Political economy of green transition - I

Before jumping into the green transition debate, let’s have a look at basic economic development and social statistics. World Bank report indicated 39.4pc (95 million) of population lives below the poverty line. During the fiscal FY2023, 12 million more fell into the poverty trap. Only 36pc of population has access to safe drinking water facilities. 58.8pc is food insecure in the country. Food production system and agriculture are highly vulnerable to climate change. Poverty in Pakistan is feared to increase, as almost 39 percent of population is directly employed in agriculture. The number of out-of-school kids is increasing. According to the latest data, 26.6 million kids do not attend school.

The situation on the energy front is even more complicated. Almost 24.6pc of population has no electricity, meaning almost 59 million people do not have access to electricity. People have to face loadshedding due to low-quality transmission systems. Moreover, per capita availability of electricity is extremely low at 644KW/h.

On the other hand, Pakistan is one of the most vulnerable countries to climate change. The disasters like floods, droughts are regular visitors to Pakistan. Agriculture is losing productivity. Sea intrusion is happening at an alarming speed. Climate change is also introducing new diseases like dengue. Environmental degradation is on the rise, and the country has to bear the loss of billions of dollars every year.

The situation is grave, as economic and social indicators present a miserable picture, while climate change and environmental status are quite scary. Pakistan has to plan and execute green transition policies. The situation demands a wise, smart, indigenous solution, policies and plans. Unfortunately, policy documents and actions on green transition indicate the other direction.

These documents have minimal relevance to the ground realities. They seem to be drafted under the influence of activists and foreign donors. For example, a few years back, Islamabad developed Nationally Determined Contribution (NDC), which has minimal relevance for Pakistan. The NDC overemphasised mitigation and did not pay the required attention to adaptation.

It is a well-established fact Pakistan has a negligible carbon footprint, but it is highly vulnerable to climate change. The situation demands Pakistan prioritise adaptation, but NDC focuses on mitigation.

The analysis of NDC indicates Pakistan aims to reduce the projected emissions by 50pc by 2030. It has shown intent to cut emissions by 15pc on a voluntary basis, and a 35pc reduction has been attached with assistance. NDC also emphasised till 2030, 60pc of energy will be generated from renewable sources, including hydropower, solar, wind biogas, etc., to meet the target of a 50 percent reduction.

Simultaneously, Pakistan has offered to shift 30pc of its transportation system to electric vehicles. The country would need $101 billion by 2030 and an additional $65 billion by 2040 to complete the transition. This amount is required to achieve the energy targets and does not include the cost of reducing GHG emissions from agriculture and other sectors.

Though NDC document has raised many questions, it is hoped the government has the answers. Looking at Pakistan’s economic health, it is impossible to generate such huge resources. If we follow the formula of voluntary and conditional GHG emissions targets, Pakistan will have to invest at least $15 billion by 2030 to meet the targets. Pakistan will also need financial resources for adaptation. As the NEEDs study suggested, in 2030, Pakistan would need $11.2 billion annually for adaptation. Hence, the country will have to generate a minimum of $26 billion.

NDC conditioned 35pc of targets to global funding. Let’s be clear: no free funding is available for such a huge transformation. The world is in no position to fund countries, and financial and development institutions are also not interested in providing grants. For example, Pakistan faced one of the worst floods in 2022, and country had to bear a loss of $30 billion.

The world community showed sympathy, organised international conferences and invited world dignitaries to Pakistan. However, there was no one to fund Pakistan for rehabilitation (only a few million). The country is struggling to manage the situation on its own. Against this backdrop, who will fund Pakistan’s transition? Therefore, NDC is considered a classic example of an activist or donor-driven policy document.

Moreover, instead of fulfilling their commitments, developed countries are convincing the world to look towards the private sector for action. Glasgow Financial Alliance for Net Zero is an excellent example of understanding the phenomena. The Alliance was presented as a new window of opportunity. It is a consortium of private companies and investment houses to pool resources. Mark Carney, UN Special Envoy for Climate Action and Finance, and UK Prime Minister Johnson’s Finance Adviser for COP26 had claimed the total assets of the companies committed for net are around $130 trillion. It is private money, available for investment and lending, and it cannot be compared with the commitment of $100 billion.

The NDC did not give much weight to the existing energy landscape. It is an open secret Pakistan has agreements with IPPs, and these agreements bind Pakistan to buy power from them. Besides, Pakistan is also bound to buy IPPs according to its capacity, whether the country uses it or not.

Now, the question arises: how will Pakistan negotiate and convince IPPs to support the transition? If Pakistan continues to fulfil commitments without negotiating with IPPs, it will create a dual-edge problem. It will boost circular debt. The energy prices will increase.

We can learn the implications of donor or activist-driven policies without any regard to ground realities from the examples of shifting to CNG-based vehicles and promoting Solar energy for domestic use. A few years back, Pakistan started to convert its transport system to CNG. The government was convincing people to shift to CNG, as it would help the country to save foreign reserves. Pakistan erected a comprehensive infrastructure to support the initiative and installed CNG stations nationwide. It was celebrated as a landmark decision and transformation of the transport system.

Pakistan showcased it globally as a model for the green transition. Pakistan was trying to sell it as a cheap and eco-friendly transition.

However, the country lost enthusiasm after the shortage of natural gas. It started to move away from the CNG transportation system and shifted back to petrol or diesel. The immature policy and lack of a well-prepared action plan cost the country on many fronts. First, Pakistan’s natural gas reserves started to deplete at an alarming speed.

With the passage of time, gas loading became a new normal. People started agitatation against the situation.