“Green finance is the future”

November 24, 2019

An interview with Hashim Jawan Bakht, the Punjab finance minister, on how the government plans to achieve economic prosperity and development while addressing climate crises

The world is opening up to a debate on the economic impact of climate crises which until recently, failed to capture the full damage. As research has made progress toward more realistic estimates, do you think the country’s economic policy is ready to address this issue given the incredible array of factors that have not been dealt so far?

Hashim Jawan Bakht: From a financial point of view, we have already seen the impact of extreme weather events affecting health and damaging infrastructure and private property, reducing wealth and decreasing productivity. In case of developing countries like Pakistan, such events can disrupt economic activity and trade, damages agricultural sector, create resource shortages and divert capital from more productive uses in, for example, technology and innovation, to reconstruction and replacement. From an economic point of view, such uncertainty about future losses could also lead to lower investment. We are beginning to understand that the climate crisis is also a source of financial risk having system-wide negative impacts on financial stability and macroeconomic conditions. Since the country is going through a reformative phase, I believe it’s an opportunity for us to factor in all possible aspects leading not only to assessing the economic impact of climate crises but also taking steps to mitigate these challenges.

TNS: Recently, you’ve been heard using the term ‘green finance’ and transition towards a low-carbon economy, an idea Singapore’s regulators are enacting to support the city state in promoting environmentally — sustainable projects and mitigating climate change risks in the region. How is that idea being replicated in the Punjab?

HJB: Green finance is the future. Globally, green bond issuance hit $100bn in the first six months of 2019, according to the Climate Bonds Initiative (CBI) – the fastest sum reached in a single year. But overall, Asia-Pacific has been found lacking.

According to the World Wide Fund for Nature (WWF) 2019 Sustainable Banking Assessment, only four out of the 35 banks analysed across the region, were meeting at least half of the outlined criteria for sustainability, with the exception of Singapore’s DBS, OCBC and United Overseas Bank (UOB) which were praised for their moves to cease any future investments into coal-fired power plants or deforestation.

Our best option now is to start our journey towards a smooth transition to a low-carbon and sustainable economy, which could be done by acknowledging and managing climate change risks by integrating environmental, social and governance principles into our day-to-day risk management process. In this regard, the government of Punjab recently launched a PKR 40 billion Punjab Green Development Programme (PGDP), with the support of World Bank, to address environmental issues and promote green development. A major component of the programme is regarding Mobilisation of Sustainable Green Financing which includes establishing an Environment Endowment Fund (EEF). The goal is to promote and support environmental stewardship and sustainable living in the province through grant programmes.

The purpose of the EFF is to address environmental problems by utilising available capital, expertise and resources to encourage all sectors to work in tandem towards mitigating the causes of environmental degradation. According to the WWF report, Asia has $5,000 bn of sustainable development investment needs between now and 2030 and governments cannot provide all of this finance without help from private sector capital. The PGDP is our first step for green financing to take off in Pakistan.

TNS: The idea of putting a price on carbon dioxide emissions to help tackle climate change has been slowly spreading around the globe over the past two decades. Whereas, our economy is CO2 intensive, and with very little checks in place, multinationals walk scot free without sharing responsibility polluting the environment. In your opinion, can direct taxes on fossil fuels or cap-and-trade programmes can the government flip the model?

HJB: Whereas, economists have long suggested that raising the cost of burning coal, oil and gas can be a cost-effective way to curb emissions most countries have found it politically difficult to set the level of carbon tax required to mitigate the impact of climate change. For example, in France and Australia, efforts to increase carbon taxes were shelved after a backlash from voters angry about rising energy prices. Similarly, developing countries like Pakistan are in a situation where their capacity to reduce their emissions is limited by a lack of funding and their economic conditions.

The government of Punjab through its Environmental Protection Department has proposed an Emissions Trading Scheme within the province which aims to cap total pollution emissions, increase regulatory transparency and accountability and reduce compliance costs for the participants. Carbon pricing in Pakistan may never be politically feasible, but there are ways to structure pricing and subsidies that make adoption more likely; to achieve this, a higher level of transparency and accountability is required for which we are already engaged with industry, experts, investors, scientists, researchers and consumers to put in place the most appropriate policy settings.

Moreover, the absence of studies to ascertain the level of emissions and the lack of data, especially on industrial emissions, acted as an impediment to implement instruments like the ETS. Partly for these reasons, carbon pricing has, so far, not been introduced. But the Finance Ministry is confident that carbon pricing policies will catalyze resource efficiency, green technology development, low-carbon intensity industries, electricity generation from renewables, and low-carbon transportation, provided we get support from all the relevant departments in this regard.

TNS: You also chair the inter-ministerial committee on smog and have been seen lately taking part in discussions related to addressing the issue on a war-footing. However, there is a mistrust between the public and government departments on the issue with the public accusing the government of not coming clean on the topic. How do you plan to devise a roadmap to address the smog situation in the province?

HJB: Agreed, there is mistrust and it exists due to reasons which should have been addressed years ago. As chairperson of the inter-ministerial committee on smog I’ve advised all concerned departments to address this deficit and monitor the situation to provide real-time information to the public. While working on a robust implementation plan, we have started integrating environmental components to various projects in order to address any short comings which were experienced in the past.

For example, in the PGDP we have added an Air and Water Monitoring component which will have the EPD purchase 15 new air quality monitoring units in order to collect reliable data. We have also taken into account findings of recent studies which indicate that the transport sector as the biggest contributor to air pollution. In this regard, we have advised the Transport Department and traffic police to devise a mechanism for Inspection and fitness check of public transportation alongside coming up with an action plan for traffic congestion and traffic management. As a long-term policy, options are also being explored for the purchase of electric vehicles for public transport and for government departments. We are working on a new partnership between the private and the public sectors to support initiatives to achieve clean air for all. The committee has asked all departments to be open to innovative solutions from the public and be willing to work with the civil society, the health sector and businesses to accelerate solutions to air pollution. In collaboration with the private sector we are devising a systemic approach to create an impact and make a difference on this pressing issue.

The writer is a development communications specialist and journalist covering environmental stories

Economic impact of climate change in Pakistan:“Green finance is the future”