Threat of loss of exports, FDI looms large

KARACHI:

Pakistan faces the threat of losing exports and foreign direct investment (FDI) due to possible failure to comply with measures needed to combat climate change, as global buyers increasingly urge domestic producers to report their best and worst practices that contribute to global warming.

Speaking at the launch of a report titled “Pakistan’s Climate Crossroads: Private Sector Solutions to Climate Challenges” at the Investors Chamber of Commerce and Industry (OICCI) on Wednesday, OICCI President Rehan Shaikh said that compliance and nominal contribution are ensured Pakistan’s less than 1% greenhouse gas (GHG) emissions have provided it with an opportunity to attract $500 billion in international green finance through marketing of climate-friendly projects.

The Executive Director of the Sustainable Development Policy Institute (SDPI) and member of the International Advisory Committee for COP29, Dr. Abid Qaiyum Suleri, said that the government’s work on the carbon credit policy has entered its final stages. “Approving the policy ahead of the COP29 meeting will allow the country to attract financing through the sale of carbon credits to high greenhouse gas emitters, mainly in the developed world,” he stressed. Suleri said the Ministry of Climate Change was consulting with the provinces on the development of the carbon credit policy, as its implementation was a provincial matter.

He pointed out that the temperature of Karachi, the country’s industrial hub, had remained two degrees Celsius above pre-industrial levels since the 1970s compared to the global consensus to limit average temperature rise to 1.5 degrees Celsius or less for to mitigate the effects of climate change.

Citing examples, Suleri said South Africa and Indonesia prematurely shut down their coal-fired power plants in the past two years and managed to win global funding as part of the damage and loss fund.

However, he feared that the world may use climate compliance as a tool to influence geopolitics in the coming years. OICCI’s Rehan Shaikh stressed that climate compliance is necessary to remain competitive in overseas markets, adding that any increase in greenhouse gas emissions would reduce the country’s competitiveness.

Suleri added that global buyers had linked purchases from Pakistani producers to climate compliance reporting from October 2023 and every producer had to ensure they 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, accounting for nearly 60% of total export earnings.

Other notable industries in the country are cement, fertilizers and steel, but they are yet to adopt the reporting practices. Although their share of global exports remains negligible, to increase their footprint they will need to meet 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 planting, it could affect the export of Basmati, which is part of the $3.7 billion annual rice exports.

Shaikh mentioned that Pakistan has taken great strides that significantly mitigate climate challenges, including setting up massive renewable energy projects (solar and wind), producing multi-billion dollar organic cotton and plans to increase the sale of electric vehicles (EVs) in 30% by 2030.

He emphasized the need for greater cooperation between government, private and foreign actors to address climate challenges. “The nation must ensure good governance through policy making and its implementation in true letter and spirit.”

SDPI official Dr Khalid Waleed said Europe imposes a carbon tax on those industries that produce GHGs beyond the reference ceilings.

The carbon tax has raised their production costs to such high levels that they are forced to comply with the guidelines for the survival of their businesses, he said. He pointed out that Pakistani producers, who produce significantly less emissions, could sell carbon credits to those who emit excess GHGs.