Background: The textile sector in Pakistan employs 40% of the industrial labour force, and accounts for 8% of the total gross domestic product (GDP). At the same time, it is the second most polluting industrial sector in Pakistan, contributing 6% of the country’s greenhouse gas (GHG) emissions. These GHG emissions stem from two sources: 1) industrial processes which contribute direct GHG emissions from stationary combustion, and 2) the textile sector is the largest consumer of electricity produced by the energy sector, which is the biggest GHG emitter in the country.
While factories linked to international supply chains are required to comply with environmental regulations, textile manufacturers producing for the local market in Pakistan only rarely comply. The main barriers for a sector-wide transformation towards a greener industry are: (1) weak enforcement of environmental regulations on the local level, (2) lack of awareness of the benefits of resource and energy efficiency (RE & EE) measures, and (3) absence of liquidity in textile small and medium enterprises (SMEs) to invest in renewable energy (RE) and energy efficiency (EE) measures, paired with a lack of access to external capital.
Approach to Transformational Change: The project “Pakistan – Decarbonising Textile Manufacturing” will provide access to funding (via the financial cooperation [FC] component) and advisory support (via the technical cooperation [TC] component). The FC component will establish a fund to provide loans to manufacturers for adopting EE and RE technologies on reduced interest rates. By establishing business cases for cleaner production technologies, the project will also catalyse the development of private sector financial instruments that textile SMEs can utilise to invest in RE and EE technologies beyond the project duration.
The TC component aims to improve regulations, and address enforcement and compliance issues through capacity development and policy interventions. In addition, capacities of relevant ministries and other national institutions of Pakistan, textile manufacturers, green technology service providers, and the banking sector will be built or strengthened.
The project will leverage private funds and will contribute to the implementation of Pakistan’s Nationally Determined Contributions (NDCs). SMEs across the textile supply chain will be targeted.
Mitigation potential: Approximately 354,000 tonnes of CO2e will be mitigated over the five-year duration of the project. In addition, and due to the increased demand for specialised technology, the local market for industrial technologies for the textile sector will be built, which will bring down the costs for industry players. Due to the increased demand for specialised technology in the national textile sector, the project will also build up this market locally, reducing costs for industry players.
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