Pakistan urged to accelerate energy efficiency, carbon audits in textile sector amid EU climate regulations

Policymakers, diplomats, industry experts and development partners on Thursday called for urgent policy interventions, green financing mechanisms and stronger industry-government coordination to help Pakistan’s textile sector meet emerging international climate compliance requirements and remain competitive in global markets

ISLAMABAD, (APP - UrduPoint / Pakistan Point News - 21st May, 2026) Policymakers, diplomats, industry experts and development partners on Thursday called for urgent policy interventions, green financing mechanisms and stronger industry-government coordination to help Pakistan’s textile sector meet emerging international climate compliance requirements and remain competitive in global markets.

The recommendations emerged during a workshop on “Exchange of Knowledge and Best Practices in Energy Audits, Energy Management, and Life Cycle Analysis (LCA) for the Textile Sector in Pakistan,” jointly organized by the Danish Energy Agency, SDPI, NEECA and Embassy of Denmark, said a press release.

Opening the session, Danish Ambassador to Pakistan, Maja Mortensen stressed that implementation of energy transition policies, rather than planning alone, was now the key challenge for Pakistan and other countries.

She said t4hat energy efficiency was directly linked with economic resilience, energy security and national stability, especially amid global energy supply disruptions and rising domestic energy prices. Referring to Denmark’s experience after the 1970s oil crisis, she said that long-term planning, institutional reforms and close public-private cooperation had enabled Denmark to become a global leader in renewable energy and industrial energy efficiency.

The Ambassador announced that Pakistan and Denmark had entered into a three-year Strategic Sector Cooperation in the energy sector, which would continue until 2029 and provide a structured framework for technical cooperation, policy dialogue and implementation support. “Green transition and economic growth can go hand in hand,” she said, adding that energy-efficient industries were more competitive and better prepared for future market requirements.

German Ambassador to Pakistan, Ina Lepel warned that new European Union regulations, including the Carbon Border Adjustment Mechanism (CBAM), mandatory sustainability reporting and life-cycle-based environmental requirements were becoming binding market access conditions for exporters.

She said Pakistan’s textile sector, which contributes around 60 percent of export earnings, can face serious commercial disadvantages if exporters failed to provide verified environmental performance data across supply chains. “Pakistani textile exporters who cannot demonstrate their environmental performance risk losing contracts to competitors who can,” she said.

The German envoy particularly highlighted the vulnerability of small and medium enterprises (SMEs), saying that they lacked adequate resources for sustainability compliance and energy transition. She called for enterprise-level technical support, sustainable technology adoption and stronger incentives for carbon audits and climate planning.

Executive Director of the Sustainable Development Policy Institute (SDPI), Abid Qaiyum Suleri said that Pakistan needed evidence-based policy frameworks to reduce dependence on imported fuels through energy efficiency and renewable energy adoption. He said that energy audits, energy management systems and life-cycle analysis could help industries optimize energy consumption, improve efficiency and contribute to national macroeconomic targets by reducing fuel imports and industrial energy costs.

Dr. Suleri also linked energy policy challenges with wider geopolitical uncertainties and fiscal pressures, saying that governments were increasingly being forced to rethink industrial and energy planning amid regional instability and changing global supply chains.

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Country Manager of the Danish Energy Agency, Nadeem Niwaz said that the Pakistan-Denmark Green Strategic Partnership reflected Denmark’s recognition of Pakistan as a country of strategic significance in energy transition efforts. He said that Denmark’s energy partnerships were tailored according to the unique challenges of each country and were focused on long-term government-to-government collaboration on clean energy and industrial efficiency.

Senior Technical Expert at Viegand Maagøe, Fridolin Holm said that Pakistan’s textile industry remained highly energy-intensive, relying heavily on fossil fuels amid unreliable energy supply and rising international pressure to verify carbon emissions performance. He noted that textiles accounted for around 28 percent of industrial electricity consumption and 40 percent of industrial gas use in Pakistan.

Holm warned that without certified and verified CO2 data, Pakistani exporters could face “worst-case default values” under the EU’s CBAM framework, effectively creating permanent financial penalties on exports and potentially threatening Pakistan’s GSP+ trade benefits. He recommended that Pakistan should adopt layered compliance strategies beginning with ISO 50001 standards to establish metering and energy management systems. He added that energy audits could simultaneously support cost reduction, emissions reporting, investment planning and regulatory compliance.

Technical LCA expert Lasse Vinblad Thaisen said that the European Union's textile regulations were rapidly reshaping global supply chains and buyers would increasingly demand verified product carbon footprints, digital product passports and emissions audit data from suppliers. He explained that Life Cycle Analysis (LCA) and Product Environmental Footprint (PEF) standards would become central tools for measuring environmental impacts including water use, chemical consumption and ecosystem effects throughout a product’s lifecycle.

Associate Research Fellow and Head of Ecological Sustainability and Circular Economy at SDPI, Zainab Naeem highlighted Pakistan’s growing role in textile recycling and circular economy initiatives and said that Pakistan recycled nearly 89 percent of textile waste, with major processing hubs operating in Karachi, Faisalabad and Chiniot. However, she identified untreated wastewater, chemical discharge management, skills shortages and ambiguity in harmonized system (HS) codes as major policy and regulatory challenges requiring urgent attention.

During the panel discussion, Head of Compliance at the National Compliance Centre, Ministry of Commerce, Nabeel Amin said that Pakistan needed an indigenous compliance model to address CBAM-related challenges rather than replicating foreign approaches. He called for integrated green financing facilities to support SMEs and the informal sector in adopting cleaner technologies and scaling up compliance capacities.

Aftab Khan of the National Productivity Organization (NPO) noted that SMEs continued to face major gaps in technical skills, management systems and financial resources needed for sustainability transition. He also emphasized the need for government subsidies, targeted financing models, stronger public-private coordination and enhanced technical training to support Pakistan’s textile sector in adapting to evolving global environmental standards while maintaining export competitiveness.