Pakistan is amidst an unprecedented humanitarian crisis caused by the recent floods. The numbers related to the impact of this catastrophe are staggering — a third of the country is submerged under water that has led to 33 million people being displaced, a seventh of the population has lost its home, and over 1,000 lives have been lost.

Early estimates suggest that the overall loss could be as high as $20 billion. These costs include damage to the crops, houses, livestock and infrastructure. The actual loss could be higher as more data comes in through the ongoing rescue and rehabilitation efforts. In 2010, Pakistan experienced flooding of a similar enormity.

According to the Damage and Needs Assessment (DNA) conducted by World Bank and Asian Development Bank, Pakistan had to bear an estimated loss of more than Rs10bn to its national economy. While the losses in 2010 were huge, the current calamity is easily the biggest natural disaster Pakistan has experienced.

Read: Satellite photos show extent of flooding in Pakistan

In some sense, Pakistan is a victim of cross-border greenhouse gas emissions as its losses are disproportionate to its contribution toward climate change. Although it contributes less than 1 per cent of global carbon emissions, it remains among the countries most vulnerable to climate change. It is ranked 152nd among 181 countries based on its vulnerability to climate change and readiness to improve its resilience.

An estimated 0.5m electric vehicles can save up to 0.68bn litres (Rs46bn) annually, but large-scale investments are needed to provide technologically viable and economically-competitive alternatives

Adverse impacts of climate change will strain the country’s water resources and affect approximately 5m lives and their livelihoods. At the national level, the annual loss to Pakistan’s GDP could be as high as $3.8bn.

Pakistan has not received its due share of official assistance despite it being a vulnerable frontline state with climate mitigation and adaptation requirements in the range of $7-14bn annually. In the face of this shortfall, new climate finance commitments and mainstreaming them in the budget are extremely important.

The energy crisis is a structural economic problem that various governments have been unable to solve with long-term sustainable policies. The tendency has been to plug inefficiencies with short-term policies such as subsidies and sovereign guarantees to power producers. Reliance on fossil fuels compounds the adverse effects of climate change — a problem that is faced by not only Pakistan but plagues the entire global community.

Successive governments have shown desire and commitment toward energy diversification and efficient resource allocation. Pakistan is a signatory to various treaties and international frameworks relating to climate change, such as the Conference of Parties held under the United Nations Climate Change Conferences and the UN’s Sustainable Development Goals.

To pursue the goals set under these frameworks, Pakistan’s biggest initiative is its Alternative and Renewable Energy (ARE) Policy which was introduced in 2019. Under this policy, renewable energy projects will be proactively implemented. A target has been set whereby Pakistan intends to have 20pc of its generation capacity as ARE technologies by 2025 and 30pc by 2030.

Complementing this target is the goal of increasing the share of hydel to 30pc, which would be a big shift towards making power generation environmentally and fiscally friendly.

Strengthening and opening up financing avenues for these initiatives is as important as developing these frameworks. “Green financing” augments the financial flows from the banking, micro-credit, insurance and investment from the public, private and not-for-profit sectors.

As such, the global green financing market is growing at an aggressive pace due to the immense potential of green projects. It is expected that the global green investment market will touch $1 trillion in the first part of this decade, signalling a pivotal milestone for climate finance.

The success of Pakistan’s first green bond issued by the Water & Power Development Authority and the State Bank of Pakistan’s refinance scheme that financed over 700 projects shows that climate finance has promise. Pakistan will have to aggressively pursue all local and international avenues to achieve its goal of a green economy.

It would be amiss to mention clean energy sources without energy efficiency, a process through which more efficient and advanced technologies are deployed to reduce carbon emissions and contribute positively to climate change.

According to the National Energy Efficiency and Conservation Authority, over $4bn in investment opportunities exist in energy efficiency improvements in the industrial sector. There is room for efficiencies across a whole host of industrial segments ranging from textile, steel and foundry to sugar and ceramics.

The textile segment, accounting for approximately 28pc of the overall electricity consumption by industries, offers considerable efficiency gains. The transport sector, the biggest consumer of petroleum, also offers considerable gains.

An estimated 0.5m electric vehicles can save up to 0.68bn litres annually or Rs46bn (as of 2019). While the government has given tax breaks for electric vehicles in the current budget, this is an encouraging step that can be a segue to import substitution and development of the local industry, as in the case of Jolta Electric, Pakistan’s first electric bike manufacturer.

Green energy offers an opportunity within a challenge, but Pakistan will have to move beyond broad frameworks to long-term commitments and their realisation. To make deeper cuts in emissions, large-scale investments and innovations are needed to provide technologically-viable and economically-competitive alternatives to fossil-fuel-intensive technologies in sectors like industry, transport and power.

An economy based on clean energy can reduce Pakistan’s dependence on fossil fuel imports and make it less vulnerable to exogenous shocks. This will also curb the huge economic losses in terms of natural disasters, depletion of natural resources and endangerment of livelihoods.

The writer is senior manager knowledge management at Karandaaz Pakistan

Published in Dawn, The Business and Finance Weekly, September 19th, 2022