In recent years, the World has been experiencing the consequences of climate change, and the South Caucasus has been affected by this phenomenon too. Energy security and environmental security have been affected by the dependence on fossil fuels and damages associated with energy exploitation, such as the rise in greenhouse gas (GHG) emissions. The development of renewable energy (RE) helps to meet growing energy demand and to mitigate climate change. Dependence on energy imports can be reduced, local resources can be utilized, and energy supplies can be diversified by deploying RE technologies in the region. Thus, it is one of the most attractive and reliable options for achieving sustained low-carbon growth. Against this background, this paper analyzes the trends in energy consumption and GHG emissions during 1995-2012 in the South Caucasus countries: Armenia, Azerbaijan and Georgia. Special focus is accorded to the prospects of RE in these countries based on their potential and policy framework. The paper concludes that the South Caucasus has substantial RE potential. However, with the exception of hydropower, other sources of RE are minimally utilized. Proper policy framework with clearly defined goals for RE generation and effective implementation are needed in this regard to ensure affordable and sustainable energy in these countries.