Last month, in September 2024, the world witnessed a grand spectacle at the United Nations as leaders assembled in New York to sign three ambitious documents: the Pact for the Future, the Global Digital Compact, and the Declaration on Future Generations.
These treaties contain 56 action items—lofty aspirations aimed at solving humanity’s greatest challenges, from climate change and AI to inequality.
But as we witnessed the red-ribbon ceremonies and handshakes of global elites, one couldn’t help but notice the familiar echoes of the past.
The Millennium Development Goals (MDGs) of the 1990s, later repackaged as Sustainable Development Goals (SDGs) in 2012, promised much of the same: a narrative of international cooperation in which the Global North, with its goodwill, would lift the Global South into prosperity. Yet, here we stand in 2024, with hunger, war, social injustice, and energy deprivation still looming like dust clouds over this utopian rhetoric.
Pakistan, it seems, remains caught between these worlds, forever grappling with widening gaps between the haves and the have-nots.
However, the definition of who exactly falls into these two camps has evolved, particularly through the lens of energy affordability: one may have access to energy but lack the financial means to fully utilise it.
Gone are the days when energy was a mere luxury; it is now a basic necessity—a lifeline to survive our sweltering heat and rising costs of living. Those who can’t afford it feel trapped, forced to pay for the inefficiencies of the state, while those entirely excluded from the energy grid remain invisible in the discussions of political and intellectual elites.
This is no sudden catastrophe. It has taken decades of short-sighted planning, governance failures, and a national addiction to the wasteful use of cheap, indigenous fuels to bring us here. Our dependency on subsidized energy began with the introduction of imported fuels in the 1980s to meet peak summer demands.
Since then, industrial and commercial consumers have been burdened with passing these costs down, while domestic and agricultural consumers continued to remain in the safety net of cross-subsidization. As more dollarized energy projects entered the mix, the disparity between the sale price of electricity and its production cost deepened. The difference has long been papered over by budgetary support and fiscal injections, cementing a dangerous dependency on subsidies that has bled the country dry.
Today, the very foundation of our energy policy is rooted in a flawed subsidy system. The price we pay for electricity and gas is far below the cost of producing or procuring them, and the weight of this imbalance has culminated in the notorious circular debt crisis. Yet, for all the debates around tariff hikes and subsidy reforms, one critical issue is consistently ignored: energy poverty.
Defining the undefined
Energy poverty—the inability to access affordable, reliable, and modern energy services—is mentioned implicitly no fewer than 15 times in the Summit for the Future’s agenda, yet it remains conspicuously absent from Pakistan’s energy discourse.
Despite the focus on affordability in various policy documents[1], this “affordability” has become the tombstone of households and industries alike. Wealthier consumers benefit disproportionately from consumption-based subsidies, while those without any energy access are left out of the equation entirely.
The absence of a formal definition of energy poverty in Pakistan is a glaring oversight. While countries around the world have developed their own definitions and frameworks to measure it, Pakistan continues to stumble in the dark, oblivious to the severity of its energy poverty problem.
Among the 82 countries involved in China’s Belt and Road Initiative, Pakistan ranks among one of the worst in terms of energy poverty—a damning statistic that should have sparked nationwide reform, but instead has been met with silence.
A flawed framework
Imagine defining poverty solely by income: you consider low-income households but completely overlook those with no income at all.
This approach would be absurd, yet that’s exactly how energy subsidies are currently handled. The current framework provides relief only to those connected to the grid, leaving out the millions without access to energy services. This approach not only perpetuates inequality but misses the root of the problem: the lack of access to affordable energy for all.
In their attempts to reform the subsidy structure, many well-meaning experts and energy gurus have suggested tying energy subsidies to the Benazir Income Support Program (BISP). However, this simplistic solution ignores the deeper complexities of energy poverty, which, unlike income poverty, is not just about financial resources but about access, their consumption patterns and the climatic regions where households live. By treating the two issues as interchangeable, we risk further alienating the most vulnerable segments of society.
What needs to be done?
Pakistan’s subsidy model must be overhauled, starting with the development of a standardized, consensus-based definition of energy poverty.
The Federal Government, in collaboration with provincial governments and Ministry of Poverty Alleviation and Social Safety, should initiate a series of dialogues to ensure that the definition reflects the realities of each province’s unique socio-economic and geographical challenges. Once energy poverty is clearly defined, we can begin to craft subsidies that actually address the needs of those most affected, rather than reinforcing existing inequalities.
By establishing a fixed annual subsidy per household for gas and electricity, the government could provide a sense of forward-looking planning and stability to households, reducing the erratic fluctuations that now dominate the system. This would also allow for more thoughtful, long-term planning, rather than the monthly scramble that currently leaves policymakers and households alike at the mercy of the next tariff hike.
The debate for having a voucher or a card system or any other mechanism for disbursal can then happen.
Pakistan has spent over $17 billion on budgeted energy subsidies between 2017 and 2025, with little to show for it. Combined with the ever-growing circular debt and system leakages, this figure becomes more staggering and humongous.
The time has come to confront the elephant in the room: our subsidy framework. And the only way to fix it is to start by recognizing energy poverty as a distinct and pressing issue. Let this not be another rhetorical exercise. As the global community rallies behind their next set of promises, we must make our own.
Defining energy poverty and developing a smart, customized roadmap to mitigate it will not solve all our energy sector woes, but it will be a step in the right direction—a step towards a future where access to energy is a right, not a privilege.
Copyright Business Recorder, 2024
The article is by an EDF Climate Corps fellow and an energy policy practitioner. He can be reached at [email protected]
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