Energy has become the defining battleground where geopolitics, economic power, and climate ambition collide.

Energy, Geopolitics, and Competing Global Models

Energy remains the lifeline of modern economies, shaping development, industrialization, and social welfare. Today, it also sits at the center of an intensifying geopolitical contest, as the world’s two leading powers pursue sharply different energy strategies. The United States is doubling down on fossil-fuel dominance, while China seeks supremacy in clean-energy technology.

Washington relies primarily on private industry, supported by selective state intervention, to shape its energy and climate outcomes. The U.S. now leads the world in both oil and natural-gas production, producing about 24.2 million barrels of oil per day, more than Saudi Arabia and Russia combined, and roughly 108 billion cubic feet of natural gas daily, rivaling the output of Russia, Iran, and China. This unprecedented energy abundance underpins U.S. economic resilience and geopolitical leverage, even as global climate commitments call for rapid decarbonization.

Fossil fuels still dominate the U.S. energy system, accounting for about 83 percent of total consumption. Although petroleum’s share has fallen from nearly 50 percent in the late 1970s to around 38 percent today, America remains deeply reliant on oil. Efforts under President Barack Obama to accelerate the renewable transition faced structural limits, particularly China’s dominance over critical minerals such as lithium, cobalt, and rare earth elements essential for clean-energy technologies.

President Donald Trump later reversed much of the climate agenda, prioritizing fossil fuel expansion in the name of energy independence. At the same time, the shale revolution transformed global markets, cementing the United States as the world’s largest oil and gas producer. Yet the country still imports roughly 30 percent of the oil it consumes, underscoring the enduring complexity of U.S. energy security.

China, by contrast, has become the world’s dominant supplier of clean-energy hardware. It manufactures over 70 percent of global solar panels and leads in batteries, electric vehicles, and grid equipment. By offering affordable renewable technologies, China enables developing countries to decarbonize quickly and cheaply. Yet this green leadership coexists with continued reliance on coal at home and financing of fossil-fuel infrastructure abroad, revealing a dual-track strategy that blends clean-technology dominance with carbon-intensive realities.

For developing countries like Pakistan, this divergence presents both opportunity and risk. China enables technological leapfrogging but also creates new dependencies in clean-energy supply chains. Meanwhile, fossil fuels remain essential for baseload power and industrial stability in the short to medium term. Pakistan’s strategic challenge is not choosing between global models, but crafting a pragmatic energy pathway that aligns climate ambition with development imperatives.

Climate Ambition Versus Economic Reality

Pakistan’s climate commitments must be grounded in economic and social realities. Nationally Determined Contributions (NDCs) should support growth, inclusion, and progress toward the Sustainable Development Goals—especially SDG 7 on affordable and reliable energy.

Pakistan’s third NDC targets a 50 percent reduction in projected emissions by 2030, with only 15 percent unconditional and 35 percent contingent on international finance that has yet to materialize. Looking ahead, Pakistan has outlined a voluntary 2035 target of up to 50 percent, of which only 17 percent is unconditional. These figures underscore how heavily Pakistan’s climate ambition depends on external financing, technology transfer, and capacity building.

Delivering on these goals will require an estimated $565.7 billion in total investment, including $348 billion by 2030 and another $217.7 billion by 2035, according to the World Bank’s Pakistan Country Climate and Development Report (2022). At the same time, coal remains embedded in the power system, accounting for about 17 percent of installed capacity and 16 percent of annual generation, as reported in NEPRA’s State of Industry Report 2024.

Pakistan’s broader development performance reflects these constraints. With an SDG Index score of around 57 and a global ranking of 140th, the country has achieved just over half of the measurable progress toward the SDGs. Climate ambition without development alignment risks becoming politically unsustainable and economically destabilizing.

The Paradox of Surplus Capacity and Energy Insecurity

Pakistan’s power sector illustrates a damaging paradox. According to the National Transmission and Despatch Company, installed generation capacity stands at 45,824 MW, while NEPRA reports that net-metering capacity has reached 6,035 MW. Yet total electricity generation in FY 2023–24 was only 127,421 GWh for a population approaching 250 million.

This translates into per-capita electricity consumption of less than 510 kWh annually. Capacity utilization averages just 30–35 percent, while transmission and distribution losses remain high at 18–20 percent. Pakistan thus faces a situation of excess installed capacity alongside persistent energy insecurity.

International comparisons highlight the scale of the gap. Pakistan’s per-capita electricity consumption of 510 kWh is far below the global average of 3,000–4,000 kWh. India consumes around 1,300–1,400 kWh per person, China 5,000–5,500 kWh, and the United States over 12,000 kWh annually. These disparities reflect not just income differences, but access to reliable and affordable electricity. The problem is not merely generation capacity, but system performance, affordability, and governance.

