OPINION: Clean energy in Pakistan: a matter of sovereignty, survival, and industrial competitiveness

As the world marks Clean Energy Day, Pakistan confronts an uncomfortable truth: its clean energy challenge is not a failure of technology or ambition. It is a failure of political economy.

Pakistan’s climate commitments — articulated through its nationally determined contributions under the Paris Agreement — include an objective of shifting the energy mix toward around 60 percent renewable and alternative energy by 2030. A decade on, this ambition remains largely rhetorical. Yet paradoxically, Pakistan is already witnessing one of the fastest clean energy transitions in its history — not because of state policy, but despite it.

This contradiction reveals a deeper reality: for Pakistan, clean energy is no longer merely an environmental or climate issue. It has become a question of economic sovereignty, fiscal survival, and institutional credibility.

An energy system built on imports and debt

Pakistan’s energy sector remains heavily dependent on imported oil, gas, and coal. This dependence extracts a staggering cost — estimated at Rs 2.6 trillion annually — through foreign exchange pressure and circular debt. Capacity payments to inefficient power producers, transmission losses, and currency depreciation have turned electricity into one of the most destabilising elements of the economy.

In such a context, clean energy is not a luxury. It is the most rational response to persistent balance-of-payments crises, inflationary shocks, and structural vulnerability.

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Green energy as an industrial necessity, not a luxury

Pakistan’s industrial sector now operates under sustained environmental scrutiny. Environmental approvals, NOCs, and compliance clearances are no longer procedural formalities; they are prerequisites for financing, export access, and insurability. Environmental compliance has quietly become part of industrial cost.

This scrutiny is not abstract. Cities such as Lahore, Karachi, and Faisalabad face some of the worst air pollution in the country, with smog episodes disrupting health, productivity, and industrial operations. Environmental degradation has moved from being a distant concern to a daily economic constraint.

In this context, green energy is no longer an environmental add-on. It is a core industrial input. Around the world, industrial clusters are increasingly designed around renewable energy — not only to reduce emissions, but to stabilise costs, manage regulatory risk, and meet buyer requirements. From manufacturing parks in Southeast Asia to export zones in the Gulf, clean energy is embedded at the planning stage.

For Pakistan, the question is no longer whether industry should transition to clean energy, but whether it can remain competitive without it.

The solar revolution that happened without policy

The most striking development in Pakistan’s energy landscape has been the citizen-led solar boom. In 2024 alone, Pakistan imported an estimated 17 gigawatts of solar photovoltaic panels, contributing significantly to recent additions in national power capacity.

This transformation did not occur because of generous subsidies or coherent long-term planning. It happened because households and businesses responded rationally to unreliable supply, rising tariffs, and falling technology costs. Rooftop solar became a tool of economic self-defence.

In effect, Pakistani citizens achieved what the State could not: rapid energy diversification, reduced peak demand, and lower emissions — all without fiscal burden.

SEZs, EPZs and the case for captive renewable power

Pakistan’s regulatory framework already acknowledges this industrial reality. Under SEZ and EPZ regimes, captive power generation — including renewable energy — is permitted within zones to ensure reliable, competitive, and low-cost electricity for export-oriented industries.

The EPZ Rules 2023 go a step further by mandating that at least 20 percent of electricity consumed within Export Processing Zones must come from renewable sources such as solar. This is not symbolic regulation. It reflects a growing recognition that export competitiveness and energy sustainability are inseparable.

When industrial zones are designed around renewable captive power, firms gain predictable costs, reduced exposure to circular-debt shocks, and faster compliance with international buyer standards. This is how modern industrial clusters remain viable in an era of tightening climate and supply-chain scrutiny.

When policy turns against progress

Instead of consolidating these gains, recent policy decisions risk reversing them. The shift from net metering to net billing, combined with regulatory uncertainty, has unsettled consumers and investors alike. For many this signals not reform but retreat — an attempt to preserve a failing centralised system by penalising decentralised solutions.

Globally, energy transitions succeed when grids adapt to citizens. In Pakistan, the grid appears to be demanding that citizens adapt to its inefficiencies. This approach undermines trust and sends a damaging signal: innovation is tolerated only until it threatens entrenched interests.

What the world is doing differently

Countries that take clean energy seriously have already confronted these tensions. Germany restructured its grid to accommodate distributed generation. China paired large-scale renewable manufacturing with massive grid investment. India’s Gujarat region is developing one of the world’s largest hybrid wind-solar energy parks to power industrial growth. The United Arab Emirates, despite its hydrocarbon base, has aggressively expanded solar capacity while maintaining regulatory clarity for investors.

Across continents, industrial clusters are increasingly anchored in renewable energy ecosystems. Pakistan could replicate such clusters by integrating renewable energy into its industrial hubs, ensuring both environmental compliance and export competitiveness. The lesson is consistent: clean energy transitions are not driven by slogans, but by institutional alignment.

The real obstacle: political economy

Pakistan’s difficulty lies not in sunlight or wind availability, but in the political economy of power. Long-term contracts, capacity payments, rent-seeking, and regulatory capture have produced a system resistant to decentralisation. Clean energy disrupts this equilibrium by redistributing economic and decision-making power.

As long as policy prioritises preserving legacy arrangements over national competitiveness, climate commitments will remain ceremonial.

Competitiveness in a green-conscious global market

Clean energy now determines market access, not just production cost. Global consumers and buyers increasingly demand transparency in emissions and sustainability. Products are judged not only by price, but by how they are made.

For exporters, this introduces a new dimension of competitiveness. Energy-intensive goods produced on fossil-fuel-heavy grids face growing resistance, carbon-adjustment pressures, and reputational risk. Green energy, therefore, is no longer merely cheaper energy — it is qualifying energy.

Pakistan’s natural advantages make this transition feasible. The country sits on major wind corridors, enjoys high solar irradiation, favourable weather patterns, and possesses significant small-hydropower potential. Few countries combine such renewable diversity with such pressing economic need.

Failure to integrate these resources into industrial planning would be not just an environmental oversight, but a strategic economic error.

Clean energy as sovereignty

On Clean Energy Day, Pakistan should rethink its narrative. Clean energy is not about pleasing international forums or meeting abstract climate targets. It is about reducing external dependence, stabilising the economy, and restoring policy credibility.

A country that imports fuel to generate electricity while exporting its foreign exchange cannot claim energy security. A country whose citizens adapt faster than its institutions must confront deeper questions of governance.

Clean energy, then, is not climate symbolism. It is an industrial survival strategy in a world where sustainability increasingly determines investment, market access, and consumer demand. Until it is treated as an instrument of industrial policy and economic sovereignty — rather than a peripheral environmental concern — Pakistan’s energy transition will remain incomplete, and its competitiveness compromised.

Copyright Business Recorder, 2026