Pakistan’s Green Boom: Industry Wins, Consumers Lose

As the world transitions toward sustainable energy solutions, developing nations are playing a pivotal role in driving green energy adoption. Countries like China, Turkey, Kenya, and Mexico have implemented balanced policies that incentivize both industries and consumers, fostering widespread adoption. In contrast, Pakistan stands as an outlier, prioritizing manufacturers over end users.

Recent policy shifts—such as reduced net metering rates and discussions on a potential carbon tax—raise concerns about whether these measures encourage or deter investment in alternative energy. With electricity, water, and gas costs rising and becoming increasingly unaffordable for consumers, this investigative report examines how Pakistan’s incentives for eco-friendly solutions, including Electric Vehicles (EVs), solar panels, and solar-powered appliances, compare to those in Africa, Asia, South America, and Europe.

Drawing from insights and best practices worldwide, the findings reveal why Pakistan’s approach may be hindering consumer adoption and what lessons can be learned to create a more effective, inclusive green energy transition (NEPRA, 2024; Ministry of Finance, 2024).

Comparative Analysis of Industry Incentives Across Developing Economies

While Pakistan continues to prioritize industrial incentives, other developing nations are taking a more balanced approach by offering both industrial and consumer incentives to accelerate the transition to eco-friendly technologies.

For instance, China provides substantial subsidies, covering up to 40% of EV manufacturing costs, along with direct research and development (R&D) funding for solar panel and battery storage advancements (MIIT, 2023; NDRC, 2023). Turkey, on the other hand, has created special economic zones with tax reductions for EV manufacturers while simultaneously offering low-interest loans to solar panel producers (Trade Ministry, 2023; EPIA, 2023). In Kenya, import duty exemptions on EV components and tax waivers for small-scale solar panel production have contributed to a growing green energy market (Kenya Revenue Authority, 2023; Energy Ministry, 2023).

South Africa and Brazil have taken a step further by offering both tax incentives and manufacturing rebates to facilitate local green energy production (DTIC, 2023; ANP, 2023). Mexico and Spain also follow a similar approach by providing financial assistance and subsidies to both renewable energy manufacturers and end users (SE, 2023; IDAE, 2023). Even Greece, despite economic constraints, has introduced tax reductions for companies investing in solar energy and electric mobility (Greek Energy Ministry, 2023; Ministry of Finance, 2023).

In contrast, Pakistan’s incentives remain industry-centric, with a 1% duty on EV parts, a 0% sales tax on locally manufactured EVs, and tax holidays for new solar companies (FBR, 2023; AEDB, 2023). However, no significant consumer-based incentives exist, making green energy options unaffordable for the general population. Additionally, recent policy changes—including the reduction of net metering rates and the potential imposition of a carbon tax—raise concerns about whether these measures will deter investments in alternative energy rather than promote them (NEPRA, 2024; Ministry of Finance, 2024).

Notably, the main beneficiaries of Pakistan’s existing incentives include major automotive manufacturers such as MG Motors (SAIC Motor Corporation ownership), Sazgar Engineering, and Lucky Motor Corporation, along with solar panel importers and assemblers like Tesla Industries and SkyElectric. However, end users receive no direct financial relief, leaving them to bear the full cost of transitioning to eco-friendly technologies.

Table 1: Industry Incentives for Eco-Friendly Technologies in Developing Countries

Incentives for End Users: A Key Missing Link in Pakistan

A major drawback of Pakistan’s policy is the lack of consumer-oriented incentives, which makes green energy adoption costly for individuals. While Pakistan provides no direct subsidies or financial support to consumers, other nations have established extensive programs to encourage adoption.

China leads the way by offering subsidies of up to $10,000 for EV buyers and a 50% rebate on residential solar panel installations (MIIT, 2023; NDRC, 2023). Turkey provides financial relief through $3,000 EV subsidies and a 40% reduction in electricity bills for households that install solar panels (Trade Ministry, 2023; EPIA, 2023). Similarly, Kenya exempts solar panels from VAT and offers tax waivers on small-scale solar systems, making renewable energy more affordable (Kenya Revenue Authority, 2023; Energy Ministry, 2023).

South Africa and Brazil offer direct rebates and tax credits for consumers who adopt EVs or install solar panels (DTIC, 2023; ANP, 2023). Mexico and Spain also provide direct cash subsidies and discounted loans for green technology investments (SE, 2023; IDAE, 2023). Even Greece, despite its financial struggles, has introduced tax deductions on EV purchases and home solar projects (Greek Energy Ministry, 2023; Ministry of Finance, 2023).

