Pakistan has a European Smog Problem
Global Solutions, Local Problems
European Gas and Pakistani Smog
The noise and the fury of the US election and President Trump’s nominations to top government posts tends to bury other news. There is no doubt that these “local” USA events, will have global consequences. Indeed, that is the theme of this post: our interconnected world has some strange network effects.
Exhibit A: European energy policy and smog in Pakistan.
Last week’s headlines include some pretty shocking news about smog in Pakistan (and across the Punjab, Delhi and indeed in Bangladesh). The smog is due to stable meteorological conditions that trap air-masses, combined with lots of human-made particulate matter - mostly the result of combustion: cooking fires, vehicle emissions, brick kilns, and coal-fired power stations.
Also in today’s headlines we see that Europe is starting to look worried about it’s winter energy security as Russia ends a gas supply contract just as the wind takes a holiday, causing prices to spike.
Plus ca change…
Mixology
Smog is pretty terrible, and for once, hyperbole-prone headline writers using a term such as “toxic smog” are probably not wrong. That said, there is often confusion between smog and climate change - a notable example being the (in)famous youth climate activist Sophia Kianni (feted by: BBC, Forbes, TED, UN etc)
…when I visited my relatives in Iran as a 12 or 13-year old. I noticed how polluted the sky was; I couldn’t see the stars at night. I realized this was a symptom of the climate crisis. (UN)
Whilst I think we’d all agree that smog doesn’t cause climate change1 (although ironically it can cause local cooling), the global fight against fossil fuels would seem to be well aligned here. The cause of harmful particulate matter and CO2 emissions is the same - combustion. So what does this have to do with European Energy Policy?
Joining the Dots
In 2022, after Russia invaded Ukraine, Europe was already in the start of an energy crisis - triggered by low wind (the “dunkelflaute” of September 2021). Gas prices had risen as autumn turned to winter - then in early 2022, Russian tanks rolled across the Ukraine border. The EU sought to impose sanctions and eventually the Nord Stream pipelines were blown up. This led to a desperate scramble for gas. Whilst I have written about this in previous posts (here, here and here) it is critical to the understanding of today’s headlines.
Europe was desperate, and consequently - “buying the entire market” - which had the mostly unseen knock-on effect of pricing many other buyers out of the market.
This global price-war wasn’t just price; in the case of inelastic supply, this doesn’t mean that gas is just “more expensive” - it means that some people simply have to go without. In many countries, not having gas - meant no fuel for electricity leading to brown and black-outs with obvious negative effects on businesses, on people losing their livelihoods, and families ability to feed themselves in Pakistan, Bangladesh and elsewhere.
“Buying up everything on the market” was expensive and was clearly felt by European consumers, but unfortunately it didn’t stop there. Global supply was finite and Russia was not able to divert its gas to new markets - being locked into a pipeline distribution network heading east to Europe. The European demand and pricing meant that there was, in effect, price rationing elsewhere. Up until then, Pakistan may have felt good about itself - it had LNG cargos locked-in at contracted prices for delivery.
Shockingly Gunvor (and ENI) broke their LNG delivery contracts, paying a break fee but still reportedly making $550 million profit on price arbitrage by selling to Europe.
Pakistan had to scramble and plan for a world in which it could be shut out of the global energy market in the blink of an eye. Once the immedaite crisis was managed, security of supply and affordability took precedence. Coal was the obvious candidate, cheap, locally available and reliable. Discounted Russian oil was also a no-brainer. Pakistan has a population of 230 million and cannot have disrupted energy supplies.
Back to the Blackstuff
Pakistan approved new coal power plants right after this mess - another "win" for European energy policy. Indeed, by February 2023 it was reported that Pakistan would quadruple its coal-fired power generation.
Pakistan plans to quadruple its domestic coal-fired capacity to reduce power generation costs and will not build new gas-fired plants in the coming years, its energy minister told Reuters on Monday, as it seeks to ease a crippling foreign-exchange crisis. (Reuters)
Europe’s gamble
Led by Germany, Europe took a view that oil and gas were undesirable and, more significantly, would soon be unnecessary. The rose-tinted view that renewables would obviate the need for gas led to a rejection across many aspects. Notably there was:
no desire to build LNG import terminals,
no desire to lock-in long term supply contracts and
no desire to finance (quite the opposite!) any new oil and gas activity: neither domestically nor abroad.
