Looking Ahead at 2025

Pakistan’s Uncertain Energy Transition

Date: January 3, 2025

Maha Kamal
Energy, Resources and Growth (ERG) Consultant
Oxford Policy Management

Moving to renewable energy sources is a crucial step towards climate change mitigation at the global level. For countries like Pakistan that are highly vulnerable to climate change impacts, adaptation is critical for facing the existential threats from climate change, especially since Pakistan consistently ranks among the top ten countries most at risk. Traditionally the nation has been heavily reliant on fossil fuels, leading to an energy crisis marked by volatile global energy markets and unaffordable energy prices. According to the Power ministry, more than 50 % of energy today in Pakistan is generated through hydel and nuclear, with a 20% reliance on RLNG, while a move towards distributed solar energy has led to higher decarbonisation across the country. With prices for solar infrastructure going down via high imports from China, Pakistan has seen a surge in solar energy consumption, often now called the “rooftop revolution”, based on either net metering or even off-grid solutions, which is further reducing public reliance on expensive and dirty fossil fuels, triggering a challenge to the stability of an ageing and leaky grid. 

Pakistan’s journey towards an energy transition holds valuable lessons. The country’s updated Nationally Determined Contribution (NDC) in 2021 set ambitious goals of achieving 60% renewable energy and 30% electric vehicles by 2030, along with a ban on imported coal. This commitment highlighted the recognition of renewable energy’s potential in meeting Pakistan’s energy needs and mitigating climate change. Pakistan possesses abundant renewable energy resources, with significant potential for solar, wind, hydropower, and geothermal energy.

With the NDC 3.0 submissions coming up in February 2025, Pakistan’s commitments may need to raise ambition. However, amidst political volatility and regulatory uncertainty, with contracts on IPPs in regulatory risk, caps on net-metering, on paper it is debatable that Pakistan will meet the earlier targets set forth for 2030. 

To facilitate a smoother energy transition, Pakistan has been developing a comprehensive policy framework. The Ministry of Climate Change has been working on a Monitoring, Reporting, and Verification (MRV) system, a national carbon registry, and an Emissions Trading System (ETS) framework. These initiatives aim to establish a transparent and accountable system for tracking emissions and promoting carbon market mechanisms. Furthermore, Pakistan’s exploration of green bonds and international capital markets demonstrates a commitment to attracting investments for sustainable energy projects. Transnational financing and Just Energy Transition Partnerships (JETP) are also being pursued to accelerate decarbonisation while addressing social costs.

Looking ahead, Pakistan needs to prioritize clear roadmaps and action plans for the clean energy transition to attract climate funds. Collaboration and coordination among ministries and departments are essential to address the multi-sectoral nature of climate change. A just transition that considers social equity and inclusivity is imperative, involving insights from front-line communities and local knowledge. Finally, a clear vision for a cleaner energy future is paramount, guiding policy decisions and investments towards sustainable and equitable outcomes.