SUSTAINABLE GROWTH
“Every nation faces a moment when survival demands reinvention; Pakistan’s comes not with the roar of revolution, but with the hum of solar panels and the quiet spark of creative destruction.”
The 2025 Nobel Prize in Economic Sciences, awarded to Philippe Aghion, Peter Howitt and Joel Mokyr, could not have arrived at a more fitting moment for a world teetering between climate crisis and economic reinvention.Their work, captured vividly in Aghion’s ‘The Power of Creative Destruction’, argues that sustainable growth is born not from preservation but from perpetual renewal.
In its chapter on ‘Green Innovation and Sustainable Growth’, the book reveals that climate policy and innovation policy are one and the same, while ‘Financing Creative Destruction’ highlights that green revolutions demand financial systems bold enough to fund the new and dismantle the obsolete.As Pakistan rolls out the third iteration of Nationally determined Contributions (NDC 3.0), this Nobel serves as both a theoretical compass and a practical warning: progress will not come from protecting the old order, but from financing its creative destruction.
Pakistan’s third Nationally Determined Contribution (NDC 3.0) is an ambitious document in both scope and sentiment, a national confession that climate change is no longer an environmental issue but an existential one.It proposes to cut projected greenhouse gas emissions by half by 2035, with 17 per cent to be achieved through domestic measures and the remaining 33 per cent contingent on international finance, technology transfer and capacity building.The price tag, estimated at $565.7 billion, may appear staggering, but it represents the cost of catching up with the future rather than the price of inaction.
Every dollar deferred today will cost a multiple tomorrow.
Yet behind this numeric precision lies a deeper political economy of transition.
Nearly 40 per cent of the required investment lies in the energy sector, transforming the grid, building renewable capacity and modernising transmission.The rest stretches across agriculture, water, resilient infrastructure, urban adaptation, transport and social protection.These are not climate projects but development projects wearing a green conscience.
The URAAN Plan, which frames this ambition within Pakistan’s larger transformation agenda, rightly ties climate to competitiveness.Still, the NDC remains a half-finished symphony; it hits the right notes on vulnerability and ambition but leaves silence where instruments of execution should play.
At its core, Pakistan’s NDC needs what Philippe Aghion calls the “engine of creative destruction”.Aghion reminds us that prosperity does not come from preserving the past but from replacing it.Innovation, not maintenance, drives progress.
For Pakistan, that means daring to dismantle the old energy economy, the monopolistic power purchase agreements, the fossil-fuel subsidies, the guaranteed returns on idle capacity and replacing them with a system that rewards efficiency, competition and innovation.
The paradox of Pakistan’s power sector, where idle plants receive billions in capacity payments while consumers endure unaffordable bills, is a textbook case of economic stagnation without destruction.Creative destruction, managed well, would mean letting inefficient megawatts die so that new, decentralised energy systems can live.
NDC 3.0, if reimagined as a dynamic document rather than a static submission, can become not merely a report to the UNFCCC, but a declaration of Pakistan’s next industrial revolution
The rooftop solar revolution is the first hint of that renewal.The sight of solar panels glinting across the country is not merely a technological shift but a silent insurgency against centralisation.However, the regulatory system still treats this transformation as a threat rather than a triumph.
The NDC celebrates renewable expansion but remains coy about reforming the policy architecture that suffocates it.It promises more generation, but not yet market competition; it calls for green finance, but not for deregulation of innovation.The document also fails to articulate a clear exit strategy for stranded assets and an economic plan for communities dependent on fossil energy.
There is, however, immense untapped potential that could redefine this trajectory.Among the most promising frontiers is Pakistan’s comparative advantage in sodium-ion battery technology.
The country’s vast salt reserves can serve as the feedstock for sodium-ion battery manufacturing, offering a cheaper, safer alternative to lithium-ion storage.
NDC 3.0 mentions battery energy storage systems (BESS) as a mitigation measure, but it stops short of linking this to industrial policy or local manufacturing.A sodium-based storage ecosystem could anchor a new export industry while supporting domestic solar and wind integration.The absence of such forward-looking industrial linkages is one of the NDC’s greatest omissions; it counts technologies but not industries, measures emissions but not markets.
The other missing piece is macroeconomic integration.Pakistan’s climate ambition still sits outside its fiscal reality.
The NDC lacks a fiscal strategy that embeds climate action within budgetary and debt frameworks.The IMF’s Resilience and Sustainability Facility (RSF), for instance, is completely absent from the text, even though it explicitly requires climate-informed fiscal planning and carbon pricing reform.Without connecting NDC targets to RSF reforms, such as carbon levies, targeted subsidies and green public investment, Pakistan’s commitments risk floating above its financial architecture, untethered to the instruments that can make them real.
Similarly, the NDC overlooks the potential of domestic capital markets, green bonds, sukuk, diaspora bonds, to raise concessional finance for climate infrastructure.It reads like a plan to receive money, not yet a plan to generate it.
Institutionally too, the NDC underplays the political economy of implementation.
It acknowledges governance structures but evades their reform.The Pakistan Climate Change Authority exists on paper, yet its operationalisation remains uncertain.Climate finance tracking systems are proposed but not institutionalised.Subnational governments, though central to adaptation, appear as consultees, not co-architects.Aghion’s framework would remind us that innovation ecosystems thrive on decentralisation, letting local actors compete, experiment and fail without waiting for top-down permission.
Perhaps the most vital gap, however, lies in imagination.The NDC speaks eloquently about mitigation and adaptation but scarcely about transformation.It lacks a clear vision of how climate action can reshape the economic model itself, from dependence on imports to local manufacturing, from fossil-based infrastructure to green entrepreneurship and from linear consumption to circular production.
There is no explicit linkage between the NDC and Pakistan’s industrial, education and trade policies.
No roadmap for research and development, no incentive structure for universities and startups, no integration with digital transformation.Climate action without innovation is philanthropy; with innovation, it becomes strategy.
Pakistan’s climate future will not be determined by the generosity of donors but by the audacity of its own reforms.The NDC has outlined its ambition; it now requires the color of creative destruction to bring it to life.To build a green and equitable economy, Pakistan must retire what no longer serves its purpose, subsidise what has not yet matured and protect those who risk being left behind.Every old furnace that shuts down, every solar panel that rises, every startup that challenges a monopoly, all of these are acts of creative destruction.
They are also acts of national renewal.
NDC 3.0, if reimagined as a dynamic document rather than a static submission, can become not merely a report to the UNFCCC, but a declaration of Pakistan’s next industrial revolution — a revolution where economic disruption becomes the instrument of ecological survival.
The writer has a doctorate in energy economics and serves as a research fellow at the Sustainable Development Policy Institute (SDPI), Islamabad.He tweets/posts @Khalidwaleed_ and can be reached at [email protected].
