Amid a rapidly changing energy landscape and mounting environmental pressures, Armenia faces both an urgent challenge and an opportunity to reshape its transport system. As it seeks to balance the twin goals of enhanced energy security and reduced dependence on imported fossil fuels, Armenia has made the transition to sustainable transport a top priority.

This chapter lays out a forward-looking framework designed to accelerate Armenia’s shift to an efficient, low-carbon and resilient transport system. Drawing on international best practices, the recommendations focus on three interconnected priorities: electrifying the road transport fleet, boosting overall transport system efficiency and expanding the use of fossil-free fuels. These objectives support a broad transformation, aimed not only at curbing greenhouse gas emissions in Armenia, but also at improving economic competitiveness and quality of life.

To speed the transition, Armenia’s transport governance must evolve. This chapter outlines key reforms, including greater transparency and the creation of dedicated institutions to support long-term strategic planning.

Accelerating sustainable transport requires targeted investments in modern infrastructure – from freight corridors that support multimodal transport to an expanded, reliable network of charging stations. It also calls for rethinking of regulatory frameworks, with incentives for speeding the shift to electric mobility and stricter measures to limit the impact of internal combustion engines.

This chapter lays out a strategic blueprint, examining a range of policy options, technological upgrades and financing mechanisms. The objective is clear: to help Armenia transition quickly and decisively to a transport system that meets modern standards of safety and efficiency while supporting sustainable, innovation-driven growth.

Armenia faces several institutional hurdles that complicate efforts to advance sustainable transport governance. While the 2019 merger of the former Ministry of Energy Infrastructures with the Ministry of Transport into the Ministry of Territorial Administration and Infrastructure (MTAI) has helped improve co-ordination on transport-related issues, high staff turnover threatens institutional memory and disrupts continuity. A lack of strong monitoring systems also makes it difficult to track policy implementation and measure progress.

Co-ordination with the newly established Climate Policy Department within the Ministry of Environment remains limited – particularly on issues that indirectly affect climate reporting, such as transport infrastructure development. Stronger inter-ministerial co-operation will be needed to ensure climate and transport policy are aligned.

Armenia does not yet have a dedicated entity responsible for developing and implementing energy policy. Under the Comprehensive and Enhanced Partnership Agreement (CEPA) with the European Union, Armenia is preparing to adopt a new Renewable Energy and Energy Efficiency Law, which will authorise the creation of an agency to carry out its mandates. It is still unclear whether this task will fall to a new institution or to the existing Renewable Energy and Energy Efficiency Fund. Either way, the agency will be central to advancing Armenia’s decarbonisation agenda.

One major hurdle to sustainable transport planning is the lack of sufficient and transparent data. Armenia’s modelling capabilities are heavily reliant on financial and technical support from international donors, which raises concerns about long-term sustainability as wells as national capacity and ownership of policy tools.

The IEA has already highlighted persistent challenges in the quality of energy end- use data. In the transport sector, key transport data – such as the total vehicle numbers and traffic flows – is not publicly available. Existing datasets cover only commercial vehicles, leaving information on private vehicles inaccessible to the public, other agencies and researchers. This lack of transparency hampers evidence-based policymaking and complicates efforts to track emissions and plan infrastructure investments.

Increasing transparency is vital for a successful transition to sustainable transport in Armenia. The absence of accessible, reliable data hinders decision-making at both national and local levels. Various historical and institutional factors have fostered a reluctance to share data on private vehicles and general traffic flows. Yet other countries facing similarly complex geopolitical circumstances have succeeded in make such data public.

This report recommends policies that ensure relevant transport data is freely available and accessible. Open data initiatives can foster independent research, spur innovation and enhance accountability in transport planning.

The Statistical Committee of the Republic of Armenia should be tasked with developing transparent methods for collecting, validating and disseminating all energy and transport data relevant to sustainable transport policy. This process should include a broad discussion of what counts as “relevant” data, even when some information remains difficult to collect.

Improving data collection, statistics and scenario work in Armenia is essential for developing evidence-based sustainable transport policies.

Our short-term recommendations include establishing a centralised digital platform that aggregates data from various sources such as government agencies (e.g. the Ministry of Territorial Administration and Infrastructure (MTAI) and the Ministry of Internal Affairs), local municipalities and private sector stakeholders such as EV charging station and public transport operators. A unified data hub would simplify analysis and improve transparency – creating a formal channel for data sharing, reducing duplication and giving policy makers a comprehensive view of the transport ecosystem.

