Navigating the Climate and Energy Landscape in Pakistan

Energy Systems and Economic Pressures in Pakistan

Pakistan’s current energy system faces a complex set of challenges that affect both economic and environmental outcomes. Much of the country’s energy supply is dependent on imported fossil fuels, which creates a fragile foundation vulnerable to global market fluctuations and supply disruptions. This overreliance on fossil fuels also contributes to high carbon emissions, exacerbating climate change and limiting the country’s ability to meet international climate goals.

The real cost of this energy model is not just financial. It affects transportation, agriculture, industry, and daily life, particularly for low- and middle-income families. With energy becoming less affordable and less reliable, there is an urgent need to rethink how Pakistan plans for and manages its energy future.

How Does Climate Change Affect Energy Security?

Climate change makes energy insecurity worse. Extreme weather events such as floods, droughts, and heatwaves affect infrastructure, supply chains, and the demand for electricity. When systems are already stressed, these climate shocks can lead to blackouts, fuel shortages, and broader economic instability.

Fossil fuel consumption also increases greenhouse gas emissions, creating a feedback loop. Emissions cause climate change, which then disrupts energy supply and increases costs. Breaking this cycle requires moving towards low-carbon and climate-resilient energy systems.

What Is Climate Finance?

Climate finance refers to money, whether from governments, banks, or international institutions, that helps countries deal with climate change. This includes funding to reduce emissions (mitigation) and to prepare for climate impacts (adaptation). For Pakistan, climate finance can support solar energy systems, improve urban infrastructure to cope with floods, or assist farmers adapting to unpredictable weather.

Climate finance can take many forms, including grants, concessional loans, carbon credits, and green bonds. Countries like Pakistan can access these resources through global mechanisms such as the Green Climate Fund or partnerships with development finance institutions.

How Does Digital Finance Fit In?

Digital finance is emerging as a powerful tool to support climate action. Blockchain-based systems can be used to track climate finance flows, improve transparency, and build trust in carbon credit markets. Mobile banking platforms can deliver adaptation funds directly to vulnerable communities.

While there is growing interest in digital currencies like Bitcoin, it is important to consider their energy intensity. Instead of investing in high-energy digital assets, Pakistan can prioritise digital tools that support financial inclusion and climate resilience.

Inflation and Climate: What’s the Connection?

Energy-driven inflation is not just an economic challenge; it is also a climate challenge. As long as Pakistan relies on fossil fuels, its economy remains exposed to international fuel price shocks. These shocks increase the cost of goods and services, making it harder for people to maintain their standard of living.

Climate finance offers solutions. It can be used to improve energy efficiency, invest in affordable public transport, and expand access to clean energy. These measures help control inflation, reduce emissions, and improve daily life for communities most at risk.

What Are Strategic Reserves, and Why Do They Matter?

Strategic reserves, traditionally understood as emergency fuel stockpiles, must evolve to meet the demands of a climate-constrained future. Pakistan should expand its definition of reserves to include renewable energy storage, decentralised solar systems, and infrastructure that enhances energy access and resilience.

Climate finance can support this broader approach. With targeted investments, Pakistan can reduce its dependency on imported fuels and build a more stable, sustainable energy system that is better equipped to withstand both economic and environmental shocks.

Conclusion: Learning to See the Bigger Picture

Climate change, energy security, and economic stability are deeply interconnected. Understanding and using climate finance effectively can help Pakistan transition towards a more resilient, inclusive, and low-carbon future. This means investing in clean energy, building financial systems that support climate adaptation, and ensuring that vulnerable communities have access to the resources they need.

At CUSP, we are committed to advancing climate literacy and promoting policy solutions that work for both people and the planet. Understanding climate finance is an essential step towards building the future Pakistan deserves.