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world stage for impactful climate change?

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ISLAMABAD:

“The world is still falling short of the Paris climate objectives, with no credible pathway to 1.5°C,” noted the United Nations Environment Programme (UNEP) in its recent Emissions Gap Report, published on October 27, 2022.

According to the flagship report, the nationally determined contributions (NDCs) or pledges taken by countries since last year have been “woefully inadequate” and make negligible difference to the emissions predicted for 2030. This lack of progress puts the globe on track for a 2.8°C temperature hike, far above the Paris Agreement goal. In addition, unprecedented amounts of emission reduction, between 30–45%, are required to limit global warming to 2°C and 1.5°C, respectively.

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With COP27 set to begin on November 6 in Egypt, the UNEP report sets the stage for one of the most critical climate dialogues, especially in the context of a year marked by international political turmoil, global inflation, severe climate catastrophes, and worldwide energy crisis, all of which have distracted leaders and complicated efforts to address climate change.

COP27 will build on the outcomes of COP26, which included the signing of the Glasgow climate pact requiring signatories to present stronger action plans within a shortened timeframe, and the agreement on the Paris rule book outlining how signatories to the Paris accord will structure their NDCs to reduce emissions.

The main objectives of COP27 are to restrict the global temperature rise to well below 2°C while pursuing efforts to limit the increase to 1.5°C, enhancing capacity to adapt and create resilience, and mobilising funds for mitigation, adaptation, and loss and damage.

Despite lofty objectives, COP conferences have devolved into a display of hypocrisy over the years, as politicians, business magnates, and lobbyists make impassioned pleas and promises of doing more on the world stage, only to break their commitments immediately after the display concludes. Like many summits, they allow global leaders to take respite from domestic difficulties and boost their self-esteem before a more “sympathetic” international audience.

The UN Secretary-General António Guterres, in his comments on the UNEP report and the upcoming COP27, remarked, “Commitments to net zero are worth zero without the plans, policies, and actions to back it up… our world cannot afford any more greenwashing, fake movers or late movers. We must close the emissions gap before climate catastrophe closes in on us all.”

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To have any meaningful impact, COP27 should focus on the following 3R global climate strategy, an approach coined by the Climate Crisis Advisory Group (CCAG): ‘Reduce’ (emissions), ‘Remove’ (GHG emissions), and ‘Repair’ (the planet) to achieve the subsequent key results.

1) Ensure pledges translate into implementation. A 2021 analysis of the efficacy of climate pledges in the finance sector found that global banks provided around $740bn in financing to coal, oil, and gas companies, despite the fanfare of climate pledges by multiple lenders and borrowers. Therefore, COP27 should hone in on a concrete ‘policies-to-action’ dialogue, identifying opportunities for countries, especially those responsible for cumulative global emissions stock, to not only announce further policy changes but implement stringent accountability standards to ensure that pledges are doing enough to reach the agreed Paris accords.

2) Ensure the availability of climate finance for countries most impacted by global warming. In previous conferences, many coal-dependent developing economies felt cornered since, to them, an emphasis on coal while excluding oil and gas would have a disproportionate impact on their economies. These nations feel pressured to transition from fossil fuels to renewables without financial or technological assistance from developed countries. Some nations, like India, have used a ‘fairness argument’ by agreeing to revise their NDCs but condition their implementation on foreign contributions. The crux of the fairness argument is that the cumulative stock of global emissions was produced by developed nations that benefited from the industrial revolution. These nations can now enact climate-friendly policies while reaping the benefits of having the money. Hence, they should bear the principal responsibility for solving the problem they created.

Therefore, to increase support for vulnerable countries and promote trust between nations, the promised climate action flows from larger economies for developing countries must be prioritised. The conference needs to ensure that the Paris rule book is properly implemented and that the private sector is mobilised to contribute more efficiently. According to a recent estimate by the World Resources Institute, approximately $600 billion in climate finance is required by 2025 to combat climate change.

3) Focus on nature-based solutions or geoengineering. It has become painfully clear that as important as adaptation is, we can no longer adapt our way out of the climate crisis. Ultimately, we must cut emissions, and nature-based solutions present a unique opportunity for us to do so. These solutions involve conserving, restoring, or better managing ecosystems to remove carbon-dioxide from the atmosphere. COP26 took a historic step in recognising the need for nature-based solutions, and it is expected that COP27 will focus on further investment and funding in this space. Currently, nature-based solutions receive less than 10% of all climate funds. Recent research shows that if deployed effectively, nature-based solutions, alongside other decarbonisation efforts, can ensure that climate goals are met.