Data collection methods in Armenia remain largely analogue, relying on paper- based records and manual reporting. Our recommendation is to expand digital reporting and establish standardised protocols for data collection and reporting across agencies. Consistent data formats and regular audits will enhance the overall quality and comparability of collected data. While partnering with international institutions to adopt best practices is valuable, it is equally important to invest in local capacity development and enhance staff skills in data collection, analysis and statistical modelling. Tools, such as those provided by the IEA, can guide the development of strategic action plans and resource allocation to build national energy data capacity. Universities and specialised training programmes can also help develop a local talent pool, reducing reliance on external consultants.

Alongside more transparent and reliable data, local capacity for analysis and scenario planning must be strengthened. Establishing a dedicated transportation research institution could facilitate long-term scenario planning, oversee data collection initiatives and ensure the quality of statistical analyses.

A transport research centre would collect and study data from multiple sources, enabling comprehensive scenario planning and forecasting. A data-driven approach ensures that policies are aligned with actual mobility patterns and evolving technologies, leading to better infrastructure investment decisions and more effective regulatory reform.

With a centralised institution, disparate agencies (e.g. the MTAI, the Ministry of Internal Affairs and municipalities) can better co-ordinate data sharing and joint research projects.

Establishing a dedicated institution helps build local expertise in advanced modelling, simulation, and data analytics. This not only reduces dependence on external consultants but also creates an environment where researchers, policy makers and industry stakeholders can collaborate to drive innovation in transport technologies and smart mobility solutions. It also helps Armenia attract international support and funding by demonstrating its commitment to systematic, transparent policy planning.

As Armenia navigates challenges such as urban congestion, sustainability, and the integration of new mobility services, a national research centre can provide critical insights for long-term planning. Whether by assessing the viability of public transport expansion projects or exploring the potential of electric and autonomous vehicles, this centre would generate the rigorous, scenario-based analyses that Armenia needs to guide policy shifts toward sustainable development.

Traffic emissions and air pollution are a major problem in Armenia and particularly in Yerevan – and a major reason is that vehicles lack catalytic converters. Catalytic converters are crucial for meeting emissions standards and reducing air pollution. The catalytic converter is an integrated part of a vehicle exhaust system, positioned after the engine. It facilitates chemical reactions that convert harmful gasses such as carbon monoxide (CO), nitrogen oxides (NOx) and unburned hydrocarbons into less harmful substances like water vapour, carbon dioxide (CO2) and nitrogen (N2). Exhaust-emission control devices, including catalytic converters, became common in the 1980s. But some older vehicles, as well as those built for unregulated markets, may lack such equipment.

In Armenia, there is a widespread problem with the removal of catalytic converters from modern vehicles, which are then often sold to countries with stricter environmental regulations, such as Georgia. This practice has prompted a temporary ban on their export.

Our policy recommendations for reducing the negative impact of ICE vehicles over the long term is to promote electric vehicle use. For the near term, they include:

Strengthening exhaust-emission compliance. Technical inspections in Armenia are mandatory for cars older than four years. Cars between four and ten years old are inspected every two years and vehicles older than ten years face yearly checks. Natural gas-powered vehicles have their tanks certified every two years. A central digital reporting system tracks these inspections, which are carried out at 47 technical stations across Armenia.

To address the problem of catalytic converter exports, the report recommends adopting policies that reward vehicles with a strong inspection record by offering benefits such as lower registration fees. Such incentives encourage owners to maintain their vehicles in prime condition.

Enforcement requires adequate capacity to inspect and monitor vehicles. Emission standards for trucks exist, yet some Soviet-era vehicles continue to operate, especially in cities and at construction sites. Armenia’s road police help ensure compliance on the ground. They monitor and perform inspections to verify that vehicles meet technical and safety requirements. Their role complements the oversight provided by MTAI’s specialised technical inspectors. Local authorities or municipal agencies may also oversee compliance, especially where construction activity overlaps with urban traffic.

Permanently banning catalytic converter exports. Armenia currently imposes a temporary ban, renewed every six months, to prevent the removal and export of catalytic converters. By keeping these devices in the country, the ban helps vehicles meet emission standards and supports efforts to improve air quality. Making the ban permanent would make enforcement more consistent and strengthen environmental protection.

Tightening emission standards. As a member of the Eurasian Economic Union, Armenia adheres to EURO V emission standards. Since 2014, the European Union has adopted the stricter EURO VI standards and is implementing EURO VII standards from 2025. We recommend tougher emission standards for heavy duty trucks to phase out outdated, high-polluting vehicles. Aligning local regulations with EU or international standards would encourage truck operators to adopt cleaner technologies.

