From waste to wealth ( Part – I )

With its vast agricultural base and rapidly urbanising population, Pakistan generates over 650 million metric tons (MT) of agricultural waste and 23 million MT of municipal solid waste annually.

Imagine this waste covering over 15,500 cricket stadiums, piled three meters deep every year. Alarmingly, this stockpile will only grow as the population doubles by 2050, with urban dwellers contributing increasing amounts of organic waste, as seen in other emerging economies.

Traditionally, waste has been viewed as a socio-environmental problem. However, adopting a sustainable circular economy perspective -- where waste becomes a resource -- reveals transformative opportunities that are both financially lucrative and climate-friendly.

Sustainability in an over-populated, youthful nation necessitates shifting from the traditional ‘take-make-dispose’ consumption model to circularity, which emphasises resource recovery, recycling, and reuse. This ‘circular economy’ approach needs to be adopted led by the private sector for a practical redesign that will result in impactful solutions along the waste supply chain where the government should play the role of a facilitator under incentivised frameworks, addressing the ‘how’ by employing first principles and data-driven strategies. This approach will transform agricultural and urban kitchen waste into valuable energy resources, reducing environmental impact, creating green jobs, enhancing energy security, and aligns with up to eight Sustainable Development Goals (SDGs).

With urbanisation projected to surpass 50 per cent by 2025, municipal solid waste (MSW) generation will rise significantly. Without intervention, much of this waste will end up in landfills, emitting methane and other greenhouse gases (GHGs) and aligns with SDG12 which promotes sustainable consumption and production patterns and SDG13 which focuses on combating climate change as transition to circular economies helps foster climate resilience.

Simultaneously, as Pakistan’s population exceeds 400 million, agricultural waste will grow due to heightened food security demands. Transitioning to biofuel production offers a sustainable pathway to manage this waste, create green jobs, and develop biofuels and energy ecosystems. This aligns with SDG7 to ensure access to sustainable energy as biofuels produced from agricultural and municipal waste, serve as clean energy alternatives to fossil fuels, helping to reduce reliance on non-renewable energy sources.

Waste-to-biofuels (WtB) projects can attract climate-linked investments, providing alternatives to fossil fuels and reducing national CO2 emissions under Pakistan’s Nationally Determined Contributions (NDCs). By reducing reliance on imported fossil fuels for vehicular mobility, WtB can save over $1.5 billion annually in foreign exchange, easing fiscal pressures and connects to SDG8 which promotes sustained and inclusive economic growth and SDG9 since this sector attracts innovative technologies to be deployed. Additionally, exporting surplus Sustainable Aviation Fuels (SAF) could generate over $1 billion annually.

Let’s scope out the global biofuels market, valued at $116 billion in 2022, is expected to exceed $200 billion by 2030. Ethanol, derived primarily from agricultural by-products, constitutes 72 per cent of biofuel production, while biodiesel accounts for the rest. SAF, currently just 1.0 per cent of biodiesel production, is poised for exponential growth to 13 per cent of the biofuels market by 2030 or over $7.8 billion due to stringent regulatory mandates globally for the transition of the aviation sector toward blending more biofuels into JP1.

Initiatives like RefuelEU and the US SAF Grand Challenge target significant SAF blending into jet fuels by 2030 requiring over 17 million MT per year of SAF globally as against a production cap edging up to 7.8 million MT per year. Projections indicate that demand could outpace supply by as much as 25 per cent or more until 2040, and hence without substantial advancements in production capacity, supportive government policies, and technological innovations, the global SAF demand-supply gap is unlikely to close in the foreseeable future.

Pakistan needs to zoom in and bridge these anticipated global supply gaps as these projects can draw climate-linked development financing and get commissioned over the next five years.

Learning from global successes is important and Morocco, Indonesia, Brazil, and India provide valuable lessons and highlight the potential of a circular economy that creates value from waste. Morocco’s integrated solid waste management projects have reduced landfill waste and generated carbon credits, while in Indonesia, decentralised waste-to-biofuels initiatives have created local employment while addressing energy poverty.

Brazil's ‘Fuel of the Future’ programme aims to attract investments totaling BRL 300 billion by 2037 which is over $49 billion to enhance the biofuels sector, while in June 2024, British Petroleum acquired Bunge's 50 per cent stake in their Brazilian biofuels joint venture for $1.4 billion which reflects confidence in the sector's profitability.

In India, ethanol production has nearly tripled over the past five years aiming for a 20 per cent ethanol blending rate in petrol by 2026, positioning itself as the world's third-largest producer and consumer of ethanol. Similarly, a 5.0 per cent biodiesel blending target is set for 2030 which requires over 4.5 billion liters of biodiesel annually.

Noticing the global demand for SAF and by the domestic aviation industry, significant investment is also being routed into SAF production as India's National Biofuels Coordination Committee has set targets to blend 1.0 per cent SAF with jet fuel by 2027 and 2.0 per cent by 2028 and hence feedstock capacity to produce up to 24 million tons of SAF annually is being lined up. This is supported by the Indian government's biofuel policies which aims to reduce oil imports and promote cleaner energy, creating a favourable environment for climate-linked foreign investment too alongside its domestic business conglomerates.

With this backdrop of the global demand and domestic demographic dynamics, we can now outline specific tactics for the ‘how part’ for Pakistan to leverage and reshape the waste sector and biofuels feedstock value chains that can attract formal foreign and domestic climate-linked development financing and equity investment.

Crop residues such as rice husk, wheat straw, sugarcane bagasse, and maize stalks have the potential to produce 8.29 million metric tons of biomethane annually from crop residues alone, with an additional 3.6 million metric tons from animal waste. Besides incentivising farmers to sell agricultural waste rather than resorting to stubble burning, provincial governments and local enterprises can focus on the logistics for collecting and transporting agricultural residues to biofuel plants which can be set-up under strategic joint ventures.

Waste transported to privately owned biofuels production facilities at the tehsil/zilla level can offer lucrative return on investment which can be paid as a dividend or fee back to the provincial government by the private-sector entrepreneurs or biofuel facilities. Sustainable management of agricultural residues can improve soil quality, prevent burning, and enhance biodiversity adequately SDG15.

To be continued

The writer is a seasoned banker with 30 years of international expertise in global markets and development finance.He can be reached at:1adnanpasha@gmail.com