rate to an eight-year high of 13.25% amid soaring inflation.
Add to Pakistan’s woes a crippling shortage of energy.
Although the government has made progress in tackling the power
deficit, blackouts are a way of life. Tens of millions of people aren’t
connected to the grid. In 2015 inefficiencies in the power sector
cost the economy $18 billion, or 6.5% of gross domestic product,
according to a World Bank report. When it comes to power, says
James Stevenson, Sydney-based senior director for global coal
research at IHS Markit Ltd., “it’s having it or not that matters, not
where it comes from. Governments wanting to be elected want
people to have electricity. That’s why coal has momentum.”
THE SIGHTS AND SOUNDS at the Sindh Engro mine in the Thar tell
you a lot. The coal being scooped out of the ever-deepening hole is
soft, brown, and crumbly—lignite, one of the biggest producers
of greenhouse gases. Lignite and hard black anthracite generate
about twice the level of carbon dioxide as natural gas; gasoline and
heating oils fall about halfway between the two.
The workers digging in the mine, where temperatures can
reach 50C (122F), are Pakistani and Chinese. In total, China will
provide financing—from 50% to 90% of total costs—for $60 billion
in projects to upgrade Pakistan’s transport and energy infrastruc-
ture, making the South Asian country a standout partner of Beijing’s
“Belt and Road” initiative. Of the 10 biggest BRI power projects
by capacity, eight are in Pakistan, and five of those are coal-fired.
China is a vivid example of the rich-poor quandary when it
comes to weaning the world off coal. Like many developing nations,
it has taken measures to curb climate change, shutting some of its
most-polluting steel mills and power plants and relying increasingly
on alternative sources. It added more renewable energy last year
than all of the 36 member countries of the Organization for Economic
Cooperation and Development combined, according to the BP report.
But at the same time, China is the world’s largest producer
and user of coal. It’s helping to pay for and build power plants in at
least a dozen countries, and though many are solar, wind, natural
gas, and hydro projects, the bulk of the Chinese investment is in
coal. That doesn’t bode well for the 2016 Paris Agreement on climate
change, in which almost 200 nations, including China, pledged to
take steps to limit the increase in global average temperature to well
below 2C. That commitment basically requires the phasing out of
coal: Since the Industrial Revolution, the Earth has warmed by
1 degree and is predicted to at least double that by the end of the
century, the fastest pace since the end of the last Ice Age.IT’S NOT AS IF Pakistan doesn’t have alternatives to coal. The country’s
current natural gas fields are dwindling, but the IEA estimates its
shale reserves could contain more than 9 billion barrels of recoverable
oil and 105 trillion cubic feet of gas, enough to meet the nation’s
needs for decades. It has five nuclear reactors, fed with locally mined
uranium, and plans to build two more with Chinese help.
Pakistan is also a regional leader in hydropower. About 29%
of its electricity comes from harnessing water, including the massive
4.9GW Tarbela Dam on the Indus River, the largest earth-and-rock-
filled dam in the world. Such big structures have come under increas-
ing criticism from environmentalists because of their impact on
local ecosystems and populations, but Pakistan plans to build more.
Another problem with hydropower infrastructure is the
heavy cost of construction, which is hard to pay for without
international support. Pakistan’s proposed $10 billion-plus
Diamer-Bhasha Dam, upstream of Tarbela, has held at least five“Governments wanting to
be elected want people to have electricity.
That’s why coal has momentum”68 BLOOMBERG MARKETS