Promoting modern trucks. Phasing out old, polluting trucks is essential, but leakage to other markets is unsustainable. Offering incentives that lower the capital costs for companies that invest in newer trucks can help speed fleet renewal. Armenia already offers tax breaks and subsidised leasing to businesses investing in modernisation. Under the government’s Measures to Modernise the Economy programme, companies can access nearly interest- free loans for new equipment, including trucks. To further accelerate fleet upgrades, the report recommends introducing designated zones in major cities (e.g. Yerevan, Gyumri and Vanadzor) with tougher emissions standards. These “environmental zones” could be introduced gradually, starting with EURO V standards and initially excluding the oldest, most polluting post- Soviet trucks.

Taxing fossil fuels. Armenia currently imposes no taxes on fossil fuels used for transport. A fuel tax would internalise the environmental costs associated with fossil fuel consumption, making polluters bear the cost of its environmental impact. Vehicle owners in Armenia already pay an annual vehicle tax, based on engine power, as well as an environmental tax tied to emissions. A fuel tax on fossil fuels should complement these existing levies.

A fossil fuel tax would encourage households and businesses to shift to energy-efficient, low emitting vehicles, while the revenue could fund improvements in public transportation, accelerate e-mobility and support a more sustainable transport system. In neighbouring Georgia, environmental taxes, including fuel-related levies, are helping to reduce emissions and promote sustainable energy. Last year, Georgia's motor fuel tax raised a total of USD 78.2 million.

Targeted policies have contributed to a notable rise in passenger EVs, particularly in Yerevan. This momentum is largely driven by incentives, including an import customs exemption for EVs, extended through January 1, 2026. An accelerated transition to EVs in Armenia is crucial to tackling air pollution, cutting reliance of imported fossil fuels and meeting climate goals. Under the Long-term (until 2050) Low Greenhouse Gas Emissions Development Strategy, expanding the number of electric passenger cars is central. The strategy aims to grow Armenia’s fleet of EVs to 100 000 by 2030 and 500 000 by 2050.

As a member of the Eurasian Economic Union (EAEU), Armenia must co-ordinate any new supply-side regulations with other member states. However, the current quota-based import customs exemption – 8 000 EVs for 2025 – is a key policy tool, identified in the roadmap as the primary path forward.

Lower operating costs can partly offset higher EV purchase prices. But widespread adoption depends on overall cost competitiveness compared with internal combustion engine vehicles.

Light-duty vehicles

Under the Energy Savings Program, Armenia plans continue and expand current polices to promoting electric vehicles, including the import customs duty and VAT exemptions. Currently, 8 000 EVs (M1 and M1G classes) are exempted from import duties each year, although total imports exceeded the quota in 2024. To bolster EV adoption and help Armenia reach 100 000 EVs by 2030, the quota must increase. While this would reduce tax revenues, it would not require additional public spending. With a policy framework in place and strong political backing, expanding its scope would be a positive early step to accelerate progress toward the national target of 100 000 EVs by 2030.

Adjusting the quota could be achieved either through a single intervention or an incremental approach. To assess the feasibility of reaching Armenia’s 2030 target of 100 000 EVs, this roadmap models three scenarios, each based on a different scope of import customs duty exemptions:

• Scenario 1, Business-as-Usual: Assumes no policy changes. The quota remains capped at 8 000 EVs annually, while actual imports are assumed to continue at 2024 levels (9 528 EVs per year) through 2030.
• Scenario 2, Single Step: The quota for import duty exemption is increased to 14 000 EVs annually beginning in 2026, and imports are assumed to meet this volume. The adjustment of the quota is designed to meet the 2030 target of 100 000 EVs in 2030.
• Scenario 3, Incremental Increases: Similar to scenario 2, this scenario is designed to meet the 2030 goal by gradually expanding quotas for import duty exemption. Starting with 13 000 EVs per year in the 2026-2027 period and increasing to 15 000 EVs annually from 2028 to 2030.

All three scenarios assume minimal EV exports and focus on domestic fleet growth.

As illustrated above, the Business-as-Usual scenario falls short of achieving the 100 000 EV target by 2030. The modelling underscores the need for demand-side policies to achieve the 2030 target and highlights the potential to expand the scope of import duty exemptions.

A single-step approach offers a clear, decisive path to 100 000 EVs in 2030. But it may not correspond to domestic EV demand and risks underdelivering in the short term. An incremental approach may align more closely with Armenia’s growing EV demand and import capacity.

The modelling illustrates various feasible pathways for reaching 100 000 EVs by 2030. One option is to expand the import duty exemption quota – raising it as high as 20 000 vehicles annually by 2026. This would send a clear signal to the market and reduce uncertainty over eligibility and the risk of the incentive being oversubscribed.