Affordability: The System’s Breaking Point

Electricity affordability has become Pakistan’s most critical energy fault line. NEPRA data show that overall electricity consumption has declined sharply—by 14 percent in industry and 47 percent in agriculture, indicating demand destruction rather than efficiency gains.

Although a concessional tariff of PKR 22.98 per unit has been announced for incremental industrial and agricultural consumption, baseline industrial tariffs remain around PKR 38 per unit, equivalent to $0.13–0.14 per kWh. This places Pakistan at a severe competitive disadvantage.

By comparison, industrial electricity costs in the United States average around $0.08 per kWh, while China’s typically range from $0.08–0.09 and India’s from $0.09–0.11. Even allowing for regional variation, Pakistan’s tariffs remain significantly higher.

These elevated costs erode competitiveness, suppress manufacturing output, and deter foreign investment. As a result, industry’s share in Pakistan’s GDP has fallen to just 17.7 percent. Energy-intensive basic industries have struggled to survive, exposing the limits of competing in low-value manufacturing under high electricity prices.

Pakistan must therefore pivot toward high dollar-value, low energy-intensity sectors—such as electronics, IT services, and knowledge-based industries—while investing in skilled manpower. This shift is essential to raise export earnings, strengthen domestic value addition, and restore the trade balance under persistently high and volatile energy prices.

Structural Reform Before Expansion

Before raising climate ambition or expanding generation capacity further, Pakistan must resolve deep structural contradictions. Improving capacity utilization, reducing transmission and distribution losses, prioritizing least-cost domestic resources such as small hydropower, solar, and wind, and aligning power-sector planning with affordability and development objectives are more rational than simply adding new megawatts.

These reforms must be complemented by sustained energy-efficiency measures and a strategic shift toward higher value-added, less energy-intensive economic activities. The goal should be to increase economic output and export value per kilowatt-hour consumed.

Bridging the gap between Pakistan’s electricity consumption levels and those of advanced economies will require strong state intervention, coordinated planning, and a clear national energy-transition roadmap. Market signals alone cannot deliver universal access, industrial revival, or a just transition in a structurally constrained economy.

Unlike the United States and India, where subnational governments play central roles in energy planning, Pakistan’s power sector remains highly centralized in practice. Despite constitutional devolution under the 18th Amendment, provinces have limited authority over power planning, tariffs, and grid investment. In a large and diverse country, such centralization is neither practical nor efficient.

Climate Pressures and the Cooling Crisis

The global climate context further complicates Pakistan’s energy dilemma. At COP30, UN Secretary-General António Guterres warned that an overshoot of the 1.5°C threshold is now inevitable. Rising incomes and intensifying heat are already driving a surge in electricity demand, particularly for cooling.

The World Energy Outlook 2025 projects that under current policies, global demand for oil and natural gas will continue to grow through 2050. Pakistan, located near the equator, is especially vulnerable to heatwaves.

NEPRA reports that the gap between winter and summer electricity demand has widened to around 18,000 MW, driven overwhelmingly by residential cooling loads. Poor building insulation and inefficient air-conditioning sharply inflate consumption. Without urgent action on building codes, appliance standards, and demand-side management, Pakistan risks locking itself into a vicious cycle of excess capacity, rising costs, and recurring system stress.

Proposals to allocate up to 2,000 MW for AI data centers and Bitcoin mining illustrate the risks of misaligned priorities. While such projects may absorb surplus capacity, without affordability, reliability, and strong governance they risk deepening distortions rather than driving productive growth.

The electrification of transport poses similar challenges. Under the NEV Policy 2025–2030, Pakistan plans to deploy 3,000 EV charging stations nationwide. While the projected EV load of 120–180 MW is manageable, charging demand is localized and peak-oriented, requiring targeted distribution upgrades and smart load management to avoid new bottlenecks.

Energy Policy as National Strategy

Electricity in Pakistan has become increasingly unaffordable for households and industry alike. Capacity payments, surcharges, inefficiencies, and opaque accounting continue to drive costs upward, while selective averages and short-term subsidies mask the depth of the crisis.

Without transparent data, honest accounting, and decisive state leadership, Pakistan risks entrenching an energy trap—characterized by high costs, suppressed demand, weakened industry, and constrained climate ambition.

Energy policy can no longer be treated as a narrow technical or fiscal issue. It is fundamentally a question of development strategy, economic competitiveness, and national sovereignty.

Pakistan’s future will be shaped not by how much energy it produces, but by how wisely it balances affordability, security, and climate ambition to power sustainable growth. How Pakistan resolves the politics of power affordability will determine whether it can grow, decarbonize, and secure a meaningful place in a rapidly transforming global order.