Threat of losing exports, FDI looms
Global buyers have linked purchases from Pakistani producers with reporting climate compliance since Oct 2023 and every producer needs to make sure that it adopts the reporting practices by the year 2026. photo: FILE
Pakistan is facing the threat of losing exports and foreign direct investment (FDI) because of potential failure to comply with measures required to combat climate change as global buyers increasingly urge domestic producers to report their best and bad practices contributing to global warming.
Speaking at the launch of a report titled "Pakistan's Climate Crossroads: Private Sector Solutions to Climate Challenges" at the Overseas Investors Chamber of Commerce and Industry (OICCI) on Wednesday, OICCI President Rehan Shaikh said ensuring compliance and Pakistan's nominal contribution of less than 1% to greenhouse gas emissions (GHG) provided it an opportunity to attract international green financing of $500 billion through marketing climate-friendly projects.
Sustainable Development Policy Institute (SDPI) Executive Director and International Advisory Committee Member for COP29 Dr Abid Qaiyum Suleri said the government's work on the carbon credit policy had entered final stages. "Approval of the policy ahead of COP29 meeting will enable the country to attract financing through the sale of carbon credits to high GHG emitters, mostly in the developed world," he stressed. Suleri said the Ministry of Climate Change was consulting provinces on rolling out the carbon credit policy as its implementation was a provincial subject.
He pointed out that the temperature of Karachi, the country's industrial hub, had remained two-degree Celsius above pre-industrial levels since the 1970s compared to the global consensus to limit the average increase in temperature to 1.5-degree Celsius or less to mitigate the impact of climate change.
Citing examples, Suleri said South Africa and Indonesia had prematurely wound up their coal-fired power plants over the past couple of years and managed to win global financing as part of the loss and damage fund.
He, however, feared that the world may use climate compliance as a tool to influence geopolitics in the coming years. Rehan Shaikh of the OICCI emphasised that climate compliance was a must to remain competitive in overseas markets, adding that any rise in GHG emissions would dent competitiveness of the country.
Suleri added that global buyers had linked purchases from Pakistani producers with reporting climate compliance since October 2023 and every producer needed to make sure that it adopted the reporting practices by the year 2026. He revealed that many Pakistani textile manufacturers and exporters had started reporting and complying with climate guidelines as they were the leading exporters, fetching almost 60% of the total export earnings.
Other notable industries in the country are cement, fertiliser and steel but they have not yet adopted the reporting practices. Though their share in global exports remains negligible, to increase the footprint they will have to meet the reporting standards and ensure compliance with the Paris Declaration and COP agreements.
Global buyers may question the process of growing rice in Pakistan. If they find that methane – a greenhouse gas – is produced during plantation, it may impact Basmati export, which is part of the annual rice exports worth $3.7 billion.
Shaikh mentioned that Pakistan was taking great strides which were significantly mitigating climate challenges including the setting up of huge renewable (solar and wind) energy projects, producing multibillion-dollar worth of organic cotton and plans to increase the sale of electric vehicles (EVs) to 30% by 2030.
He stressed the need for greater collaboration among government, private and foreign stakeholders to address climate challenges. "The nation has to ensure good governance through policymaking and its implementation in true letter and spirit."
SDPI official Dr Khalid Waleed said Europe was imposing a carbon tax on those industries which were producing GHG over and above the benchmark ceilings.
Carbon tax has taken their cost of production to such high levels that they are forced to comply with the guidelines for survival of their businesses, he said. He stressed that Pakistani producers, which were generating significantly less emissions, could sell carbon credits to those emitting excess GHG.