The incentive scheme could also be further refined. Currently, light-duty trucks are excluded from the import duty exemption. Adding them could lower emissions, as such vehicles are generally highly utilised. Duty exemptions also risk favouring progressively more expensive vehicles. As the market matures, introducing a price cap for eligible vehicles could help promote the purchase of more affordable models.

By 2050, EVs will need to make up 40% to 50% of Armenia’s fleet – about 500 000 vehicles. Additional measures beyond the import duty and VAT exemptions will be required, or the cost of fossil fuel alternatives will need to rise sharply. Higher taxes on imports of petrol- and diesel-powered vehicles would also boost state revenues.

Heavy-duty vehicles

In the short term, efforts to promote electric buses are recommended. Public procurement rules requiring electric buses should be paired with incentives that lower purchase costs. Electric buses are already being piloted in Yerevan, for example, as part of the Global Environment Facility project.

In Yerevan, trolley buses offer an electrified, high-capacity option – but the government currently limits their operation to within city limits. Extending the system to surrounding residential areas where many workers live would offer a viable alternative to cars, easing congestion and cutting commute times. Expanding trolley bus networks and funding interregional collaboration in the capital region would align with the Long-term (until 2050) Strategy and could accelerate public transport electrification.

Like other disruptive technologies, the rollout of electric vehicles has been clouded by myths rooted in outdated information and early technical limits. Despite advances, misconceptions persist. This section examines the challenge of disseminating accurate, evidence-based information about EVs. Misinformation can shape public perceptions, sow uncertainty and slow the transition from fossil fuels. Such misperceptions are not unique to Armenia but are common in many countries adopting EVs.

Comprehensive resources debunking EV misconceptions have been developed in many countries and are readily available to support public awareness campaigns and educate government officials.

In its 2021-2026 Policy Action Plan, the government announced a programme to promote EVs, which could be supplemented with measures to raise awareness. Our recommendation is to use existing resources to develop information campaigns aimed at key groups such as households, taxi and bus drivers, and public officials. Over time, better access to country-specific data will allow more effective policy design, strengthen legitimacy and help dispel misinformation about EVs.

Closer collaboration between the energy sector, transport system and the built environment could help accelerate road transport electrification in Armenia. For now, access to grid capacity is not a barrier. Electricity grid development depends on co-ordination between the state-owned TSO High-Voltage Electric Networks (HVEN) and the DSO Electric Networks of Armenia (ENA) for tasks such as grid reinforcement and expansion.

Armenia is liberalising its electricity market and shifting to a wholesale model aimed at boosting competition and transparency. Reforms are focused on allowing consumers to choose their electricity suppliers and encouraging more players to enter the market, moving away from the single-buyer system. The distribution network is privately owned but remains centralised.

As the road transport sector electrifies, electricity demand will rise in new parts of the grid – primarily in residential areas for overnight charging, but also at strategic urban locations along major transport routes. Meeting this demand and building new, cost-efficient charging infrastructure will require closer collaboration among stakeholders like the HVEN, public transport providers, property owners (residential and commercial) as well as owners of conventional fossil fuel filling stations.

To align efforts across the value chain, this report proposes a Cross-Sector EV Partnership – a task force that includes the ENA, HVEN, charge point operators (CPOs), transport officials and private businesses to co-ordinate EV infrastructure development. This group could advise the Government on issues such as data sharing and grid capacity mapping.

Armenia already has a nationwide network of fast chargers, with about 200 public stations – just shy of the European Commission’s guideline of one public charger for every 10 EVs. Fast and slow public charging networks serve different needs and generally complement private charging. As the EV fleet grows, both public and private infrastructure will need to expand, with a focus on making the system convenient, reliable and robust for users.

Fast charging

The European Union sets charging infrastructure requirements for light duty vehicles through its Alternative Fuels Infrastructure Regulation (AFIR). A development in line with these requirements in Armenia, corresponds to the following level of fast-charging infrastructure deployment:

To build a convenient, reliable and robust public charging network, this report recommends that Armenia align with the AFIR requirements and focus on strategic locations, such as the North-South Corridor. Reaching adequate service levels at these locations may require additional resources. To access funding, charge point operators (CPOs) should fulfil certain criteria such as:

• Certification and standards: Unified technical design standards for chargers, such as component durability, communication protocols and data logging capabilities.

• Data transparency: Require real-time information on charger availability and functionality through open APIs, enabling third-party apps that EV drivers can use for trip planning.

• Minimum uptime: Establish minimum standards for public chargers to remain available and operational.

