LAHORE: State Bank of Pakistan (SBP) Governor Jamil Ahmed says a climate-driven banking framework is being worked out to facilitate energy transition finance.

“Transition to renewable energy in countries like Pakistan is strongly needed, but they do not have the required financing,” the SBP chief told the Asia Energy Transition Summit, organised by the Pakistan Renewable Energy Coalition (PREC) in collaboration with the Lahore University of Management Sciences’ Energy Institute, SDPI, Renewables First and PRIED on Saturday.

Mr Ahmad said countries like Pakistan need to make the most urgent energy transition because they are highly vulnerable to climate change and the most indebted in the world.

“Foreign individuals and institutional investors, therefore, are reluctant to invest in such countries,” he said in his keynote address at the two-day summit.

He said Pakistan was among the top 10 countries vulnerable to climate change despite its minimal contribution to the issue, adding that the country was committed to reducing its carbon footprint by 15 per cent by 2030, with a further reduction of 35pc conditional upon the availability of external climate financing.

He also highlighted Pakistan’s goal to generate 60pc of its energy from renewable sources by 2030, stressing the importance of adopting policies to reduce carbon emissions.

“Although Pakistan faces significant challenges in shifting to green energy, he noted that, despite recent macroeconomic difficulties, the country is in a better position than other Asian nations,” he added.

Mr Ahmad pointed out that the share of fossil fuel in Pakistan’s energy consumption has decreased by 4.8pc, from 86.79pc in 2019 to 81.9pc in 2023. He acknowledged the country’s abundance of natural resources like solar, wind, and hydropower. Additionally, he emphasised the need for developing countries to secure climate funding, stating that macroeconomic stability and structural reforms were essential to addressing climate change challenges.

“The SBP has taken several initiatives, including introducing a revised renewable energy financing scheme in 2016, issuing an environmental and social risk management manual in 2022, and collaborating with the World Bank to develop a Green Finance Taxonomy,” he said.

On the occasion, Power Minister Awais Ahmed Khan Leghari termed innovative financial solutions crucial to drive Pakistan’s energy transition. “Initiatives like the Asian Development Bank’s Energy Transition Mechanism and Just Energy Transition Partnerships can mobilise necessary capital for this transition,” he said.

Mr Leghari stressed we must follow the Chinese expertise to enhance our renewable energy capabilities, focusing on knowledge transfer, infrastructure development, and technical training. “Pakistan must not rely only on traditional funding sources, it should also consider instruments available in China’s financial markets, including RMB-based bonds. Additionally, Pakistan can position itself in the supply chain for green metals, which is critical for future energy technologies.”

The minister revealed that Pakistan has 54pc clean energy. This is going to be 82pc by 2034. Pakistan’s risk is at large due to climate change, as it experienced 11 floods in the past 8-9 years.

According to him, the fossil fuel part of our energy will reduce from 46pc to 18pc. “We expect to add over 1,200 megawatts in our solar grid every year from now until 2034.”

Delivering a keynote speech during another session, Dr Nafisa Shah, co-convener of the Parliamentary Forum on Energy and Economy, highlighted deep connections between energy and economic crises.

The summit’s first day was marked by a rich exchange of ideas and expertise as various sessions explored the multifaceted challenges and opportunities surrounding the region’s transition to renewable energy.

Experts and panellists discussed the progress and hurdles faced by different sub-regions, emphasising the need for tailored approaches to overcome barriers in the energy transition.

Dr Irfan Khan, Assistant Professor at Texas A&M University, Mr Ali Habib, Dr Zeeshan Ullah Khan, Dr Fiaz Chaudhry, Engr Usman Sheikh and others also spoke.

Published in Dawn, September 29th, 2024