European banks were at the fore-front of defunding the O&G industry. This actually worked out pretty well for Europe for the decade leading up to the invasion of Ukraine. Russian gas was literally “on tap”, abundant and cheap, and any shortfall could be made up on the spot market. Only fools would lock-in long-term LNG contracts. A great plan, until it wasn’t.
Europe continues to buy Russian gas, albeit in lesser volumes and increasingly via more expensive LNG cargos. The European shortfall is made up by increased supply from Norway and the USA as well as - with the usual massive dollop of irony very long-term LNG contracts with Qatar.
Economy minister Robert Habeck also welcomed the long-term deal. “Fifteen years is great,” Habeck told reporters at a business conference in Berlin. “I wouldn't have had anything against 20 (years) or longer contracts.” (source)
Yes - that Robert Habeck - Mr. Energiewende.
Europe continues to discourage financing of oil and gas projects that could contribute to global gas supply and help displace coal in countries out of sight and out of mind…
Meanwhile 8000km away, millions suffer from dangerous air quality - in part2 due to Europe (what is a polite word for stealing? - ah yes…) “out-bidding” Pakistan for LNG back in 2022.
With a staggering 1.8 million people requiring medical treatment in Pakistan’s eastern province of Punjab and 11 million children facing health risks, according to the United Nations, provincial authorities are scrambling to combat hazardous smog that has driven air pollution to unprecedented levels. (Al Jazeera)
and to be fair, the wording is “symptom of” which is debatable, but potentially defendable…
To be clear, burning coal for electricity is one part of a much bigger and more complex smog problem. That said, cheap and abundant gas could be used for electricity, brick-kilns and cooking…
Pandreco - I shared your post with a friend who was brought up in India. He gave a reply that will interest you, and I'm hoping you'll have a few comments.
"Thanks for sharing the article. As the article mentions, air pollution has always been a problem in Pakistan - and in recent years it has become much worse. As a kid growing up in Lahore, I distinctly remember that on clear days it was possible to see the Himalaya mountains to the north. That is no longer the case. When Fawn and I visited in 2019, there was one morning when it was hard to see a wall only 100 yards away. You could directly look at the sun without hurting your eyes - it looked like an orange ball in the sky. In the past, the smog cleared up pretty well once you left the major cities. Not so any more. When we were there this last time, the smog stayed with us on a trip to a village probably 40 or 50 miles from the city.
Having said all that, something the article didn't mention is that smog in the Punjab (where the city of Lahore is) is, to a certain extent, seasonal. Subjectively, I would say that vehicle emissions are down from when we lived there. For example, the city of Lahore has banned rickshaws with two-stroke engines which were a major source of pollution. I have often seen hordes of rickshaws pouring out huge clouds of blue smoke from the oil mixed in with the petrol they ran on. You don't see that any more. Similarly, a large proportion of the other vehicles have been converted to run on natural gas - of which Pakistan is a major producer. (Going by the article, Pakistan is no longer self-sufficient in gas, but they do produce much of what they use.)
So what is the major source of the air pollution which plagues the country and why do I say it's seasonal? It's because much of it comes from burning off the fields in the Fall. During that part of the year, the prevailing winds come from the East. So, it isn't just the Pakistani farmers who are to blame. The winds bring in huge quantities of smoke from the burn-off in India. Then, about this time of year (November), when the main harvest is over and the fields are plowed for the new crop, air pollution goes way down and the air becomes breathable again. During the monsoon season, which in Lahore begins July 15, the heavy rains wash all the crud out of the air. During the monsoon, there is little sustained pollution.
It would be interesting to know where Pakistan is getting the coal to run the generating plants mentioned in the article. India has huge coal deposits, but Pakistan does not (unless there have been new discoveries since we lived there). I would have thought they would pursue the nuclear option. Since they have the knowhow and expertise to build a bomb, surely they can build a reactor and generating station? Why they don't pursue small plants to run individual cities is a puzzle to me."