• Fair pricing and convenient payments: Require transparent pricing and interoperable payment options (e.g. mobile apps) to maximise accessibility.

Home charging

Home charging plays a critical role in accelerating EV adoption by providing convenient and cost-effective charging for drivers. Charger installation is straightforward for a single-family home – but in Armenia, multi-family housing remains the norm, especially in cities. Where off-street parking is available, it is therefore essential to facilitate home charger deployment.

To expand access to home charging, we recommend offering partial reimbursements, either through subsidies or tax credits, or waiving VAT and import duties on home charging equipment.

Measuring electricity consumption in transport is more difficult than gathering sales data from fuel suppliers. While public charge point data could be obtained with moderate effort, accurate tracking of private charging remains challenging. Most countries rely on models that estimate transport electricity use from driving data. With improved traffic data transparency, similar models could be developed for Armenia.

Local policies for charging infrastructure deployment

Local authorities play a key role in promoting EV adoption. This section highlights strategic and practical considerations for municipalities.

Prioritise off-street charging infrastructure

On-street charging stations are highly visible and politically attractive, but they are generally more expensive to install than off-street stations. The city of Yerevan encourages CPOs to deploy on-street charging stations and develop business models. But supporting new off-street charge points in parking lots and garages makes better economic sense. Not only does this represent a service upgrade for drivers, but the ownership structures of parking facilities are also less complex and charger installation costs are lower. Expanding charging infrastructure at such sites also benefits residents in multi-family buildings, providing a clear benefit to the local community.

Local authorities could support off-street charging in three ways:

As fleet operators: Invest in EVs and charging infrastructure for municipal vehicles at designated parking spaces.

Through public housing and parking facilities: Finance investments in charging infrastructure – especially for overnight charging.

Setting requirements for new developments: Require developers to include charging infrastructure in new properties that include parking, similar to the rules under the EU Energy Performance in Buildings Directive, and enforce compliance through the building permit process.

Align EV parking policies with broader sustainable mobility goals

Parking policy is an important tool for cities. In Yerevan, EVs are currently exempted from parking fees. But as the fleet grows, it will be important to align parking and transport system goals to avoid increasing overall car demand or designating parking only for specific users. The aim is to support sustainable mobility for all residents and businesses.

Administrative hurdles – such as unintentional regulatory or legal barriers, policy gaps and poor co-ordination – can slow road transport electrification. Moreover, as electrification advances, new challenges will always arise. The proposed Cross-Sector EV Partnership could help to identify these barriers and assist local and national authorities in finding ways to surmount them.

Improving transport efficiency for people and goods brings multiple benefits, including higher competitiveness and reduced CO2 emissions. This section focuses on high-capacity transport modes, such as rail and public transport, as well as creating a built environment that encourages walking and bicycling.

Transport planning is central to developing a mobility system that moves people and goods efficiently, stimulates local economies and attracts businesses.

Effective, efficient, and convenient multimodal transport planning is essential for cities, regions and state actors to prioritise resources, governing the transport system and to evaluate and formulate relevant policy goals. This report highlights measures that can help accelerate the climate transition in cities like Yerevan, including reduced speed limits and dedicated bike lines. Gaps in transport data and weak regional co-ordination are barriers to progress. Strengthening transport planning capacity is critical to ensure effective decision-making for sustainable transport at national, regional and local levels.

Transport planning involves evaluating, assessing and forecasting demand, and then designing and implementing strategies to improve the efficiency and safety of the transport system. The goal is to create a sustainable multimodal system that serves everyone – pedestrians, cyclists, public-transport users, motorists and goods carriers.

A well-designed transport system supports economic growth by improving access to education, jobs, services and markets to all citizens. For example, the report recommends that Armenia integrate gender analysis into its transport policy and planning to address mobility constraints specific to women (e.g. safety concerns, affordability and public transit reliability) as part of the recently approved Strategy and Action Plan for the Implementation of Gender Policy in the Republic of Armenia 2025-2028. The needs of other groups with special needs – children and youth, the elderly, people with disabilities and low-income or rural users – should also be considered.

Transport planning assistance has long been a part of international aid to Armenia. Yet managing the transport system should be considered a core national competence, since it is critical to economic development and growth. Emerging transport modes – such as self-driving taxis and delivery drones – add complexity, but they also lower overall transport costs. Meanwhile, it is important to learn from past experience and adopt best practices. Previous rollouts of electric scooters, for example, underscore the need for governance to ensure that new mobility technologies deliver societal benefits.