In contrast, Pakistan has recently reduced net metering rates, which previously allowed solar users to sell excess electricity back to the grid at favourable rates. This policy shift, coupled with the potential imposition of a carbon tax, has sparked concerns that rather than promoting clean energy, the government is discouraging consumers from investing in it (NEPRA, 2024; Ministry of Finance, 2024). With electricity, water, and gas prices rising, the absence of consumer incentives makes it increasingly less attractive for Pakistani households to switch to sustainable alternatives.

Table 2: End User Incentives for Eco-Friendly Technologies

With electricity, gas, and water prices continuing to soar, the absence of consumer-focused policies in Pakistan stands in stark contrast to the proactive measures taken by other developing nations. This imbalance hinders green energy adoption, increases reliance on fossil fuels, and contributes to Pakistan’s growing carbon footprint, which, at approximately 223.6 million metric tons of CO₂ emissions annually, remains significantly high relative to its economic output (World Bank, 2023). By comparison, Kenya emits just 17.5 million metric tons, while Mexico (472 million metric tons), Turkey (405 million metric tons), and South Africa (452 million metric tons) have taken extensive steps to curb emissions through consumer incentives (IEA, 2023). Without urgent reforms to introduce direct consumer incentives, tax relief, and financing options, Pakistan risks lagging further behind in the global push toward sustainability.

Why Pakistan is Struggling to Incentivize End Users

Several factors contribute to Pakistan’s lack of consumer-focused incentives:

• Fiscal Constraints – Pakistan faces a fiscal deficit of 7.4% of GDP (Ministry of Finance, 2024), limiting its ability to provide subsidies or financial relief to consumers for green energy adoption. In contrast, China has allocated over $30 billion in subsidies to promote EVs and solar energy (MIIT, 2023), while Brazil invests 1.5% of its GDP annually in green energy incentives (ANP, 2023).
• Policy Focus on Industrial Growth – Pakistan’s incentive structure prioritises industrial development over consumer adoption. The 1% duty on EV parts, 0% sales tax for manufacturers, and tax holidays for solar companies (FBR, 2023; AEDB, 2023) benefit major manufacturers like Lucky Motors, Sazgar Engineering, and Tesla Industries, but end users receive little to no support. By contrast, Mexico offers direct rebates on consumer EV purchases (SE, 2023), and Kenya provides VAT exemptions for solar installations (Kenya Revenue Authority, 2023).
• Lack of Renewable Energy Targets – Unlike China, which has set a target of 50% renewable energy by 2030 (NDRC, 2023), and Brazil, which already sources 45% of its energy from renewables (Energy Ministry, 2023), Pakistan lacks aggressive green energy adoption targets. NEPRA’s latest report (2024) indicates that renewable energy accounts for only 6% of Pakistan’s total electricity generation, highlighting the lack of policy urgency.
• High Initial Costs – The cost of solar installations in Pakistan ranges from PKR 1.2 million to PKR 2.5 million for a 10kW system, making it unaffordable for most households (AEDB, 2023). Meanwhile, EVs in Pakistan cost 30-50% more than conventional vehicles due to high import taxes and a lack of financing options (FBR, 2023). In comparison, Turkey and Spain provide low-interest loans for green technology adoption, significantly lowering upfront costs for consumers (Trade Ministry, 2023; IDAE, 2023).

Theoretical Perspectives

The arguments and recommendations presented in this article can be reinforced through multiple academic theoretical perspectives in International Political Economy (IPE), Environmental Economics, and Development Studies. The following theories provide a strong foundation for understanding Pakistan’s policy choices and the implications of failing to provide consumer incentives for green energy adoption.

1. Dependency Theory

Dependency Theory (Prebisch, 1950; Frank, 1967) argues that developing nations remain economically dependent on core (industrialized) countries due to imbalanced trade structures and foreign investments. In Pakistan’s case, the government’s policies prioritize manufacturers—many of whom have links to foreign investments—over end users, creating a system where green energy adoption is driven by industrial profitability rather than widespread public access.

In contrast, China, Brazil, and Mexico have actively subsidized end users, reducing reliance on industrial monopolies and promoting widespread adoption of renewable technologies (NDRC, 2023; SE, 2023). Therefore, it is safely deduced that Pakistan’s industry-centric approach to green energy incentives reflects structural dependencies on industrial actors and international supply chains rather than fostering domestic consumer-driven growth. To break this dependency cycle, Pakistan is required to recalibrate its policies by shifting towards consumer-centred incentives, enabling broader economic participation in green energy transitions.

2. Public Goods and Market Failure Theory

Pakistan’s failure to provide consumer incentives for green energy adoption results in a market failure, where public goods like clean energy remain underutilized despite their long-term benefits. According to Samuelson’s Public Goods Theory (1954), governments must intervene in markets where the benefits of a product (e.g., renewable energy) exceed the private costs to consumers. Without intervention (e.g., subsidies, tax incentives), clean energy remains too expensive for ordinary consumers, leading to continued reliance on fossil fuels.

