COMMENT: Carbon markets in Pakistan – Can the myth be turned into a reality?

Published 11:48 on September 26, 2019  /  Last updated at 03:01 on September 27, 2019  /  Asia Pacific, Conversations, Other APAC, Views  /  No Comments

A carbon pricing instrument could support Pakistan reducing its greenhouse gas emissions and set the country into a lower-emissions pathway. However, carbon pricing cannot be seen in isolation, as an end in itself, and therefore it is important to ensure such approach is aligned with national priorities and that it can support and reinforce other existing policies, UNFCCC carbon pricing consultant Syeda Hadika Jamshaid argues in this op-ed.

By Syeda Hadika Jamshaid, Consultant Carbon Pricing Mechanisms, UNFCCC

The idea that a warming planet threatens stability around the globe is not a new one. The global average temperature has already increased by one degree Celsius above pre- industrial level, resulting in an increase in the frequency and intensity of natural hazards such as floods, heatwaves, droughts, rising sea-levels, soil degradation, wildfires and storms. Pakistan is also severely impacted and it has experienced some of its worst disasters in recent years due to climate change. According to the Global Climate Risk Index, compiled by GermanWatch, Pakistan ranks as one of the ten most affected countries by climate change. Given the vulnerability and socioeconomic situation of the country, adaptation seems like the obvious national priority of Pakistan when it comes to dealing with climate change.

While adaptation takes precedence over mitigation, Pakistan acknowledges its role as a “responsible member” of the international community in combating climate change and the importance of adopting mitigation efforts domestically. This is reflected in major policy documents on climate change issued by the government, namely the National Climate Change Policy (2012), the Pakistan’s Nationally Determined Contribution (NDC) (2015), and the Pakistan Climate Change Act (2016).

According to its NDC, which lays out Pakistan’s intentions and commitments on climate change to the international community, national greenhouse gas emissions are expected to increase fourfold by 2030 in relation to 2015 levels. The energy sector is the single largest contributor to emissions, accounting for 46 per cent of total emissions, and is projected to increase to 56 per cent by 2030. These projections definitely call Pakistan to take appropriate actions to combat climate change.

HOW TO ADDRESS THE CHALLENGE?

There is much talk around behavioral change being the most important instrument to fight climate change, both globally and domestically. Educating people to change their lifestyles and creating awareness around environmental sustainability and its impacts is one of the solutions. However, given the magnitude of the issue, are efforts to encourage behavioral changes enough? Much of it is left at the discretion of people – e.g. to use energy efficient appliances, invest in solar panels for distributed energy generation, or reduce the consumption of single-use plastics – which is important but might not necessarily motivate the majority to embark in the transition towards a low- carbon and climate resilient pathway.

In my opinion, the damage is beyond the lifestyle choices of individuals. In fact, climate change and the will to combat it depends on the choices made by every single actor in society, from the individual citizen to the largest corporation. Yet, it is the role of government to create the conditions for instilling change and lead by example.

Looking at the predicted scenarios of Pakistan, climate change mitigation instruments such as carbon pricing can play a vital role in steering the country towards a low-carbon economic development trajectory. Simply put, carbon pricing consists in putting a price on the emissions of greenhouse gases. A price on emissions functions as an incentive mechanism whereby the societal, economic, and environmental costs associated with their release into the atmosphere are “internalized” back to the sources of emissions. The price signal introduced this way is an efficient way of encouraging a shift in practices, consumption and investment patterns towards less carbon intensive options, and could at the same time support the achievement of sustainable development goals in Pakistan.

A key success factor for the effective design of carbon pricing instruments is the need to take into account the specific circumstances and priorities of the countries where its adoption is considered. Pakistan is a lower-middle income country, whose national priorities hinge on sustaining strong economic growth. According to Vision 2025, which is a roadmap for national development, economic growth of at least 7 per cent on a yearly basis is required for creating jobs, reducing poverty and eventually reaching upper-middle income status.

A carbon pricing instrument could support Pakistan reducing its greenhouse gas emissions and set the country into a lower-emissions pathway. However, carbon pricing cannot be seen in isolation, as an end in itself, and therefore it is important to ensure such approach is aligned with national priorities and that it can support and reinforce other existing policies.

DIRECT AND INDIRECT BENEFITS OF CARBON PRICING

Along with emissions reduction, there are other several benefits of introducing carbon pricing. It can accelerate the deployment of climate-friendly solutions, such as renewable energies, whose potential in Pakistan is still largely untapped. Carbon pricing could also boost investments in these sectors, thereby reducing the vulnerability of the country to energy imports and potentially enabling the “energy poor”, i.e. those without electricity or who rely on traditional biomass for heating and cooking, to have access sustainable forms of energy in a more affordable manner.

Another important benefit that could be tapped alongside with a carbon pricing instrument is the reduction of local air pollutants. Air pollution due to emissions of particulate matter, nitrogen oxides and sulphur oxide from industrial facilities or transport vehicles is a problem that the dweller of any big city in Pakistan is familiar with. In developing countries such as Pakistan, societal benefits from reduced air pollution alone are estimated to the tune of at least 50 USD per ton of carbon dioxide abated, mostly in the form of avoided deaths and reduced health care costs. Carbon pricing can also be an important source of revenue for the government, which can be reinvested in programs that foster emission reductions such as energy efficiency, but also in initiatives that could support development priorities of Pakistan, such as on climate change adaptation and disaster risk reduction.

WHAT IS THE MINISTRY OF CLIMATE CHANGE DOING?

The Ministry of Climate Change (MoCC) under the leadership of Malik Amin Aslam, Advisor to the Prime Minister on Climate Change, is considering the establishment of a carbon market in Pakistan. During the recent launch of the study “Introduction of Carbon Pricing Instruments in Pakistan,” which was conducted by MoCC in collaboration with the United Nations Framework Convention on Climate Change (UNFCCC), he reiterated the government’s commitment towards a cleaner, greener, and sustainable Pakistan. Highlighting the success of the Billion Tree Tsunami initiative, the Advisor reinforced the government’s intention of capitalizing on the opportunities for establishing a domestic carbon market stating that “Pakistan needs to explore how the outcomes of projects like the Ten Billion Tree Tsunami can be developed into a commodity that can be sold in international carbon markets.”

During the launch ceremony of the study, it was recommended the setup of a ‘NationalCarbon Markets Establishment Committee’ tasked with the mandate of assessing in detail the prospects for a carbon market in Pakistan and laying out the conditions for its establishment. This committee will have equal representation from federal ministries, provincial governments and the private sector. The composition of the committee clearly points out to the stakeholders that are expected to take a lead in the development of a domestic carbon market and ultimately benefit from it: businesses, provinces and their respective constituencies.

Initiatives like these make us hopeful about a greener future for Pakistan. MoCC is taking many initiatives, which will help Pakistan to move towards sustainable economic growth. This will not only help in contributing towards tackling climate change but will also boost the country image in the international arena for future collaborations and partnerships for reducing greenhouse gas emissions.

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