Alongside the long-term recommendation to create an Armenian national transport research centre, our proposals for the short-term include:

• Building transport planning competency: Introduce mobility studies at Armenian universities from undergraduate through doctoral level.

• Strengthen public-sector expertise: Partner with Armenian universities to create joint research programmes that focus on value creation.

• Conduct a transport data gap analysis: Identify and enhance the collection of missing information that would help improve transport planning.

• Harness the potential of transport data: Improved data quality can guide planning and help prioritise resources for more efficient transport of people and goods.

Reducing Armenia’s speed limits could advance sustainable transport by improving safety, cutting emissions and encouraging cycling and walking. Current traffic laws permit maximum speeds of 90 km per hour in metropolitan areas and 60 km/h in areas indicated by a white road sign, such as city centres and villages.

Lower speed limits lead to more fuel-efficient driving, reducing CO₂ emissions and air pollution. Enforcing urban limits not only lowers fuel consumption but also makes streets safer, creating more accessible environments for pedestrians and cyclists. Slower traffic can also make public transport a more attractive alternative to private cars.

Data show broad public support in Armenia for limiting speeds to 30 km per hour in built-up areas. This report recommends reducing limits to 40 km per hour in city centres and 30 km per hour in residential zones. Infrastructure will need to be adapted to enforce slower speeds. International funding is available for measures such as speed bumps and lane adjustments that naturally slow traffic and improve safety. Complementary enforcement measures, including camera-based monitoring, will also be key for ensuring compliance.

Today, 70% of freight in Armenia is transported by road, with just 18% by rail. Increasing rail’s share is key to creating a more sustainable and efficient freight transport system. Rail offers clear environmental advantages, including lower greenhouse gas emissions and reduced energy consumption per ton-kilometre. It also provides economic benefits through decreased congestion and infrastructure wear. Armenia’s rail network is already fully electrified and has capacity available, presenting a significant opportunity to boost efficiency and lower CO2 emissions.

The Government recognises the importance of rail and has launched initiatives to shift from road to rail transport. To transform this commitment into results, Armenia should focus on a limited number of projects and see them through to completion.

This report recommends prioritising logistics hubs to smooth customs and freight handling, as well as strengthening regional passenger connectivity and public transport.

Developing Yerevan-Tbilisi high-speed train

Improving the rail connection between Yerevan and Georgia’s capital Tbilisi would improve the accessibility, and MTAI is developing a concept paper for a Yerevan- Tbilisi high-speed rail corridor. The Yerevan-Tbilisi train currently operates three times a week, taking about 10 hours. By road, the 273 km journey takes between four and five hours, depending on border delays. The region’s mountainous topography makes travel challenging, but a better rail link would ease road traffic and improve safety. By air, flights between Zvartnots International Airport and Tbilisi International Airport take less than an hour.

Developing Gyumri into a logistics hub

Armenia plans to transform Gyumri into a major dry port (a land-based facility for transferring cargo) and free-trade zone. The new hub will connect warehouses and industrial parks to the Gyumri Shirak International Airport through air, rail and trucking links, streamlining the movement of goods and boosting trade efficiency.

Governing the expansion of the Yerevan metro

Developing public transport in Armenia is a joint effort between local and national authorities. Local governments design and propose systems, which are then financed at the national level. Greater national governance could help improve coherence and efficiency. The Yerevan metro is the best example.

Yerevan’s metro is a single, 13 km line that serves 10 stations. It is operated by the Karen Demirchyan Yerevan Subway CJSC, a department of the MTAI. Ridership is around 80 000 passengers per day – just over 20 million per year – with 32 cars currently in service.

Ambitious plans to expand the metro have stalled for lack of funds. An extension beyond Baregamutyun station, to include stops in Achapnyak and Nazarbekyan, has been scrapped. Achapnyak, a largely residential district of more than 100 000 inhabitants, and Nazarbekyan, part of the broader Achapnyak district, remain without direct metro access. Completing this expansion would ease congestion, provide an alternative to private cars, shorten commutes and lower transportation costs.

Extending the Yerevan metro would shift large numbers of passengers from road to rail. The report recommends that the government align local transit development with national policy goals, including boosting use of public transport.

As a landlocked developing country (LLDC), Armenia faces high transport costs and limited international connectivity. Yet there are opportunities to deepen its regional and global integration.

LLDCs can negotiate transit agreements with neighbouring countries to secure efficient access to ports. Armenia already has a transit agreement with Iran, which grants access to Chabahar and Bandar Abbas ports and facilitates trade with India. The government has also expressed interest in unblocking regional communications and using neighbouring territories for transit and trade. A transit deal with Georgia, now under discussion, would provide access to Black Sea ports.

