COP31

EDITORIAL: Prime Minister Shehbaz Sharif while attending COP31 on in Türkiye highlighted Pakistan’s solar power boom, indicative of greater reliance on renewables – an effective way to cut carbon dioxide emissions and thereby mitigate the negative impact of climate change. He boasted that “in just two years Pakistan has nearly added 22 gigawatts of rooftop solar capacity, a quiet revolution by ordinary citizens seeking affordable power and a cleaner more predictable future.” His claim may have been prompted by the focus of the conference on transitioning to a low carbon future.

However, two disturbing features need to be highlighted. First and foremost, the contracts signed with Independent Power Producers (IPPs) by previous governments are on take-or-pay basis that implies that, irrespective of the actual purchase of electricity, the administration is obligated to pay capacity payments and that too in US dollar. While from 2019-onwards administrations renegotiated contracts with IPPs with support from intelligence agencies, yet re-negotiations were successful only in relation to domestic IPPs and not those that were operated by foreign nationals. All IPP contracts, around 17, that were negotiated under the China Pakistan Economic Corridor (CPEC) umbrella in 2016 remain outside the purview of negotiations and repeated requests by the government of Pakistan to renegotiate have fallen by the wayside. It is simply not China’s policy to renegotiate a contract. Thus, solar power boom has implied higher capacity payments, which the government has been unable to meet as per contract with around 500 billion rupees owed to the Chinese IPPs at present, including late payment surcharges estimated at around 170 billion rupees.

Secondly, initially the government provided incentives for the purchase of solar power generation availed largely by the rich or middle income earners. The remaining grid buyers are lower-middle and low-income earners whose utility bills have been raised to meet the full-cost recovery objective as stipulated in the ongoing International Monetary Fund programme. This has necessitated a revision in policy that has increased the overall financial and payback period of operating solar energy systems, particularly those relating to net-metering buyback rate revisions and regulatory fees.

The government no doubt felt compelled to support solar power, given that Pakistan is one of the world’s most climate-stressed countries, ranking among the top 10 to 15 nations most vulnerable to climate change despite contributing a negligible fraction (about 0.8 percent) to global carbon emissions. The forgoing reveals the obvious: solar policy decision may have been taken in haste on an ad hoc basis without taking a more holistic approach to the existing power generation. Policies, it is hoped, will henceforth be drafted by sector experts who take existing contracts into account.

Shehbaz Sharif also highlighted the government’s auto policy and pledged that 30 percent of all vehicles in the country would be electric by 2030, a mere four years away. To date, the infrastructure to power these vehicles is not yet in place and, additionally, Pakistan’s electricity rates are one of the highest in the region - a constant lament of the productive sectors that renders their output uncompetitive on the world market. Load-shedding too is not yet a thing of the past.

There is no doubt that Pakistan has suffered immeasurable losses due to floods in recent years—losses estimated at tens of billions of dollars, accompanied by over 30 million Pakistanis displaced in a single year, living under the open skies. While moving toward renewables is fully supported, a holistic, sector-wide approach—as aforementioned — is required to maximize benefits for both the general public and the government treasury.

Copyright Business Recorder, 2026