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Pakistan’s green economy dilemma

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TRANSITIONING to a green economy, marked by reduced carbon emissions, efficient resource utilization and social equity is a topic of critical importance, especially for low and middle-income nations like Pakistan. This discussion revolves around the dual objective of achieving sustainable economic growth now while safeguarding the planet for future generations. Pakistan’s vulnerability to climate change makes this transition imperative. According to the 2023 UN report, Pakistan ranks as the 5th most vulnerable country to climate change, with climate disasters causing significant damage, affecting millions of people, and displacing millions from their homes, resulting in approximately PKR 3.3 trillion in losses.

However, beyond the climate perspective, compelling arguments in favour of a green economy are rooted in its economic benefits and Pakistan’s potential to embrace green practices. Realizing this transition requires collaborative efforts from various stakeholders, starting with the government, which must provide targeted public spending, implement policy reforms, and make necessary adjustments in taxation and regulation to support green initiatives. Another crucial player is the private sector, responsible for enhancing resource efficiency during production by utilizing renewable energy sources and minimizing natural resource consumption.

The third vital stakeholder is the community itself, whose willingness to invest in environmentally friendly products and services is pivotal. Although these options may be costlier initially, they promote an eco-friendly lifestyle with minimal natural resource consumption. This aligns with the principles of sustainable consumption and production, aimed at improving production methods and consumption habits to reduce resource usage, waste generation, and emissions throughout the entire life cycle of processes and products.

To evaluate Pakistan’s readiness for a green economy, it is essential to assess the state’s capacity and institutional framework. The Ministry of Climate Change and Environmental Coordination has introduced several climate policies, including the national electric vehicle policy, which incentivizes electric vehicle adoption by reducing customs duties and taxes on imports and offering toll rebates. This policy targets the transport sector, responsible for a significant portion (43%) of airborne emissions. However, the transition faces economic viability challenges, as electric vehicles remain more expensive than traditional ones, and infrastructure support is lacking.

Pakistan is currently burdened by various deficits, including fiscal, current account, and trade balance deficits, along with circular debt and debt servicing obligations, limiting its ability to invest in green initiatives. Over 90% of subsidies are allocated to the crude oil sector, making electricity and fuel more affordable, but hindering the shift to renewable energy sources. However, Pakistan possesses enormous potential for solar and wind power generation, with abundant sunlight and favourable weather conditions. Its coastal belt alone offers a potential of 50,000 MW of electricity through wind turbines. Several private wind projects are operational, producing 1,335 MW, and more are under construction.

In the last five years, six solar power projects with a combined capacity of 430 MW have begun operations, supplying electricity to the grid and aiming to serve at least one million customers. They are poised to add around 3,000 MW of solar power through net metering. Transitioning the energy sector towards green alternatives could lead to reduced electricity costs and alleviate pressure on Pakistan’s trade balance due decline in imports of crude oil which is approximately more than 30 billion USD. However, government financial constraints and agreement with independent power producers (IPPs) hinder these transitions.

In the business arena, green practices require costly green financing; amidst rising costs and stiff competition from Chinese imports post Free Trade Agreement. Despite efforts by financial institutions with green policies and officers, affordable green loans for businesses are scarce. Small and Medium-sized Enterprises, vital to Pakistan’s GDP, struggle to access financial support, operating largely in the informal sector. Additionally, inflation has inflated loan costs to 25 percent. The Pakistan Stock Exchange lacks a clear green policy framework, hindering green Initial Public Offerings and bonds and resulting in capital depletion, limiting traditional financing options for businesses.

Finally, the community’s attitude towards eco-friendly products and services is a crucial factor. High inflation and rising electricity costs have left the public facing severe financial challenges, resulting in an anticipated 37.2% poverty rate and a 38% drop in purchasing power due to exorbitant food prices in 2023. Affordability issues are already affecting their ability to purchase costly items, and low purchasing power is influencing their consumption habits and choices towards green initiatives and products.

In summary, the transition towards a green economy is not a choice but an imperative, not only essential for the well-being of state now and survival of future generations. Taking decisive action on the climate front is vital for Pakistan’s sustainable future, as reflected in its commitment to the Paris Agreement. However, financial constraints and strict agreement with IPPs mainly owned by Chinese firms pose significant challenges to this transition. International support in the form of green aid, green financing, green investment by private sector, substantial governance reforms, and increased public awareness are essential to protect the habitat of Pakistan’s 242 million people and foster a shared, sustainable future.

—The writer is Assistant Professor at the National University of Modern Languages, Islamabad.

Email: [email protected]

views expressed are writer’s own.

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