Pakistan is often described as a country rich in energy resources but poor in energy security. Nowhere is this paradox more visible than in its vast domestic coal reserves. Pakistan has an estimated 186 billion tonnes of coal resources, of which around 185 billion tonnes are located in Sindh, overwhelmingly in the Thar coalfield. For decades, such a resource base has been viewed as an opportunity to reduce dependence on imported fuels and strengthen domestic energy security.
But the energy landscape is changing. As Pakistan increasingly looks towards solar, wind and other cleaner sources of electricity, an uncomfortable question is emerging: what happens to our coal?
Coal currently accounts for around 17 per cent of Pakistan’s installed power generation capacity, with approximately 11 per cent based on imported coal and 6.0 per cent on local coal. In terms of actual electricity generation, coal contributes around 16 per cent, with local coal accounting for roughly 12 per cent and imported coal around 4.0 per cent. The distinction is important. Pakistan has invested heavily in coal-fired generation, particularly following the development of Thar coal under the China-Pakistan Economic Corridor, yet the country’s longer-term energy direction is increasingly towards renewable energy.
Globally, this transition is already underway. The International Energy Agency (IEA) estimates that coal-fired electricity generation reached a record 10,766 TWh in 2024. Yet coal’s share in global electricity generation has fallen to around 35 per cent, its lowest level since the IEA was established. At the same time, electricity generation from wind, solar and nuclear increased much faster than coal generation.
This does not mean, however, that coal is disappearing overnight. Global coal demand remains remarkably resilient. The IEA estimates that global coal demand reached around 8.8 billion tonnes in 2024 and is expected to remain close to this historically high level in the near term. Importantly, coal is not used only for electricity. Around one-third of global coal demand is associated with non-power applications, including industrial processes, steelmaking, cement, chemicals and other uses. This presents the country with a difficult but potentially important policy choice.
If Pakistan is serious about retiring inefficient and carbon-intensive coal power plants and replacing them with renewable generation, it should also begin thinking about the future economic value of its coal reserves. Simply leaving billions of tonnes underground may be environmentally attractive, but it could also mean turning a potentially valuable domestic resource and associated investments into stranded assets. However, expanding coal-fired power generation merely because the resource exists would lock Pakistan into an energy pathway that the country is simultaneously trying to move away from. The answer likely lies between these two extremes.
Rather than viewing domestic coal exclusively as a fuel for power generation, Pakistan could explore whether a carefully regulated market for non-power applications and exports is economically viable. This could include industrial uses, selected manufacturing processes and, where technically and commercially suitable, export markets in countries where coal demand remains significant.
Using vast reserves to justify decades of additional coal-fired power generation would risk creating another generation of carbon-intensive assets. But writing off the resource altogether without assessing alternative markets could also mean foregoing economic opportunities
Such a strategy would not mean abandoning the clean-energy transition. Rather, it would mean separating the question of coal as an energy resource from the question of coal as a source of electricity. But there is an important caveat.
Not every tonne of Pakistani coal is suitable for every market. Thar coal is predominantly low-rank lignite, with relatively high moisture content and characteristics that make it particularly suited to certain applications rather than being a straightforward substitute for higher-grade internationally traded coal. Therefore, any export strategy would require serious assessment of coal quality, beneficiation, transportation costs, port infrastructure, international prices and potential overseas demand.
Nor should Pakistan simply redirect domestic coal towards highly polluting uses such as conventional brick kilns and call this a green transition. Pakistan’s brick-kiln sector is already a significant source of air pollution and recent research continues to document emissions of particulate matter, sulphur dioxide and other pollutants associated with coal combustion. The objective should therefore not be to find another way to burn coal indiscriminately, but to identify economically valuable uses that are technically appropriate and compatible with progressively stronger environmental standards.
Pakistan cannot afford another policy built around a single fuel. The country has experienced the consequences of such decisions before: imported fuel dependence, capacity payments, circular debt and underutilised generation assets. The transition away from coal-fired electricity should therefore be accompanied by a strategy for managing the economic consequences of that transition.
Domestic coal could be part of that strategy, not as the foundation of Pakistan’s future power system, but as a resource whose economic value is gradually redefined.
The question, therefore, is not simply whether Pakistan’s coal reserves are a boon or a bane. They can be either, depending on how they are managed. Using vast reserves to justify decades of additional coal-fired power generation would risk creating another generation of carbon-intensive assets. But writing off the resource altogether without assessing alternative markets could also mean foregoing economic opportunities.
Pakistan needs a more nuanced coal policy: accelerate renewable energy deployment, avoid unnecessary new coal-fired capacity, prepare existing coal plants for an orderly transition and simultaneously investigate whether domestic coal can generate foreign exchange and industrial value through carefully selected non-power applications and exports.
The real test of the energy transition is not whether Pakistan can leave coal behind overnight. It is whether we can move beyond coal-fired electricity without leaving behind the economic opportunities associated with the resource itself.
In that sense, Pakistan’s enormous coal reserves do not have to determine its energy future. They should instead force us to think more carefully about what that future ought to look like.
By: Noor ul Ain
The writer is an economist and energy researcher at the Energy Unit of the Sustainable Development Policy Institute (SDPI).
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