Pakistan approved an ambitious National Electric Vehicles Policy (NEVP) in November, with targets and incentives aimed at seeing electric vehicles capture 30% of all the passenger vehicle and heavy-duty truck sales by 2030, and 90% by 2040. It sets even more ambitious goals for two- and three-wheelers and buses; 50% of new sales by 2030 and 90% by 2040.
You might well wonder why the Government of Pakistan would propose an electric vehicle policy at a moment when the inflation rate has just reached 12.7%, the rupee is down almost 50% against the dollar, and the government is scrambling to cover a balance-of-payments deficit. This doesn’t seem like the best time to be importing Teslas!
The answer might be that the government is betting that an EV policy could not only further its climate goals and help with the dangerous air pollution problem in the cities, but also has the potential to breathe new life into Pakistan's economy.
Pakistan already has an infant electric vehicle industry. The five domestic electric vehicle manufacturers recently banded together as the Pakistan Electric Vehicles Manufacturing Association (PEVMA) and have been making significant investments in the sector, often partnering with established international automobile companies. The NEVP incorporates new foreign direct investment incentives to stimulate investment in EVs. Manufacturers, assemblers, and suppliers in the EV and related infrastructure industries will benefit from lower taxes – 1% GST for EVs as opposed to 17% for regular vehicles. The import duty for charging equipment is also being slashed to 1%. Additionally, the government will lower the unit rate of electricity for charging station operators to encourage private investments in charging stations. The government will also install at least one DC fast-charging station every 10 square kilometers in all major cities (targeting the more than 3,000 defunct CNG stations as locations) and every 15–30 kilometers on all motorways.
The NEVP also represents a step towards realizing Pakistan’s goals for climate action and improvement of air quality as those are outlined by the Climate Change Act of 2016 and Pakistan Environmental Protection Act 1997. Transportation is, of course, a significant contributor to climate change, responsible for 24% of direct CO2 emissions from fuel combustion globally. Pakistan ranks 8th on Germanwatch’s Long-Term Climate Risk Index, which tracks the extent to which countries have been affected by the impacts of weather-related loss events. Experts suggest that rising temperatures and erratic rainfall could threaten the country’s ability to sustain agricultural and livestock production at current levels, increase vulnerability of energy production from hydropower plants, and affect the availability of fresh drinking water to major urban areas.
The NEVP comes at a time when Lahore’s worsening air quality has caused it to overtake New Delhi as the most polluted city in the world on some days. The city’s thick autumn smog is a significant health threat, one which prompted schools to be shut down three times in November 2019 alone. Nor are these trends confined to Lahore. Karachi, Faisalabad, and Peshawar regularly stand alongside major Chinese and Indian cities atop the list of the world's most polluted urban areas. Ambient air pollution is responsible for 135,000 deaths per year and costs the economy 5.88% of GDP or $47.8 billion. Vehicle emissions make up a significant portion of air pollution throughout the region, contributing more than 70% of the fine particulate matter (PM2.5) and PM10 emissions in large urban centers.
It's also noteworthy that India and China have both adopted national EV plans and made significant investments in the sector as part of their efforts to improve air quality, reduce climate impact, and capture a share in the emerging EV market. Pakistan's NEVP is not occurring in a vacuum.
The energy-efficiency and emissions benefits of EVs are well known. They are compatible with renewable energy sources, produce no emissions at the vehicle tailpipe and have lower lifecycle (“well to wheel”) emissions, and can dramatically reduce or eliminate oil imports (a significant burden on Pakistan's economy at $13 billion annually). The Government of Pakistan seems also to be betting that they will spur economic development and help it keep pace with its neighbors and competitors, as the country switches from importing fossil fuels and vehicles to domestically produced electric vehicles fueled by domestically produced electricity.
The NEVP is a welcome first step, but that welcome must come with the important caveat that effective implementation is vital. The ICCT’s work shows that nearly all the world’s 7 million EV sales through late 2019 relied on regulations to make EV models widely available, incentives to increase EV affordability, charging infrastructure to ensure EVs are convenient, and EV awareness programs to increase consumer understanding. The success of Pakistan’s EV goals will depend on coordination between the applicable ministries on the incentive program, and also whether Pakistan can overcome the other barriers on model availability, infrastructure, and consumer understanding. And a reliable power supply is crucial. Pakistan’s electric power sector is notoriously volatile; brownouts and blackouts are common occurrences. The government has various power projects in the pipeline and forecasts surplus generation capacity in the next decade. A growing EV industry and market could utilize that surplus.
The EV industry has the potential to contribute significantly to the economy by saving precious foreign exchange, creating thousands of jobs, and enabling related to industries to grow as technology transfers occur. EVs can also help improve urban air quality, reduce noise pollution, and significantly reduce the health costs associated with pollution in urban areas. However, consistent policy support and a reliable grid are prerequisites for this transformation.