The devastation that Pakistan faced from the floods in 2022 is still firmly etched in people’s minds. Almost a third of the country was under water. Loss of lives, livelihood, and homes took place at a scale most of us had never seen before. The total damage was estimated at $14.9 billion, the loss to GDP at $15.2bn, and rehabilitation needs at $16.3bn.

Caretaker Finance Minister Dr Shamshad Akhtar said at the Pakistan Climate Conference 2023 that the country needs $340bn over the next seven years to address climate change-related challenges. Nearly $200bn of this amount needs to go towards adaptation, while the remaining $140bn is required for mitigation efforts.

But the billion-dollar question is: where will all this money come from?

Climate justice

Since the 1850s — or the end of the Industrial Revolution — the US, UK, China and European countries have been the largest contributors of global greenhouse gas emissions (GHG) emissions. The cost of rapid industrialisation is borne disproportionately by developing countries like Pakistan, whose contribution to greenhouse gas emissions are negligible, but remain highly vulnerable to the effects of climate change. This makes climate finance a reparatory right — the right to repair and defend against the damage caused by the actions of another.

Under the United Nations Framework Convention on Climate Change (UNFCC), of which the Paris Agreement is the landmark treaty, climate finance is also a legal right of climate-vulnerable countries. Article 9(1) of the Paris Agreement states: “Developed country Parties shall provide financial resources to assist developing country Parties with respect to both mitigation and adaptation in continuation of their existing obligations under the Convention.”

Developed countries, hence, are expected and required to take the lead in mobilising climate finance from a wide variety of resources and distribute it according to the respective needs of developing countries. Per Article 9(5) of the Paris Agreement, developed countries are also required to communicate indicative quantitative and qualitative information concerning the collection, and disbursement of climate finance every two years.

Article 10(c) of the Kyoto Protocol requires all parties to the UNFCC to “cooperate in the promotion of effective modalities for the development, application and diffusion of, and take all practicable steps to promote, facilitate and finance, as appropriate, the transfer of, or access to, environmentally sound technologies, know-how, practices and processes pertinent to climate change, in particular to developing countries.”

To further these objectives, last year at the Conference of the Parties (COP) 27 held in Sharm El-Sheikh, Egypt, nearly 200 countries signed a pledge to set up the ‘Loss and Damage Fund’ to help developing countries adapt to and mitigate the effects of climate change.

Non-materialisation of past pledges

The Loss and Damage Fund has not materialised so far. In fact, key issues such as the amount of the fund, who will pay, and who will benefit, are yet to be determined. This makes the fund another entry in the long list of hollow climate pledges made by developed countries in the past. Other examples include the Green Climate Fund — created by the UNFCC IN 2010 to allocate resources to climate-resilient projects and programmes in developing countries — the Special Climate Change Fund and the Adaptation Fund.

Similarly, at COP15 in 2009, a pledge was made by the Organisation for Economic Co-operation and Development (OECD) to raise $100bn in climate finance annually. This amount also never truly materialised. Only a small portion of the amount pledged was disbursed to the 48 poorest countries of the world.

To their credit, parties to the UNFCC acknowledged this shortcoming at the recently concluded COP28 in Dubai. In the published outcome of the ‘First Global Stocktake’ — an exercise required periodically under Article 14 of the Paris Agreement to monitor the treaty’s implementation — the parties recognised the importance of ‘climate justice’ and the principle of ‘common but differentiated’ responsibilities.

The global stocktake recognised the challenges developing countries face in accessing finance to implement their national adaptation plans as well as the growing gap between their financing needs and the funds disbursed to address them.

Paragraph 67 highlighted: “The growing gap between the needs of developing country Parties, in particular those due to the increasing impacts of climate change compounded by difficult macroeconomic circumstances, and the support provided and mobilised for their efforts to implement their nationally determined contributions, highlighting that such needs are currently estimated at $5.8–5.9 trillion for the pre-2030 period”.

COP28 — a fresh approach?

While it is understandable for all developing and climate-vulnerable countries to take these pledges with a grain of salt, COP28 seems to have adopted a self-corrective approach in its renewed narrative, redressal of past pledges, and fresh commitments. Simon Stiell, UN Climate Change Executive Secretary termed climate finance the “great enabler of climate action” and asked for pledges to turn into real-economy outcomes.

The outcome of the global stocktake recognised governments as the key facilitators in removing barriers to mobilising climate finance. It notes that both adaptation and mitigation financing would need to increase manifold. It adds that there is sufficient global capital to close the global investment gap but there are barriers to redirecting capital to climate action. Governments through public funding and clear signals to investors are key in reducing these barriers alongside investers, central banks and financial regulators who can also play their part.

According to the UN Climate Press Release circulated at the end of COP28, $700 million has been pledged towards the Loss and Damage Fund, $12.8bn has been pledged towards the Green Climate Fund, $188m has been pledged towards the Adaptation Fund, and $174m has been pledged towards the Least Developed Countries and Special Climate Change Fund collectively.

