COMMENT: UNFCCC COP22: Engaging with Pakistan’s private sector is crucial to build climate resilience
The United Nations Framework Convention on Climate Change (UNFCCC) COP22 is in the offing and it is high time the Government of Pakistan learned from its past mistakes and takes forward a strong climate agenda this year. A crucial step must be to involve the private sector in national level preparations for COP22 in order to set realistic goals and targets, unlike the drafting of the INDCs for COP21, which had no representation from the private sector and therefore throws into question the reliability of the targets set last year.
With the cost of adaptation against climate change rising at a rapid pace, the number of donor supported funds, conventions, treaties, pledges and investments in green technology are also on the rise. More importantly, the rate at which the cost of adaptation is rising is three times higher for developing countries compared to developed countries. This is because developing countries are more vulnerable to climate change due to weak socioeconomic structures and geographical settings – for example arid and semi-arid regions, and the people living in them, are highly exposed to climate extremes.
The global community is putting in a lot of effort to pool funds from around the world to divert them specifically to developing countries. Adaptation finance – being heavy on national exchequers – calls for the private sector to help shape the new development agenda not only through financial assistance, but also with technological innovations and investments.
Cost of adaptation is rising
When it comes to adaptation finance, the cost rises with increasingly complex versions of future climate projections. The annual cost of adaptation was estimated at US$50 billion for the year 20151, which has now reached a minimum estimate of US$130 billion in 2016 and a maximum of US$500 billion per year up to 20502.
Pakistan needs around US$6 to US$14 billion per year for climate change adaptation until 2050, according to a National Economic and Environment Development Study (2011)3. This year, the Government of Pakistan has allocated Rs 1027 million (US$9.8 million) for the climate change division in the Public Sector Development Programme (2016-17). This is significantly higher than last year’s allocation of Rs 39.7 million but none of this funding is reserved for adaptation.
Private sector can help fill the breach
Given the government’s budget constraints, the private sector is a major stakeholder that needs to be brought to the fore if we are to adapt against climate misfortunes. However, major challenges exist in Pakistan, which obstruct the private sector’s role in adaptation efforts, and increase the adaptation deficit – or the difference between capacity to adapt and adaptation cost at the national level.
Crucially, the private sector lacks knowledge about what needs to be done. Though businesses clearly understand the climate risks facing Pakistan, they possess little knowledge about how climate change may affect their profits and losses, for example through impacts on input providers, or transport infrastructure, as well as their potential role in supporting adaptation efforts.
Pervaiz Rashid, Secretary of the All Pakistan Textile Mills Association, said: “[the] Private sector associated with [the] textile supply chain in Pakistan is unaware about climate change impacts on businesses (sic) phenomenon because climate change does not have any direct impact on them”. Tariq Hassan, Marketing Manager of J.K. Spinning Mill, added: “Any decline in local cotton production as a result of climate change is usually covered by imported cotton, and that is why [the] private sector is quite resilient when it comes to climate change impacts. This leaves no room for private sector investment in adaptation”.
Working with the private sector to harness the opportunities climate change can present
Clearly, we need to work with the private sector at the local, provincial and national levels, not only about adaptation needs and its role in supporting other value chain actors, which are highly vulnerable to climate change. We also need to make the private sector aware of the opportunities that climate change can usher in – such as developing innovative climate services or adaptation technologies that they can harness, and also successful and commercially-viable investment initiatives by corporate giants in other regions of the world. The government, especially the Ministry of Climate Change, and social sector organisations working on climate issues, can lead the process of awareness raising among the private sector.
We all know that high costs and low returns on investment mean the private sector is reluctant to invest in clean/green technology. To encourage climate-proof private sector investment, the Government of Pakistan needs to develop a conducive or low-risk investment policy framework, which would give businesses incentives to enter the market for adaptation services. For example, the government could reform taxation policy to favour those firms that are supporting adaptation efforts. Other government level support could include low-cost debt financing, sharing of research and development costs between the private sector and the government, and support in the communication of short and long term climate risks, which may affect business communities.
Public-private partnerships are the key
But private initiatives are not a substitute for governmental adaptation efforts. Mobilising private investment requires public support. Some elements of climate adaptation are regulated primarily by the government. These include climate information, national-level risk management policies (for example, land use restrictions), and disaster planning and preparedness. Likewise, government-led climate initiatives can’t deliver efficiently without involving the private sector. Public-private partnerships to tackle climate risks through adaptation would not only help lessen these risks across different sectors but also within the supply chains of a particular business.
PRISE research, under project 3 ‘Harnessing opportunities for climate-resilient economic development in semi-arid lands: adaptation options in key sectors‘, is analysing how agricultural supply chains, especially those of the cotton sector, can be made climate-resilient through the active involvement of the private sector in Pakistan. We are working with private players in the country’s textile industry to create awareness about climate impacts on their businesses, and the promotion of adaptation efforts to strengthen the cotton supply chain, which is highly vulnerable to climate extreme events. The private sector could also be involved in promoting climate-resilient economic development through its role under Corporate Social Responsibility (CSR). A huge number of multinational corporations in Pakistan direct a substantial amount of funding to CSR activities, according to the Ministry of Textiles, which could also be used to channel these finances for adaptation actions.