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Pakistan’s participation in these conferences has generally been minimal, with the country seldom serving on the working groups or drafting committees. However, given the devastating floods the nation experienced this year, and the fact that Prime Minister Shehbaz Sharif has been made the vice-chairperson for the COP27 in recognition of his support for an urgent climate action plan, Pakistan is ideally positioned to join other climate-impacted developing countries in seeking reparations, an issue that developed nations have repeatedly pushed down the agenda in previous conferences. However, potential recipient nations, such as Pakistan, should not expect that after COP27, they will receive a massive and imminent infusion of reparations to bail them out of their budgetary and foreign currency issues. As seen by the onerous GCF criteria, reparations, as and when released, are likely to be given under stringent documentation and compliance protocols covering the nature of usage, evidence of project completion, and adherence to performance standards.

The biggest threat, as we enter COP27, is the widening gap between eloquent rhetoric, virtue signalling, and real climate action. According to Greta Thurnberg, “As it is, the COPs are not working unless, of course, we use them as an opportunity to mobilise.”

In two weeks, we shall see if COP27 was able to capitalise on this opportunity. Otherwise, the global climate strategy will need a fourth R: ruination.

The writer is a Fulbright alumnus, passionate about sustainable energy consumption and climate change

 

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Published in The Express Tribune, November 7th, 2022.

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Privatisation fails to meet objectives

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ISLAMABAD:

The success of Pakistan’s privatisation programme has remained limited to only generating $11 billion in sale proceeds, as the country could not achieve the post-privatisation objectives of improving efficiency and competition, says a new independent study.

The findings come amid the International Monetary Fund’s (IMF) push for approval of the State-Owned Enterprises (SOEs) Bill to improve efficiency and management of public sector firms. The finance ministry has requested the holding of a joint session of parliament to approve the law, after the bill was rejected by the Senate.

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In a study titled “Public Sector Enterprises (PSEs) in Post-Privatisation: Evidence from Pakistan”, authors Naseem Faraz and Dr Ghulam Samad concluded that the key objectives of the privatisation programme had remained unfulfilled. The study has been published in the Journal of Applied Economics.

“Our main finding is that the performance of firms has improved in the post-privatisation period but (it is) statistically insignificant,” said the authors. Privatisation has been carried out with the motive of reducing the fiscal burden and increasing the efficiency of the inefficient PSEs. Since 1991, the sale of PSEs has raised revenues of Rs649 billion, or $11 billion.

The $11 billion has been worked out by applying the exchange rate of the year when a privatisation transaction took place.

Pakistan is one of the developing countries where privatisation of a large number of PSEs has taken place, but the post-privatisation effect is yet to be analysed. Second, rather than focusing on one or a few sectors, the study considers all the privatised PSEs.

The study showed that the performance of a few firms improved in the post-privatisation period but it largely remained negative.

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“In particular, the privatised PSEs in energy, cement and chemical sectors do not show positive gains in the post-privatisation period. However, the telecom and textile sectors have experienced a positive change in the performance of the privatised PSEs.” “Similarly, the results also showed that the efficiency of firms did not increase significantly.”

The authors said that according to their assessment through the Key Informant Interviews, the malfunctioning of regulatory environment led to the market failure that eventually resulted in market exploitation.

Regulations and regulators are captured by the market, bureaucrats, judiciary and politicians. An effective regulatory environment does not exist to force the privatised entities to have higher efficiency and develop a competitive environment.

Government intervention in the regulatory sphere is dominant. Every regulatory authority has a board member from the government. This practice is clearly not aligned with the privatisation regulations.

The government intervention (secretary sitting as a board member) creates conflict of interest by having ownership and management together.

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The privatised banking and energy companies have failed to bring in the benefits of sell-off, according to the study. The process of privatisation and rewards distribution favoured mainly the buyers, while the government faced risk and cost.

According to the authors, the privatised companies earned a higher average rate of return on assets compared to their fully government-owned counterparts, as measured by the total net profits-to-sales ratio.