In countries like Turkey and Spain, government-backed financing mechanisms have increased household adoption of solar energy and EVs, demonstrating the success of public investment in correcting market failures (Trade Ministry, 2023; IDAE, 2023). If Pakistan wants to grow out of these economic turbulences and failures, the Pakistani government must treat renewable energy as a public good and actively intervene through financing programs and rebates to ensure wider adoption.

3. Environmental Kuznets Curve (EKC) Hypothesis

The Environmental Kuznets Curve (Grossman & Krueger, 1995) posits that as economies develop, environmental degradation initially increases but eventually declines once a certain level of income and technological advancement is reached. However, this transition requires active government intervention in the form of green policies and consumer incentives. Pakistan’s reliance on industrial incentives over consumer incentives suggests an unsustainable development trajectory that delays the transition to low-carbon growth.

China and South Africa have accelerated their EKC transitions by subsidizing renewable energy for both industries and households (MIIT, 2023; DTIC, 2023). Pakistan, on the other hand, risks prolonging its high-emissions phase by keeping renewables expensive for end users, thus delaying its transition to a low-carbon economy. To fast-track the EKC transition, Pakistan must expand subsidies beyond industries and towards consumers to encourage the early adoption of sustainable technologies.

4. Political Economy of Energy Transitions

The Political Economy of Energy Transitions (Meadowcroft, 2011; Newell & Paterson, 2010) argues that energy policy is often shaped by political alliances between governments and dominant industries, rather than the public interest. Pakistan’s policies reflect political capture by industrial stakeholders, limiting the government’s willingness to create a consumer-driven renewable energy market.

In Pakistan, automotive manufacturers (e.g., Lucky Motors, Sazgar Engineering) and solar panel assemblers (e.g., Tesla Industries, SkyElectric) benefit from industry-focused policies, while consumers face high costs and lack of incentives (FBR, 2023; AEDB, 2023). In contrast, Mexico and Kenya have reduced energy monopolies by diversifying incentives for both industries and households, ensuring a more inclusive transition (SE, 2023; Kenya Revenue Authority, 2023). Breaking industrial dominance in energy policymaking is crucial—Pakistan should reallocate financial resources to consumer-driven subsidies and financing programs for green energy adoption.

To sum up this scholarly outlook of Pakistan’s green paradox, it is clear that there is a dependency on industrial growth, rather than public accessibility (Dependency Theory). One can also see a failure to correct market inefficiencies, leaving clean energy inaccessible to consumers (Public Goods & Market Failure). There are also delayed low-carbon economic transitions, increasing environmental and economic risks (EKC Hypothesis) while political-industrial capture is limiting the much-needed policy reforms that benefit the wider population (Political Economy of Energy Transitions).

Let’s not forget that Pakistan has made international commitments under agreements such as the Paris Agreement and the UN Sustainable Development Goals (SDGs) to reduce its carbon footprint. Additionally, at multiple COP (Conference of the Parties) summits, Pakistan has actively lobbied for eco-friendly financing from global donors, including the World Bank and Green Climate Fund. Pakistani officials, including the Minister for Climate Change, have emphasized the country’s vulnerability to climate change and the urgent need for international financial support to implement sustainable initiatives (Ministry of Climate Change, 2024; UNFCCC, 2023).

Despite these efforts, Pakistan has struggled to secure substantial financing due to concerns over policy continuity and governance challenges. However, global eco-financing initiatives, such as the Just Energy Transition Partnership (JETP) and the World Bank’s Climate Investment Funds (CIF), provide potential avenues for Pakistan to access green funds. If Pakistan strategically aligns its policies with these international frameworks, it could unlock financing to support consumer incentives for EVs, solar panels, and energy-efficient appliances.

Empirical evidence and available data suggest that policymakers in Pakistan have to make wise choices at the right time before it is too late. To align with international best practices, Pakistan must adopt consumer-centric policies such as targeted subsidies for households adopting solar panels & EVs, extending low-interest loans for green technology investments and offering tax rebates for individual consumers, similar to China, Turkey, and Spain. Without such shifts, Pakistan risks widening its energy divide, missing out on eco-financing opportunities, and delaying its transition to a sustainable economy.

About the Author: Saeed Minhas (Saeed Ahmed) is a researcher and veteran journalist adding valuable opinions to global discourses. He has held prominent positions such as Editor at Daily Times, The Frontier Post and Daily Dunya. Currently, he serves as the Chief Editor at The Think Tank Journal. X/@saeedahmedspeak 

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