COP28 & Pakistan

Published December 4, 2023

PAKISTAN is one of the countries most vulnerable to climate change. It has paid a massive cost over the years due to recurring climate events that not just destroy infrastructure, but also livelihoods, while having a very high human cost.

The floods that ravaged the southern half of the country led to direct losses of more than $30 billion, while indirect losses that can be attributed to a disruption in the supply chain that led to spiralling inflation and loss of livelihoods would accumulate to a much higher amount.

The conversation regarding climate change largely revolves around transitioning towards clean energy and having mitigation mechanisms in place. However, Pakistan is in its very early stages of development, and in order to reduce poverty and increase incomes, it needs access to affordable, indigenous, and consistent energy supply. The same may be at loggerheads with the conventional climate change goals formulated and cascaded by the global north.

In order to prepare itself for a climate emergency, the country needs to revamp the way it operates and builds things completely. Climate mitigation can also be done using existing resources, with a more pro-people and pro-climate orientation.

Borrowing for climate projects with uncertain outcomes will worsen Pakistan’s fragile debt position

Doubling down on public transit infrastructure that operates on hybrid vehicles not only reduces reliance on imported fuel (and improves trade position) but also significantly reduces emissions.

An extensive public transit infrastructure across the country also enables access to a greater number of jobs while improving household income. Although not a typical climate initiative, a simple intervention like this can not only make us more climate resilient but also drive economic growth.

Similarly, an expansionary fiscal policy continues to drive various public sector projects. Identifying how those projects can be restructured, eliminated, or improved to reduce emissions that may be a direct or indirect consequence of any public sector investment is critical.

An initiative prioritising more roads, bridges, motorways, and underpasses over public transit infrastructure and railway logistics will always have a much higher carbon footprint and incentivise greater emissions, rather than a more efficient project that reduces carbon footprint.

Likewise, direct or indirect emissions from an inefficient gas transmission and distribution system or an inefficient electricity transmission and distribution network also contribute towards higher emissions — something that can be motivated by bringing more efficiency into the system. Making processes and infrastructure more efficient not only results in value-added economic activity but also plays a role in reducing emissions.

Each and every intervention that a government does has a climate component that can be addressed to make policies and interventions more climate friendly. Having distinct and independent projects and interventions for climate may assist in raising awareness but may not necessarily lead to scalable outcomes.

Similarly, before we look out to crowd in climate-related financing, it is imperative that structural changes are set in motion that improve existing infrastructure and reallocate existing budgetary resources towards better climate and economic outcomes.

A stretched external account, a perpetual fiscal deficit, and increasing reliance on sovereign debt to bridge deficits are factors that do not allow Pakistan to be in a position where it can internally generate sufficient resources to fund interventions that mitigate climate change.

It needs to start by revamping how existing resources are spent and how they can be utilised to generate better climate outcomes. Given a fragile domestic and external debt position, the sovereign’s ability to generate resources exclusively for climate mitigation is fairly non-existent.

There exist options of potential restructuring of external debt or swap-out of some external debt with climate-linked financial instruments, however, the same can only materialise if the fiscal side is brought in order, and a semblance of stability is achieved both on the fiscal and external side.

Achievement of such stability largely depends on the ability of the government to rationalise and overhaul the way it spends its budgets and generates revenues — the inability to address structural deficits will make it difficult to access any meaningful climate-linked financing while making the most vulnerable households susceptible to the vagaries of climate change.

A climate mitigation strategy that largely relies on raising more external debt to fund projects that may not have scalable outcomes won’t amount to much while worsening the country’s already fragile external debt position.

Any climate mitigation strategy must take into account how existing resources can be deployed in a manner that results in scalable outcomes pertaining to climate change without increasing reliance on external funding.

The threat is very much real — Pakistan has certainly not contributed towards it, considering negligible emissions per capita, but it is being disproportionately affected by it. Any delay in evolving a national consensus on climate may not just result in more economic losses but also the destruction of livelihoods, incomes and loss of lives through climatic events that could have been avoided through better mitigation measures.

The writer is an independent macroeconomist and energy analyst

Published in Dawn, The Business and Finance Weekly, December 4th, 2023

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