Pakistan is one of the most polluted countries in the world and improving air quality, especially in urban centers, should be the most paramount concern for policymakers. To that end, the recent move to upgrade vehicle emission and fuel quality standards from Euro-II to Euro-V which would certainly decrease hazardous content in air and decrease pollution. Together with the Electric Vehicle Policy, over the next few years, Pakistan could significantly clean the air. But both have implications for the country’s automobile industry.
The Euro-V compliant fuels policy - very low on sulfur content - was introduced by the government earlier this year which is followed by Euro-V emission standards. In order to meet these new standards, the sudden jump from Euro-II to V will require that automobile assemblers import more costly components which will be part of the newly assembled vehicles. This will ultimately increase the cost of import in general, and cost of production in particular for the same vehicles which will likely push automakers to raise prices. While current imports are coming from Thailand and Indonesia that are not compliant with Euro-V or VI standards, assemblers will have to move their imports to countries farther-away that would also have cost-implications.
In its first quarterly report however, the SBP argues that the decision to go cleaner is in line with global practices and that countries are in fact, moving toward Euro-VI which was introduced in 2014. But since Pakistan has fallen behind other nations in terms of transitioning to better standards, industries will require a longer adjustment period till full compliance.
On the other side, new electric vehicle policy is also set to reduce CO2 emissions within the transport sector by encouraging new investments in EV assembling and infrastructure. The target to reach 30 percent EVs in the total vehicle market over the next decade might seem lofty but achievement of even half of this would mean the country is headed in the right direction, even if lagged.
These are necessary changes, even if it stresses out the automobile and petroleum industry in their attempts to comply. Pollution is an alarming threat to the lives and health of the people. As temperatures rise and pollution affects rainfall patterns, it would have serious implications on the agriculture and livestock sectors of the country which the economy invariably depends on, as well as the availability of drinking water in the country. These can be devastating challenges if not handled in due time.
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