To advance these types of agreements, the report recommends seeking international support, particularly from organisations and countries invested in regional connectivity and trade. For example:

• The European Union: The European Union actively funds transport infrastructure projects in the Caucasus region, including initiatives that foster trade between Armenia and Georgia.
• The World Bank and the Asian Development Bank (ADB): These institutions have supported logistics and transit improvements in Armenia and could provide financial or technical assistance.
• The United Nations and UNCTAD: The United Nations and the United Nations Conference on Trade and Development (UNCTAD) both have programmes targeted at LLDCs and could help Armenia secure better transit arrangements.

Bilateral partnerships with countries that have strong economic ties to Armenia, such as Iran and India, could also help improve transit routes through Georgia to access Black Sea ports.

Yerevan’s public transport system is run by the city and currently ends at the city limits. Yet many residents outside the city commute to and from Yerevan for work, study or other economic reasons, which links them to the wider region.

Better co-ordination of public transport across the greater Yerevan region would enhance accessibility and efficiency and support sustainable mobility. The report recommends improving public transport links between Yerevan and surrounding towns (e.g. Abovyan, Echmiadzin) and aligning their operations with the city’s transport system.

Inter-city public transport is currently managed by MTAI. In the greater Yerevan region, however, it would be more convenient to extend the city’s transit system, sharing the same digital payment platform, online timetables and other features.

Development could proceed in phases: short-term efforts would focus on establishing the necessary integrations, while assessments could take place over the longer term to determine how public transport could support regional economic growth.

Public transport remains the backbone of high-capacity, shared mobility. Expanding other shared modes (e.g. cars, bikes and e-scooters) offers users more options and can create conditions for more resource-efficient and lower-emission alternatives. Private passenger cars are a major source of greenhouse gases in Armenia, and they also contribute to urban congestion, noise and air pollution. Still, studies show that private car usage remains relatively low: on average, most cars are parked for around 23 hours per day. Shared mobility can help optimise the use of these resources, increase accessibility and complement traditional public transport, making it more attractive. Common ride-sharing options range from taxis to peer-to-peer services and carpools – yet in Armenia, these do not yet exist.

Armenia is in an unusual position, since most of the country’s vehicles run on methane. Expanding the use of liquid biofuels or e-fuels in its vehicle fleet would be neither cost- nor energy efficient. Biofuels deliver low energy efficiency and offer little advantage in terms of pollution reduction compared to methane vehicles or EVs.

Studies show potential for bioethanol production in Armenia using crops such as gooseberry, corn and raw cellulose. However, vehicles should not be the main market for liquid biofuels. Instead, assessments should explore refining bioethanol into alcohol-to-jet fuel, a drop-in substitute for petroleum-based jet kerosene.

Natural gas (fossil methane) accounts for 52% of Armenia’s final energy usage, more than 80% of its energy imports and almost 66% of transport demand. In 2023, the transport sector used 412 million cubic metres.

Biomethane, a renewable gas similar to natural gas, has an estimated production potential of around 5 petajoules (PJ) per year – enough to replace about one-third of transport sector demand. Given that the European Union’s Renewable Energy Directive mandates that 14% of transport energy to come from renewables by 2030, it would behove Armenia to develop a domestic biomethane industry rather than continue relying on imported fuels.

Increasing biomethane production in Armenia, would bolster domestic resource use, expand renewable energy production and diversify energy sources. Reducing reliance on imported methane would also bring economic benefits: Armenia spent nearly USD 400 million importing natural gas in 2023 alone. Developing a biomethane industry – from collecting agricultural and municipal waste to production and distribution of biomethane – would create jobs and improve waste management. Methane production technologies are also versatile, capable of processing a wide range of biowaste, from agricultural residues to kitchen and garden waste.

Today, many countries – including Denmark, Sweden and France – inject biomethane into the gas grid. The share of biomethane in Sweden’s western regional gas grid already surpass 30%, for example, while France plans for 15% biomethane by 2030.

Scaling up biomethane production in Armenia involves several challenges, including gaps in production and distribution infrastructure and risks of methane leakage. There is also the potential for a “lock-in” effect, where continued reliance on methane risks slowing the transition to a renewable energy system.

Biomethane offers a viable pathway to decarbonise Armenia’s transport fleet, since it works with existing vehicles and infrastructure. Methane is also a key resource for many industrial processes. As the transport sector transitions toward electrification, demand for biomethane in other sectors should increase, maintaining its relevance and value within Armenia’s energy system.

