As highlighted in a recent World Bank report, Pakistan’s energy intensity is a pressing concern, clocking in at 4.2 megajoules (MJ) needed to produce just $1 of GDP. This figure starkly contrasts with neighboring Bangladesh, which manages to maintain a lower energy intensity of 1.9 MJ/US$, while Sri Lanka impressively stands at an even lower 1.7 MJ/US$. These numbers may seem abstract, but they carry real implications for businesses, families, and the economy as a whole.
The World Bank’s publication, titled ‘Pakistan Energy Efficiency, Industrial Energy Efficiency and Decarbonization (Ee&D),’ posits that Pakistan’s energy intensity is relatively high, indicating significant room for improvement in how energy is used across various sectors. The need for change is underscored by the sharp rise in energy costs. Just think about it: electricity prices have doubled, and the cost of gas has multiplied five-fold in recent times. These soaring costs are not just numbers on a balance sheet; they directly affect the livelihoods of workers, the profitability of businesses, and the overall economic landscape. The heavy burden of these expenses highlights the urgent need for infrastructure upgrades and effective advancements in industrial energy efficiency (IEE).
In fact, improving IEE is not just an abstract goal; it’s a key part of Pakistan’s Nationally Determined Contributions (NDCs). These contributions aim to enhance the country’s competitiveness on a global scale, especially in terms of carbon intensity and energy efficiency. By focusing on improving energy efficiency, Pakistan can tap into a promising solution that boosts cost savings while fostering economic growth. The industrial sector alone consumes over 37 percent of the country’s energy, which translates to more than 14 million tonnes of oil equivalent (MTOE) in fiscal year 2023. By investing in energy efficiency and decarbonizing key industries, we could see a significant reduction in GDP energy intensity, thereby enhancing industrial competitiveness and generating a multitude of economic and environmental perks.
Currently, Pakistan’s carbon intensity from industrial energy consumption stands at 55.13 grams of carbon dioxide (gCO2)/MJ. That’s a staggering 38 percent higher than the North American average and 50 percent above the European Union’s levels. It’s clear that there’s work to be done. The NDCs outline an ambitious plan to cut industrial emissions by 5.33 metric tonnes of CO2 equivalent (MtCO2e) by 2030. This plan isn’t just about setting targets; it includes specific initiatives aimed at modernizing industrial processes, enhancing energy efficiencies, and conducting energy audits tailored to each sector.
However, there are significant hurdles on this path. Many businesses harbor concerns that investing in energy efficiency will inflate production costs and diminish competitiveness. This worry intensifies when the discussion pivots to “decarbonization.” It’s important to reframe these concerns—while some initial expenses may be daunting, the long-term benefits will outweigh these costs. Many businesses mistakenly perceive those investments as setbacks when, in fact, they can often lead to lower overall production expenses in the long run.
To overcome these challenges, an urgent need exists for policies that not only foster energy efficiency but also create a supportive environment for industrial EE&D efforts. Since improving IEE is inherently linked to reducing greenhouse gas emissions, it’s crucial to maintain a clear policy focus. Given Pakistan’s vulnerability to climate change and its commitments under the NDC, strategically aligning decarbonization targets with energy efficiency policies is essential.
Yet another roadblock looms: financing. The high costs associated with commercial financing are a significant barrier for all industrial EE&D investments, especially for small and medium-sized enterprises (SMEs). These businesses often struggle to secure funding, compounded by banks that may not fully understand energy efficiency products or possess the technical know-how to assess the potential savings of such initiatives. Although the Energy Conservation Fund (ECF) exists, its current size falls woefully short of meeting the vast financing needs of the industrial sector.
In sum, Pakistan stands at a crossroads. The urgency to improve energy efficiency is palpable, and the path to a more sustainable future is clear—if we can navigate the concerns, leverage the benefits, and foster a supportive policy environment, we can transform these challenges into opportunities for economic growth and environmental sustainability. The time for action is now.
