Coal and the CPEC

The current government is very enthusiastic about the future of the CPEC regarding its multidimensional benefits for Pakistan. The Ministry of Planning and Development recently organised a summit at the Pak-China Friendship Centre Islamabad, titled ‘Discovering new possibilities – reaching new heights’. The prime minister inaugurated the summit and highlighted the importance of the CPEC for Pakistan and. 

Despite some provincial reservations, the corridor has the potential to add a lot to the economy of Pakistan if it is properly materialised, wisely managed and geopolitically realised. This article aims to shed light on some of the marginalised socioeconomic aspects of the corridor to get attention of the stakeholders for devising an optimal development policy agenda on it.

Though China’s generous economic support and the friendly response of Pakistan have led to the initiation of the corridor, differences in the economic and technological capacity of the countries may over-exploit local resources. Chinese products are cost effective (because of economies of scale) and already cheaply available in Pakistan. The local production of these goods by the Chinese in specialised zones (of which some will be owned by the Chinese, managed by the Chinese and operated by the Chinese) may further increase the vulnerability of local industry and products.

Local products and producers should be protected otherwise promotion of new industries will flourish at the cost of established local goods and producers.

Second, a huge amount is allocated for the generation of electricity via coal to overcome the existing electricity shortage and provide sufficient power needed by the economic zones and the rest of country. However, this process may endanger environmental sustainability by emitting carbon.

The use of coal for energy generation has adverse effects on human health. Coal combustion at coal-fired plants produce different pollutants such as carbon dioxide, sulfur dioxide, particulate matter, nitrogen oxides and other heavy metals which affect cardiovascular and respiratory system, cause mental disturbance, increase premature death and cancer.

Extraction of coal from mines and burning of coal in coal-fired power plants also increase occupational injuries. People who are living near these could also be affected from noise pollution. As a result of these adverse health consequences of coal-fired plants, the government health expenditure and also household level health costs could increase in the future.

Currently, although some of the cities of Pakistan are among the highly polluted cities of the world, overall carbon emission in Pakistan is rather low. Consequently, carbon emission resulting from the speedy process of industrialisation via the corridor may increase negative externalities.

Third, the emission of CO2 depends upon the technology and the quality of coal uses in the power plants. In Pakistan, lignite coal will be mostly used for the energy generation. Lignite is one of the dirty types of coal and consists of large amount of impurities. Comparatively, large amount of lignite is used for the production of energy which means a large amount of Greenhouse Gases (GHG) emission and more danger to the environment.

Pakistan is also trying to reduce GHG by five percent but at the same time initiating coal power plants for power generation will mismatch the target and despite increase the GHG emission. Around the world, most countries are replacing lignite coal and using the alternative best quality of coal for power generation.

Despite the negative externalities associated with the corridor, it is still important for the economic progress of the country. What we need is to go ahead with our plans rationally rather than excitedly. We need to consider the implicit cost of the CPEC along with the explicit cost to rightly estimate the benefits of and from the CPEC.

The writer is an assistant professor of economics at the Institute of Management Sciences, Peshawar. Email: zahoor.khan@imsciences.edu.pk