Pakistan’s electricity crisis is making it difficult for many businesses, factories, and households to operate normally. Some areas have no power, while others get only a few hours of electricity a day. The crisis is so severe that Pakistan has had to import electricity for the first time in its history.
This electricity crisis is forcing many people in Pakistan to turn to other, less conventional ways of generating electricity.
For many, this means coal.
Pakistan is one of the most coal-dependent countries in the world, which creates many problems of its own. Once plentiful, easily accessible, and cheap to produce, coal is now a scarce, expensive commodity. As a result, many Pakistani citizens are now turning to the informal trade of coal trading as a way to meet their energy needs.
Pakistan’s Quest for Energy
Pakistan has only one tiny hydroelectric dam that provides less than one percent of the country’s energy needs. This means that the country must heavily rely on fossil fuels and conventional electricity generation. Before the recent coal crisis, Pakistan had almost completely abandoned its nuclear energy program. Instead, it focused on expanding its coal production, which currently accounts for 65 percent of the country’s electricity.
Coal as a Domestic Energy Source
Pakistan’s coal-dependent economy makes it especially vulnerable to coal shortages. The country is the third-largest producer of coal in the world, but it has the second-lowest coal production rate. This production rate is so low that many analysts consider it a form of self-sufficiency.
Because of these low production rates, Pakistan must heavily rely on imports to meet its energy needs. In recent years, China has been the largest supplier of coal to Pakistan.
However, in January 2016, Pakistan experienced its worst energy crisis in history when its northern neighbor and primary energy supplier, China, suddenly halted all of its exports to the country. At the same time, domestic demand for coal was at an all-time high due to the lack of electricity supply. As a result, the country’s coal stocks dwindled to just shy of a month’s worth of consumption.
The Problem with Coal
Coal is a fossil fuel that is extracted from the ground by either strip mining or open-pit mining. The vast majority of the world’s coal is found on the ground in one form or another. However, it is also found as a byproduct of other industries, like oil and gas extraction.
Once removed from the ground, coal is transported to power plants by train, truck, or ship. From there, it is used to generate electricity or boil water to produce steam.
The burning of coal produces two main types of emissions: carbon dioxide (CO2) and sulfur dioxide. Carbon dioxide is considered a greenhouse gas, and it is the main gas responsible for human-induced climate change. Sulfur dioxide is a poisonous gas that has no redeeming qualities and is a major cause of acid rain.
The Rise of the informal Coal Trade
Because of its importance to the economy, the Pakistani government monitors and regulates the trade of coal. However, this monitoring is rarely effective, and the government’s control over the industry is often lax. As a result, the informal coal trade has flourished in Pakistan. The informal coal trade operates without any government permits or oversight, and it is therefore outside of the government’s control.
Informal traders buy and sell coal without the proper documentation or paperwork. They buy and sell coal on the street or from each other using cash and primarily through word of mouth. Although informal traders are breaking the law, they are not doing so under governmental supervision or with licenses.
The informal coal trade has grown tremendously in recent years, and it has become one of the most important economic activities in Pakistan.
The Benefits of Coal Barter Trade
Unlike most other commodities, coal does not have to be transported great distances to be economically viable. As a result, it does not require expensive infrastructure like pipelines or railways to facilitate its transport.
In fact, the cost of transporting coal is so low that it often makes more financial sense to ship it by boat rather than by train or truck. This is especially true during periods of low water levels, when the boat traffic across rivers is at its highest.
Coal is also a very stable and predictable energy source, which makes it ideal for long-term energy planning and investment decisions. With other commodities, planning for price spikes and dips is crucial for investment decisions. With coal, however, price spikes and dips are common and unremarkable, which makes them easier to weather.
In the wake of Pakistan’s recent energy crisis and its potential impact on the economy and daily life, many people have turned to the informal trade of coal trading. As a result, the demand for, and price of, this commodity is rising.
This increase in demand, coupled with stringent export rules put in place by China, has led to acute shortages in Pakistan. As a result, the country has had to turn to other, less conventional ways of generating electricity.
For many, this means coal. As the demand for this commodity continues to rise, so too will its price. This can only be a good thing, as it will allow Pakistan to import less energy and diversify its energy sources to reduce its overall carbon footprint.
However, there are concerns that the rising demand for this mineral may have a negative impact on the environment. With so much of the world’s coal reserves located in developing countries like Pakistan, it is important to have a holistic approach to the energy and environmental issues posed by this commodity.