It goes without saying that these pledges fall far short of the trillions of dollars needed by developing countries to transition to clean energy. Nevertheless, these are small but positive steps; hopefully with more to follow. It is expected that these pledges, as opposed to those in the past, will convert into material funds disbursed towards global adaptation and mitigation efforts.

In addition to the commitments above, the following announcements deserve recognition for their relevance to climate-vulnerable countries such as Pakistan:

• The Asian Development Bank, the Global Energy Alliance for People and Planet, and the Monetary Authority of Singapore announced plans to establish a blended finance partnership to finance energy transition projects in Asia.

• The Gates Foundation and the UAE committed $200m for agricultural innovation in sub-Saharan Africa and South Asia.

• Japan announced an assistance package to promote investments in decarbonisation and adaptation projects.

• The UAE pledged $200m to the International Monetary Fund Resilience Sustainability Trust to help climate resilience in vulnerable countries.

The domestic legal framework

To a large extent, the blame for the non-materialisation of climate finance lies with developed countries. However, developing countries are also at fault for ineffective self-advocacy. Pakistan alone has not played its part under the international framework to meet its obligations or procure international climate finance.

Our domestic legislation is non-conducive to international cooperation. The Pakistan Climate Change Act, 2017 set up the Pakistan Climate Change Authority. Among other functions, the authority is responsible for the development of suitable projects to attract international climate funding. Section 8(1)(c) of the Act states that the authority shall: “Prepare suitable adaptation and mitigation projects for submission to international and local institutions for funding…”

The authority is also responsible for ensuring that obligations outlined in international conventions, treaties, and agreements are fulfilled. This includes both national-level obligations towards international climate change mitigation and adaptation goals, and international obligations towards Pakistan, including the issuance of climate finance.

Pakistan’s National Climate Change Policy, 2021 also recognises that as a signatory to the UNFCC and a member state of the World Bank, it qualifies for financial assistance from developed countries. However, the policy also emphasises that Pakistan needs to create an enabling environment that can facilitate and attract this funding. Clause 9(b) of the policy states that the Government of Pakistan shall: “Continue to assess how best to position Pakistan vis-a-vis other groups of developing countries in order to secure adaptation funding”.

Further, clause 9(c) of the policy states that the government shall: “Ensure the access and effective use of opportunities available internationally for adaptation and mitigation efforts, e.g. through the Green Climate Fund, Clean Development Mechanism, Adaptation Fund, Global Environmental Facility, World Bank’s Forest Carbon Partnership Facility and Carbon credit trading”.

The Pakistan Framework for Implementation of Climate Change Policy, 2014-2030 while recognising Pakistan’s right to climate finance, highlights that in order for Pakistan to attract a significant portion of available climate financing, “the institutional capacity at federal and provincial level needs to be enhanced significantly to design and prepare effective and saleable programmes by the line ministries and other stakeholders”.

Without actively engaging stakeholders and building political support, interest from donor communities and international climate financiers will be limited.

In a writ petition filed in 2018 before the Lahore High Court (LHC) titled ‘Asghar Leghari vs Federation of Pakistan’, the petitioner argued that under the framework, Pakistan had to facilitate effective use of the available financial opportunities, both nationally and internationally. However, he argued that priority items under the framework had not been complied with and no action had been taken by the respective authorities to develop adaptative capacity and resilience to address climate change.

The LHC agreed with this argument and held that climate change has moved from a local environmental problem to a complex international one. The dictates of climate justice require developed countries to contribute more towards the global effort, as developing countries have a lesser capability to adapt. But that requires developing countries to engage with international stakeholders.

The court held that an active effort is required to build Pakistan’s adaptive capacity and climate resilience. It also held that it is incumbent upon the decision makers and power holders to protect the fundamental rights of its citizens enshrined in Article 9 (right to life) and Article 14 (right to human dignity) of the Constitution.

Missed opportunities

Pakistan’s capacity deficit in attracting climate financing follows to date. We should be vying for a chunk of the financing available under commitments outlined in the COP28 announcements, just as it should have done for all such announcements made in the past. The public has the right to know, and the government has the obligation to inform the public how it plans to meet its obligations under domestic law.

The sale and trade of carbon credit — tradable instruments stemming from the removal or avoidance of a ton of carbon dioxide from the atmosphere — is a viable and booming market for foreign investment. It was one of the climate solutions offered to world leaders at COP28. The current carbon market is estimated to be worth $2bn with roughly four in 10 credits sold in nature restoration projects.

There is a large potential for foreign investment in Pakistan through this scheme. Since 2021, nine countries have either signed bilateral agreements or formally discussed buying future carbon credits under the UN’s system, from 35 carbon credit-selling countries. Unfortunately, Pakistan does not feature in these deals.

Some work in the monetisable reforestation sector has been carried out through the Reducing Emissions from Deforestation and Forest Degradation (REDD+) programme envisaged at COP16 and reflected in Article 5 of the Paris Agreement. However, Pakistan has not yet completed the three phases required before results-based payments can be accessed.

With only 5pc of forest area in Pakistan, projects like REDD+ can serve as an excellent way to reduce GHG emissions, mitigate climate change, and earn investment through the sale and trade of resultant carbon credits in the voluntary carbon market.

