'Reforms needed to cut fossil fuel use'

Study flags debt risks, CBAM pressures and need for policy fixes to support industries

ISLAMABAD:

Pakistan needs urgent structural reforms to reduce its reliance on fossil fuels, improve export competitiveness and accelerate industrial growth to effectively respond to climate change challenges, experts said at a seminar held here on Thursday.

The views were expressed during a discussion titled "Driving a Just Industrial Transition: Role of Multilateral Development Banks (MDBs) and Solar Rush in Pakistan's Textile Sector." The seminar was organised by Alternate Development Services (ADS) and brought together policymakers, industrial professionals, economists and civil society representatives.

Speakers stressed the need to align MDB financing with Pakistan's national priorities, accelerate solar adoption in the textile sector and address climate justice concerns, including debt relief and concessional finance to prevent further burdening debt-stressed and debt-trapped nations like Pakistan.

A scoping study based on primary data from 80 textile mills in Faisalabad and Multan was presented by Dr Ali Abbas Kazmi of USPCASE, NUST, and Usman Bin Ahmad of ADS. The study mapped 82 textile units with a combined installed solar capacity of 237 megawatts. Techno-economic modelling showed that centralised solar models could achieve renewable energy shares of up to 87% at the lowest levelised cost of electricity (LCOE), while distributed systems offered quicker payback periods.

The study projected annual greenhouse gas emission (GHG) reductions of 1.6 to 1.76 billion kilograms of carbon dioxide, highlighting potential implications for compliance with the European Union's Carbon Border Adjustment Mechanism (CBAM). Policy proposals included tiered wheeling charges, incentives for solar-plus-storage incentives, and a Green Market Stabilisation and Blended Funds to de-risk investments.

Another study tracking MDB (Multilateral Development Bank) policies for Just Transition was presented by lead author Twangar Kazmi. The analysis compared the World Bank Group and Asian Development Bank country strategies with Pakistan's national frameworks, including NDC 3.0 (Third Nationally Determined Contribution), the Indicative Generation Capacity Expansion Plan (IGCEP) and the National Energy Efficiency & Conservation Policy and National Energy Mitigation and Adaptation Policies. While broad alignment was noted, the study identified gaps in metrics, reform sequencing, institutional capacity and just transition safeguards.

A case study of the Punjab Green Development Programme (PGDP) showed only 45% alignment, underscoring the need for robust monitoring, reporting and verification (MRV) systems. Recommendations included civil society-led "MDB Scorecards," multi-stakeholder working groups and advocacy for Article 6 carbon market readiness to bridge these gaps.

Panel discussions focused on regulatory barriers to solar adoption under the Competitive Trading Bilateral Contract Market (CTBCM) , including high use-of-system charges (UoSC)and legacy power purchase agreements (PPSAs). Participants also highlighted decarbonisation challenges for SMEs, including global pressures like CBAM, and industry responses through hybrid solar systems with a case study of Kohinoor.

The second session examined Multilateral Development Banks' (MDBs) priorities with experts praising the study's "menu card" for civil society interventions but urged micro-level surveys and restorative justice in transitions, critiquing MDBs' neoliberal approaches. They emphasised the burden of climate finance being delivered largely through loans rather than grants, contributing to rising debt pressures.

Concluding the seminar, ADS CEO Amjad Nazeer said Pakistan's energy crisis required coordinated policy action and called for a shift towards grants to avoid further debt stress. The session ended with calls for continued advocacy and greater support for small and medium-sized enterprises in the transition process.