Foreign investors are showing interest in Armenia’s nascent biomethane sector. Expanding production and use of biomethane could deliver economic, environmental and social benefits. To this end, the report recommends the following measures:

• A biomethane strategy for a more resilient transport sector. The strategy should cover the entire value chain, including establishing waste collection systems and determining the scope of investment in production plants. It should also identify appropriate funding schemes. The cost of producing biomethane today is estimated to be between 7 and 70 US cents per cubic metre. Meeting 14% of transport energy demand by 2030 would require annual production of 58 million cubic metres, with total capital costs estimated at USD 4 million to USD 40 million.
• The strategy should also include a review of legislation to remove barriers to injecting biomethane into the national grid and explore policy options to promote its use.
• A biomethane action plan. The strategy should be backed by a detailed action plan that includes time-sensitive deliverables to scale production and meet defined energy policy targets.
  

Aviation is one of the fastest-growing sources of carbon emissions worldwide, and international aviation to Armenia is expected to increase in the coming decades.

In October 2022, the International Civil Aviation Organization (ICAO) set a Long- Term Aspirational Goal (LTAG) of net zero CO₂ emissions for international aviation by 2050, highlighting the role of sustainable aviation fuels (SAFs), innovative aircraft technologies and more efficient flight operations. While ICAO does not impose specific obligations on individual states, countries can voluntarily submit national aviation decarbonisation strategies.

Implementing sustainable aviation policies now would help Armenia build a resilient and competitive aviation sector while boosting air quality, energy efficiency and tourism. The report therefore recommends developing a long-term strategy for meeting ICAO’s 2050 goals.

Armenia can mobilise investment in the transport sector’s climate transition by leveraging policy incentives, financial instruments and international partnerships. Armenia has developed a national strategy to promote green investments. The strategy focuses on sustainable infrastructure, private sector investments and climate finance. It includes a Green Finance Roadmap to scale up green investments and attract private sector participation. The strategy aligns with Armenia’s Nationally Determined Contributions (NDCs) under the Paris Agreement. Armenia has received funding from global climate finance mechanisms, including the Green Climate Fund (GCF), Climate Investment Fund (CIF), and the Global Environmental Facility (GEF).

In the Long-term (until 2050) Low Greenhouse Gas Emissions Development Strategy, the proposed measures under the “with additional measures” scenario are estimated to require investments in the range of AMD 1.55 billion to AMD 2.7 billion (around USD 3.7 million to USD 6.5 million). To fund implementation, various sustainable financing options exist, including green bonds, transition bonds, sustainability-linked loans and green equity funds.

Green bonds can be issued by governments and financial institutions, provided the projects meet the green bond principles set by bodies such as the International Capital Market Association (ICMA). They attract investors focused on environmental, social, and governance (ESG) goals and often offer lower borrowing costs compared to conventional bonds. Green bonds are well-suited to sustainable transport projects such as electric buses. Armenia has been exploring this type of financing, though the market remains nascent. One key initiative is the Green Bond Framework, designed to help Armenian banks and financial institutions issue bonds for sustainable infrastructure, including transport projects.

Transition bonds are for companies in an early transition phase and not yet eligible for a fully sustainable project. Japan has been a major player in transition bond issuance, with Japanese companies accounting for 91% of transition bonds by value in 2022. Projects that include biomethane could be considered for transition bonds. Sustainability-linked loans (SLLs) incentivise borrowers to improve their ESG performance. Unlike green bonds, which must fund specific projects, SLLs can be used for general corporate purposes, with loan terms (e.g. interest rates) tied to the borrower’s ability to meet predefined sustainability targets. The Sisian-Kajaran Road Project – part of Armenia’s North-South Road Corridor – has applied to the European Bank for Reconstruction and Development (EBRD) for both SLLs and transition bonds.

Green equity funds invest in companies and projects that promote environmental sustainability. These funds aim to generate financial returns while supporting green industries such as sustainable infrastructure and mobility. There are different types of green equity funds: mutual funds and exchange-traded funds (ETFs) that are focused on sustainable sectors, and private equity funds that invest in emerging green technologies and startups.

Governments can use tax incentives to encourage green equity financing, making investments in sustainable projects more attractive for businesses and investors. Examples include tax credits for green projects, reduced corporate tax rates and other measures that reward businesses for reducing their carbon footprint.

To encourage sustainable transport investments and improve competitiveness, the report recommends considering a carbon-pricing mechanism, such as the fuel tax suggested earlier. Public-private partnerships will play a key role, with the Armenian government co-ordinating the relevant stakeholders and helping to secure funding for transport projects from multilateral development banks (e.g. World Bank, EBRD, ADB) and climate funds like the Green Climate Fund (GCF).