Aligning ‘carbon pricing’ with

national priorities of Pakistan

Saadullah Ayaz
National Project Coordinator (SNC/ BUR1)
Ministry of Climate Change, Government of Pakistan/
United Nations Development Programme (UNDP) October 11th, 2018
 Disclaimer (kind of…)

• This presentation is based on personal (expert opinion) and is not

endorsed by any institution/ or Government of Pakistan (at any level)

• Aims at supporting discussion and facilitate decision making (for

objectivity of process/ tool under consideration)
 Pakistan & Paris Agreement
• Singed Paris Agreement in (April, 2016)~ 104th Country
• Submitted (conditional) NDC in (Nov, 2016)

PAKISTAN INDC STATEMENT

Having considered the existing potential for mitigation in the country,
Pakistan intends to reduce up to 20% of its 2030 projected greenhouse
(GHG) emissions subject to availability of international grants to meet the
total abatement cost

• a reduction of up to 20 percent in the projected emission figures would require an

investment of approximately US$ 40 billion (calculated at current prices)

• a reduction of 15 percent in GHG emissions amounts to US$ 15.6 billion; whereas

a 10 percent reduction is calculated as US$ 5.5 billion.
 Policy provisions for Carbon Pricing
National Climate Change Policy (2012)
• Clause: 5.1. (j). Consider introducing carbon tax on the use of environmentally
detrimental energy generation from fossil fuels
• Clause: 6 (I) (e). Strengthen the national institutional framework for undertaking
tasks related to the implementation of UNFCCC
Vision 2025
• Explicit recognition of the relevant risks (and associated economic and social
costs and implementation) of well-defined mitigation strategies/ measures
• ….. most of the current prescriptions for addressing climate change will have
the impact of raising the prices of conventional energy resources, without
making renewable energy resources more affordable
• recognizes that sufficient, reliable, clean and cost-effective availability of
energy, water and food– for now and the future– is indispensable in ensuring
sustainable economic growth and development
 Institutional & Policy Context
Ministry of Climate Change
• Federal (custodian of National CC Policy, 2012)
• National Operational Strategy for CDM, 2008
• Pakistan’s Intended Nationally Determined Contributions, 2016
Ministry of Planning Development & Reforms
Pakistan Vision, 2025
Ministry of Finance
deals with the subjects pertaining to finance of the Federal Government and
financial matters affecting the country as a whole… advice on economic and
financial policies; promotion of economic research (Rules of Business 1973,
amended in 2016)

Federal Board of Revenue/ Board of Investment

• FBR Act, 2007, Finance Acts …, 2017, Board of Investment Ordinance, 2001
Ministry of Industries
• Fertilizer Policy, 2001
• Auto Development Policy , 2016-2021
Ministry of Water & Power
• National Power Policy, 1994
• Transmission Line Policy, 1995
• National Power Policy, 1998
• Power Policy, 2002
• National Policy for Co-generation in Sugar Industry, 2008
• Bio-diesel Policy, 2008
Ministry of Textile Industry
• Textile Policy, 2014- 2019
Aviation Division
• National Aviation Policy, 2015
Ministry of Petroleum & Natural Resources
• National Mineral Policy, 1995
• Petroleum Exploration & Production Rules, 2009
• Tight Gas Exploration & Production Policy, 2011
• Liquefied Natural Gas Policy, 2011
• Low BTU Gas Pricing Policy, 2012
• Petroleum Policy, 2012
• LPG Prosecution and Distribution Policy Guidelines, 2013
• Utilization of Flare Gas Guidelines, 2016
 Analysis of Pakistan’s INDC
During (1994-2015), increase in the emissions was123 percent

Future projections for 2015-30 show a steady increase in emissions due to the
ambitious plans of the present government to spark economic activity through
large-scale investments in energy, communication and industrial infrastructure

Consistent with historical trends, both energy and agriculture sectors are
predicted to remain predominant in GHG emissions, whereas significant
increase is also expected in other sectors like industrial processes and waste

Pakistan offers different options as part of its INDC for emission reduction,
subject to the availability of Finance, Technology Development & Transfer and
Capacity Building by the international community

With per capita oil equivalent use of just 482 kg in year 2014, Pakistan is one of
the lowest ranked countries of the world in terms of energy use
 Carbon pricing and Pakistan

Opportunities~ Challenges~ Concerns & Expectations

 Opportunities
• Freedom in design on carbon pricing instrument (Country specific
context)
• Allows implementing measures where it is the most cost-
effective instead of picking specific sectors/measures
• Can fit with other existing instruments (e.g. renewable energy
policies, taxation policy)

• Possibly support implementation of long-term implementation of

INDC and achievement of long-terms goals of sustainable
development
 Opportunities
• Raising revenue collection~ utilization for adaptation measure

• Support reforms in taxation, economic assessment of policies

• Local environmental benefits (pollution control, health, sanitation...)

• Opportunity for reducing cost of fuel subsidies, though taxation

• Opportunity for penetration of new Environmentally sound

technologies

• Natural resource management (carbon stock, forestry and allied co-

benefits, like watershed, biodiversity, livelihoods… etc. )
 Current (informal) application~ Examples

• Subsidizing hybrid vehicles (vs) tax of old engines/ diesel

• Subsidy on Bus Rapid Transit (vs) non- euro compliant vehicles

 Challenges/ Concerns

• As Incentive to clean (versus) as price to pollute?

• Choosing national priority (development/energy security)
(versus) carbon pricing (voluntary participation)?
• Experience with CDM (incentive for emission reduction versus tax on
polluter?)

• Fairness…? Effectiveness?
• Political feasibility/ sensitivities (scope & coverage)?
• Issue of tracking carbon (emitter/ source)?
 Challenges/ Concerns
• Detailed Carbon Inventory? (monitoring, reporting, verification)
• Integration with sectoral policies?
• Technological barriers (transfer, investment….)?
• Smaller industrial (manufacturing) base~ additional taxation
• Institutional alignment? Capacities? Coordination?
• Regulatory barriers?
• Tax on producer/ emitter (vs) tax on consumer?
• Global market uncertainties (pricing mechanism still emerging)
 Expectations from feasibility study on
Carbon pricing
Rigorous consultation~ policy, institutional and socio- political review
(identify best fit) approach
• Not compromising on growth plans/ economic development
• Equity (inclusive development priorities)~ poverty
• Not one approach would fit everything
• No compulsion or imposing (voluntary consideration)

Continuous Experience learning (regional)

Gradual (reforms) process~ advocacy needs

Thanks

Saadullah Ayaz
National Project Coordinator (SNC/ BUR1)
Ministry of Climate Change, Government of Pakistan/
United Nations Development Programme
Email: saadullah.ayaz@undp.org