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ISLAMABAD: The Pak-German Climate & Energy Partnership (PCCEP) in collaboration with Sustainable Development Policy Institute (SDPI) is organising a symposium on "energy transition in the textiles sector-way forward through electricity market reforms and green financing”.

The objective of the symposium to be held on May 7, 2024 will be: (i) to identify the key challenges and opportunities for enabling energy transition in the textile industry of Pakistan; (ii) to identify the potential bottlenecks and forthcoming challenges in effective transition towards a competitive power sector (particularly the CTBCM model), including need assessment of the stakeholder value chain; (iii) to analyze the current challenges, bottlenecks, and knowledge gaps around green and alternate financing mechanisms in Pakistan; and (iv) to explore green and alternate financing mechanisms that can mobilize necessary finance for enabling energy transition in the textile industry, especially in the context of EU Cross Border Adjustment Mechanism (CBAM).

In response to CBAM, Pakistan's textile industry has made strides in greening its supply chain. Within the realm of Pakistan’s textile industrial landscape, a noteworthy shift is underway. A transition towards more sustainable and self-reliant energy practices. Companies recognising the economic and environmental advantages are increasingly turning towards Solar-PV integrated into their captive generation mix. The grids unreliability, marked by voltage fluctuations and supply disruptions, further tilts the scale in favour of captive power.

Consequently, industries find it more prudent to invest in their power generation infrastructure than rely on a less dependable grid system. Captive power generation, particularly through Solar-PV, has emerged as a frontrunner as it offers reliable, sustainable, affordable energy. It is not only cheaper than grid electricity but also more economical than subsidized natural gas, a significant incentive for companies looking to optimize their energy expenditures.

According to the PCCEP, in the backdrop of challenges, there is need to bring necessary reform measures that not only incentivise the textile industry through alternate economic engines, but also provides a level-playing field through increased use of renewable energy sources. This dialogue would aim to highlight two key factors; i.e., energy market reforms and greening financing mechanisms.

Pakistan’s power sector is introducing the Competitive Trading Bilateral Contracts Market (CTBCM) to reduce power tariffs and inefficiencies in the system, align industrial growth and wheeling regulations, facilitate risk sharing between stakeholders and encourage the growth of flexible power market by introducing competition in the system.

Further, it could increase transparency, accountability, and provide an enabling environment for the private sector to ensure return on their investments through market competition.

However, while Pakistan is going through market liberalisation under this regime, it is critical to address the forthcoming challenges, including but not limited to: (i) necessary policy asks; (ii) governance structure; (iii) learning from the successes and failures of the model; and (iv) addressing the capacity building needs of relevant institutions.

Given these challenges, the symposium will identify: (i) potential bottlenecks and forthcoming challenges in effective transition towards a competitive power sector; and (ii) assess the effectiveness of current regulatory frameworks and policy instruments in Pakistan to promote competition and support the industrial transition towards renewable energy resources.

This has now been well established that renewable energy and low-carbon development is not just an environment but also an economic case for the industries to transition. Hence, deploying effective "green and alter ate financing mechanisms" play an extremely critical role for optimising investments in climate resilient development and technologies to remove, and in some cases, reduce emissions, and to drive progress towards Net Zero. These mechanisms may include green financing measures such as incentive schemes for Renewable Energy (RE) adoption, tax breaks for low-carbon technologies, green/climate bonds, etc. Further, this also involves mobilising finance under the international green transition funds and the use of alternate economic engines such as "Carbon Trading".

Copyright Business Recorder, 2024

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