Islamabad, Oct 25: A policy dialogue convened by Pakistan- German Climate and Energy Partnership (PGCEP) and the Sustainable Development Policy Institute (SDPI) in Islamabad explored the economic, social, and environmental implications of early coal power plant retirement in Pakistan.
The session, titled “Political Economy of Early Coal Retirement in Pakistan,” attracted stakeholders from government, civil society, and international organizations to discuss the challenges and potential solutions for transitioning to cleaner energy sources.
Mr. Sebastian Paust, Head of Development Cooperation at the German Embassy emphasized the importance of mitigating the negative social impacts of early coal retirement, drawing on Germany’s comprehensive approach that balances economic needs with environmental protection.
“Germany’s green policies offer a model for managing coal retirement with a focus on nature conservation,” Paust noted.
Mr. Shah Jahan Mirza, Managing Director, Private Power and Infrastructure Board, briefed about the ongoing efforts of the government to phase out inefficient thermal power projects, particularly those reliant on furnace oil.
“Amid a tariff crisis and growing environmental concerns, we are phasing out inefficient power plants, though the cost of closing these projects is substantial,” Mirza said.
He also mentioned pointed to Pakistan’s commitments under the’ s Nationally Determined Contributions (NDCs)goal of increasing the renewable energy share to 60% b53% by 2030, acknowledging that the country’s outdated transmission system requires urgent upgrades.
Mr. Malik Amin Aslam, Former Federal Minister for Environment Special Assistant to the Prime Minister on Climate Change, expressed the dilemma Pakistan faces: “On one hand, we have an abundant coal resource—180 million Tonnes for the next 200 years—while on the other, we are bound by global commitments to reduce emissions.
Mr. Badar Alam, CEO of Policy Research Institute for Equitable Developme Development (PRIED), focused on the environmental and social impacts in Thar, where coal mining has disrupted ecosystems and local livelihoods.
“Air and water pollution from coal mines has severely affected livestock, wildlife, and human health,” Alam said. He emphasized the region’s potential for solar, wind, and hydropower, calling for a shift to renewable sources before the environmental damage becomes irreversible.
Dr. Khalid Walid, Research Fellow, SDPI underscored the importance of creating economic incentives for early coal retirement.
He detailed the increasing pressure from global climate governance frameworks, such as the Paris Agreement, to decarbonize Pakistan’s energy sector.
“As consumer demand rises and international trade restrictions tighten, there is an urgent need to balance accessibility, affordability, and sustainability in our energy planning,” Dr. Walid said.
Ms. Haneea Issad, Energy Finance Specialist at IEEFA, said that concessional finance is a must to retire inefficient coal or fuel-based power plants as without adequate funding the transition of such power plants is a challenge.
The retiring is incomplete without redefining those power plants into green energy sources. Pakistan however lacks such frameworks or policy maps that can guide the transition.
She further added that retiring a coal power plant immediately would require approximately $1.14 billion per plant. However, if the plant is retired after 10 years, the financing requirement could decrease to between $300 million and $500 million, as the plants would be nearing the end of their power purchasing agreements. By that time, the debt and return on equity would have been paid off.
The discussion underscored the delicate balance between economic, social, and environmental factors as Pakistan grapples with its energy future, highlighting the urgent need for international support and strategic policymaking to achieve a sustainable transition.