Deficiencies and amendments

In addition to the need to be more proactive in attracting climate finance, Pakistan should also look to address some of the deficiencies in its domestic climate change framework.

Bureaucratic hurdles remain the primary concern. For the authority to carry out its range of functions under Section 8(1) of the Act, there is bound to be significant engagement with international entities. However, Section 10(2)(b) curtails the powers of the authority from entering into agreements or partnerships with foreign governments and organisations.

Section 10(2)(b) reads: “The authority shall have [the] power to enter into contracts or establish partnerships or associate with entities and organisations as it may consider appropriate to support its functions, provided that agreement with foreign governments and organisations shall be entered into only with approval [from] the government”.

Section 10(2)(b) read with Section 12(2), which sets up the Pakistan Climate Change Fund, requires all money granted by any entity, to be deposited into the fund. A review published in the LUMS Law Journal titled ‘Examining the Pakistan Climate Change Act 2017 in the Context of the Contemporary International Legal Regime’ states: “A key feature of the major revenue that comes for developmental projects is that they are foreign in nature, highlighting an issue with bureaucratic bottlenecks”.

Therefore, the removal of the requirement to approach the federal government and the authority to be given outright power to approach international actors and sign bilateral agreements is advised.

Further, the decisions of the authority above should be open to public scrutiny. Immunity given to the authority under Section 14 of the Act against legal proceedings under the garb of ‘good faith’ decisions needs to be eliminated. The Act should be amended to provide for an appellate tribunal to be composed of independent climate change experts. The appellate tribunal can act as the first appeal against any action or direction of the authority, or lack thereof. The second appeal, that is an appeal from an order of the appellate tribunal can be made directly to the High Courts.

Lastly, the Ministry of Climate Change, the departments functioning under it, and the authority should be cut down to size. Collectively, the operation of the Act should be smooth, and those tasked with carrying out its relevant functions should be efficient and productive. It does not make sense for a Green Bench of the High Court to set up commissions and standing committees, as it did in 2015 and 2018, to nudge the concerned ministries and departments towards climate-resilient development. The authority should perform these tasks without judicial intervention.

Pakistan’s mitigation efforts

Article 4 of the Paris Agreement requires all parties to accelerate the implementation of domestic mitigation measures. The right to access climate finance does not forego Pakistan’s own responsibility to align its nationally determined contributions with low GHG emissions. Paragraph 28 of the First Global Stocktake requires all parties to contribute to the following global efforts:

1. Tripling renewable energy capacity and doubling energy efficiency improvements by 2030.

2. Accelerating efforts towards the phase-down of unabated coal power.

3. Accelerating efforts globally towards net zero emission energy systems.

4. Transitioning away from fossil fuels in energy systems.

5. Accelerating zero and low-emission technologies, such as carbon capture.

6. Reducing non-carbon-dioxide emissions, including methane in particular.

7. Accelerating the reduction of emissions from road transport.

8. Phasing out inefficient fossil fuel subsidies.

Pakistan’s energy policy of late has shifted towards prioritising wind and solar for the production of electricity, as reflected in the Alternative and Renewable Energy Policy, 2019. However, we are still heavily reliant on fossil fuels for electricity generation. Our current energy mix as per the Economic Survey of Pakistan 2022-23 consists of 58.8pc thermal, 25.8pc hydroelectric and 8.6pc nuclear power, while alternative sources like wind and solar constitute only about 6.8pc of the overall mix. Despite recent progress, the share of thermal power is unsustainably high and must be brought down fast, in addition to the rapid introduction of electric vehicles for transportation.

It is encouraging to see that from the series of under-construction and under-consideration China-Pakistan Economic Corridor (CPEC) projects, most are hydroelectric and wind-powered. However, coal still features heavily as evidenced by the 300MW imported coal project at Gwadar which is at the financial close stage, and the 1320MW local coal power plant in Tharparkar, Sindh which is in its preliminary stages.

What is the way forward?

Looking ahead to COP29 and beyond, Pakistan must recognise its role in the international framework of climate action — a developing country that contributes very little to global GHG yet is highly vulnerable to climate change.

Dr Sultan Ahmad Al Jaber, COP28 President and the UAE Special Envoy for Climate Change, said in his letter to the Parties that developing countries need $2.4tr of annual investments in climate finance by 2030. He added that the focus moving forward will be on energy transition and delivering old promises. According to him, the former can be achieved by emphasising the Global South and earmarking more funds for investment in clean energy supply. The latter can be achieved by revamping pledges made under the Green Climate Fund, creating new funding arrangements for the Loss and Damage Fund, and encouraging multilateral development banks and development financial institutions to scale up adaptation finance.

It is hoped that moving forward, funds established, and pledges made will prove to be more than just numbers on paper. But Pakistan will need to be a front-runner in both, making its case for climate finance in global forums and carrying out its own adaptation and mitigation efforts under international and domestic regimes. The likelihood of extreme weather events will only increase in the future. Let us hope that we are better prepared.

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