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The Lahore Journal of Economics 15: SE (September 2010): pp. 33-59

Pakistan’s Energy Sector Issues: Energy Efficiency and Energy Environmental Links Tariq Husain*
Abstract This paper analyzes Pakistan’s energy sector issues and highlights (i) the importance of the link between energy and the environment, and (ii) the central importance of energy efficiency for high return demand-side solutions to meet the country’s energy needs. The paper argues that energy planning should integrate the external cost of energy use in deciding about the composition of supply: coal, oil, gas, hydropower, renewable, nuclear, and solar. By utilizing external cost estimates made by the European Commission for Europe, and the US National Academy of Sciences, a total cost (external + internal) ranking of primary energy sources for Pakistan is estimated. This estimate is at the low end of the cost spectrum because classic pollutants—sulfur dioxide, nitrogen oxides, carbon monoxide—in Pakistan are significantly higher than in Europe or the US. The paper also discusses the experiences of China and OECD countries in increasing energy-wide efficiency. A central lesson emerging from the analysis is that Pakistan will have to significantly increase its energy-related research and development expenditure in order to adequately address its energy sector issues. A quadrupling from 0.25 % of gross domestic product is recommended over a decade. Keywords: Energy, policy, environment, Pakistan. JEL Classification: Q48, Q47, Q5. I. Introduction Energy is the life blood of socioeconomic development. It is essential for technological applications that promote productivity increases. The three domains where energy is used are the production of electricity, the extraction/generation of thermal energy (heating and cooling), and transportation. During the past two centuries, fossil fuels (coal, oil, and…...

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