramping up fossil fuel production,” she said. “Unless the Cop troika [UAE, Azerbaijan and Brazil] recognises that there is no such thing as 1.5C-aligned climate plans with more coal, oil and gas infrastructure, it risks making a mockery of the unprecedented mobilisation that led to the Cop28 decision to phase out fossil fuels.”

For the Azerbaijan government, there is no contradiction in being an oil and gas exporter while striving to limit global temperatures to 1.5C above pre-industrial levels. Nigar Arpadarai, who holds an important position in the Cop29 team as UN high-level champion, said: “I don’t think that oil-shaming is a good thing. Yes, we are an oil and gas country. This is our history. This is where we are coming from. But we are doing lots of things. We are committing and we have a strong drive towards a new paradigm.”

Progress on the climate crisis would be impossible without engaging oil and gas countries, Arpadarai added. “It’s not the right path, to isolate oil and gas countries. We need to have solidarity. The climate agenda is a global agenda. All countries together need to try to solve the problem,” she said.

If Azerbaijan is to shift away from fossil fuels, the wrench will be enormous. To walk around central Baku is to witness endless traffic jams, filling every lane of the large modern highways that traverse the capital, as well as the boulevards of the Black/White City. Occasionally, a small battered 1980s Lada will flit by, a passing reminder of Soviet days, now incongruous outside the many five-star hotels that will host oil executives and lobbyists when Cop comes to town. However, the vast majority of cars on the roads are recent models, shiny and expensive-looking, matching the gleaming apartment blocks.

Despite pockets of rural poverty, and the only recently concluded war with Armenia, this is a thriving economy, and the Aliyev administration – nominally a democracy, with elections and parliament, but in reality an autocracy with no real opposition and suppression of civil society – would like to keep it that way.

Mohamed Adow, the founding director of the thinktank Power Shift Africa, said Azerbaijan’s actions so far were not encouraging: “They are not engaging with the actual substance of addressing climate change.”

Though Azerbaijan is a classic petrostate, its government is conscious that its citizens are also suffering the effects of the climate crisis and the impacts of oil exploitation. As well as turning Baku black, the oil industry has polluted the Caspian Sea on which the city stands, while climate change has worsened water stress in the region. “The level of the Caspian Sea is going down – we can see it with our own eyes,” said Arpadarai.

Last month, Azerbaijan proposed a fund for developing countries stricken by climate breakdown with the hope other nations would also pay into it. The catch? It would be voluntary rather than a levy on fossil fuels many economists and experts have called for.

The key issue at Cop29 will be raising the finance needed for poorer countries to cut their emissions and cope with the impacts of extreme weather. This will require trillions of dollars a year, but so far the wealthy developed world has barely met its longstanding commitment of providing $100bn (£78bn) annually.

If Azerbaijan is to host a successful Cop, and genuinely transition away from fossil fuels, then what happens in Baku needs to be more than just whitewashing the facade of an oil-dependent nation. Fellow petrostates have sought to diversify through exploring other mineral wealth, expanding tourism, operating as a travel hub like UAE in Dubai, or using their oil wealth to buy up profitable assets overseas, like Saudi Arabia and Qatar. For Azerbaijan, quadrupling renewable energy production from a small base can only be the start. This petrostate’s whole economy, like the world’s, will need to be rebuilt.