The higher returns on assets suggest a favourable effect of privatisation. On the contrary, the profitability or productivity measure (net profits-to-sales ratio) was relatively higher for the privatised firms but it was statistically insignificant compared to the period when the firms were fully government owned.

“The privatised firms experience a mild increase in productivity compared to their pre-privatisation period. This difference in performance is not statistically significant.”

Privatisation also did not enhance the efficiency of the privatised firms in terms of increase in sales. It suggested that the efficiency improvement was merely coming through the reduction in cost of production.

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The study identified weak regulators as a reason for the failure to achieve the privatisation objectives.

“Unfortunately, the regulator Pakistan Telecommunication Authority (PTA) did not influence PTCL and other related entities to work in a regulated market environment.”

The role of the PTA is limited to overseeing the determination of market prices. PTCL’s privatisation was not a fair deal. It lost $800 million and also did not improve the market in terms of competition.

“The government sold 26% shares to Etisalat and also transferred the management, which is against the rule, which requires 51% shares,” emphasised the authors.

The government had agreed that Etisalat would pay $2.6 billion by making upfront payment of $1.4 billion and the remaining $1.2 billion in nine installments of $33 million each. For the deal, the government received only $1.8 billion and the remaining $800 million was never paid.

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“The monopoly of the telecom sector persisted despite the privatisation and drove away billions of dollars.”

The privatisation of KESC, now KE, also did not achieve the objectives. Though the main reason of the privatisation was to get rid of the loss-making enterprise, unfortunately the government is paying more after privatisation, according to the study.

Published in The Express Tribune, November 24th, 2022.

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Tractor maker faces legal action over fraud

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KARACHI:

The Federal Tax Ombudsman (FTO) has ordered legal action against a tractor manufacturing company as the Federal Board of Revenue (FBR) reported a fraud of more than Rs10 billion.

According to FBR sources, the tractor company has allegedly committed a fraud of over Rs10 billion under the previous government’s initiative to provide tractors at a lower cost to the farmers.

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As part of the subsidy scheme, the government gave billions of rupees to the deserving and underprivileged farmers for the purchase of tractors.

Sources said that the tractor manufacturer had claimed sales tax refunds on fake documents and flying invoices. The FBR then referred the case to the FTO.

They added that the FBR recommended the application of the Benami Transactions Act while taking legal action against the tractor manufacturer.

“The respondent company misused pay orders of the complainant by issuing bogus and fake sales tax invoices to other persons for obtaining fraudulent adjustment and refund,” a notification of the FTO office read.

The FBR has initiated legal proceedings against the owners and dealers of the tractor manufacturing company for the recovery of money obtained through fraudulent means.

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The Directorate General of Intelligence and Investigation, Inland Revenue has been tasked with investigating the fraud and tax evasion case.

Published in The Express Tribune, November 24th, 2022.

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G7 looking at Russian oil price cap of $65-70

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BRUSSELS:

The Group of Seven nations (G7) are looking at a price cap on Russian sea-borne oil in the range of $65-70 per barrel, a European Union (EU) diplomat said on Wednesday.

Views in the EU are split, with some pushing for a much lower price cap and other arguing for a higher one. The G7, including the United States, as well as the whole of the EU and Australia, are slated to implement the price cap on sea-borne exports of Russian oil on December 5.

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“The G7 apparently is looking at a $65-70 per barrel bandwidth,” the EU diplomat said.

“Poland, Lithuania and Estonia consider this too high because they want the price set at the cost of production, while Cyprus, Greece and Malta find it too low, because of the risk of more deflagging of their vessels, which might mean the G7 has found a good middle-ground,” the diplomat said.

Some 70%-85% of Russia’s crude exports are carried by tankers rather than pipelines.

The idea of the price cap is to prohibit shipping, insurance and re-insurance companies from handling cargos of Russian crude around the globe, unless it is sold for no more than the maximum price set by the G7 and its allies.

Because the world’s key shipping and insurance firms are based in G7 countries, the price cap would make it very difficult for Moscow to sell its oil – its biggest export item accounting for some 10% of world supply – for a higher price.

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At the same time, because production costs are estimated at around $20 per barrel, the cap would still make it profitable for Russia to sell its oil and in this way prevent a supply shortage on the global market.

Brent crude front-month future oil prices initially fell to $86.54 from $87.30 on the news.

Published in The Express Tribune, November 24th, 2022.

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