Pak-UNIDO REEE_Policy- volume 2

SUSTAINABLE ENERGY INITIATIVE FOR INDUSTRIES IN PAKISTAN Project ID 100045 Policy review and recommendationson the promotion of renewable energy and energy efficiency in industries in Pakistan Volume 2: Energy Efficiency Policy (Final Report) December 2017

Prepared by: Full Advantage Co., Ltd. (Thailand) PITCO Private Limited (Pakistan) For any query or clarification, please contact: Masroor Ahmed Khan National Project Manager UNIDO, Pakistan,Serena Business Complex, 7th floor, Khayaban-e-Suhrawardy Islamabad Office: 92-51-8354820, Cell: 92-3357888128 Page 2 of 123

ForewordPakistan is facing a severe electricity crisis due to a persistent and widening gap betweendemand and available electricity generation capacity. The power shortfall between electricitydemand and supply stands at 5000 - 6000 MW resulting in forced power outages ranging from8 to 12 hours a day in urban areas and up to 18 hours in rural areas.The frequent and prolonged power outages have had a significant impact on Pakistan’sindustrial sector, negatively affecting its productivity and profitability. The need to focus onenergy efficiency, for combating the energy shortfall situation, cannot be emphasized enough.The Government of Pakistan has passed the “National Energy Efficiency & Conservation Act2016” for driving institutional development to improve energy efficiency, specificallymandating the creation of:  the National Energy Efficiency and Conservation Authority;  the Authority Fund and  the National Energy Efficiency and Conservation Board.Various activities pertaining to Energy Efficiency such as Energy Labeling Scheme, EnergyAudits and conduct of associated training and awareness sessions are already being carried outin Pakistan.The timing of this report is impeccable as the National Energy Conservation Policy (NECP) isbeing revised as per the provisions of the National Energy Efficiency & Conservation Act2016. This report will be of great help for the National Energy Efficiency & ConservationAuthority and all relevant stakeholders while finalizing the National Energy Efficiency &Conservation Policy as it highlights the latest trends in the region, tracks regional progress,examines key drivers and market issues, and provides extremely pertinent recommendations forpromotion of energy efficiency in Pakistan.Yousaf Naseem KhokharManaging DirectorNational Energy Efficiency and Conservation AuthorityGovernment of Pakistan Page 3 of 123

AcknowledgementsThe United Nations Industrial Development Organization (UNIDO) and the Government ofPakistan (GOP) have decided to join hands and received the support of the Global EnvironmentFacility (GEF).to implement a programme that would contribute to the development of a policyand regulatory framework for incentivizing and promoting Renewable Energy (RE) and EnergyEfficiency (EE) applications in the industrial sectorof Pakistan.One of the main task of the programme was to prepare a report that would review the existingpolicies and formulate recommendations on the promotion of RE and EE in the industrial sectorof Pakistan.This task was entrusted to a consortium of experts from two companies, namely Full Advantagefrom Thailand and PITCO from Pakistan.This report (Volume 2) covers exclusively the promotion of EE in the industrial sector ofPakistan.The members of consortium would like to express their gratitude:  to UNIDO, to the National Energy Efficiency and Conservation Authority (NEECA), to the National Productivity Organization (NPO) and to the Small and Medium Enterprise Development Authority (SMEDA) for the unconditional support and advice they have provided them with during the whole duration of their study;  to the local key stakeholders who were involved throughout the whole process of the study for their comments and their invaluable contributions during the consultation meetings and during the validation workshop held in Islamabad on April 25, 2017.Their comments and feedback helped the consultants to make sure that the recommended EEpolicies were the most appropriate and fair in terms of benefits to the project developers, thegovernment and other relevant partners. Page 4 of 123

Executive SummaryThe industrial sector in Pakistan is characterized by a high dependence on expensive andenvironment degrading fossil fuels such as diesel, natural gas and coal for captive energy (heatand/or power) generation.This part of the study is conducted with objective to develop andpropose a set of appropriate EE policies and their implementation roadmap, which could beincluded in existing government policies and regulatory framework or form a basis forformulating new legislation for promoting EE adoption in the industrial sector of Pakistan. Thisstudy focuses on the state policies, i.e., EE policies and regulatory framework (laws,regulations, decisions, guidance, plans, strategies, etc.) promulgated by government authorities.Furthermore, emphasis is placed on policies which impact on the EE adoption in the industrialsector. The synopsis of the report is presented in the shape of barriers and the measures to overcome these barriers.Barriers Measures to overcome barriersInstitutional and M1.Provision of support to enhance the capacity of policy makers toregulatory barriers formulate policies promoting the deployment of EE in industries.Economic and M2. Development and implemention of scheme(s) to provide financialfinancial barriers and fiscal incentives for EE activities and projects.Technical and M3. Creation of a program to support knowledge development andoperational barriers capacitate industries to adopt and utilize EE solutions.Organizational M4. Creation of a legal framework that will obligate industries to savebarriers energy, conduct energy audits, adopt an Energy Management System (EMS) and report on their energy performance.Barriers related to M5. Development and implementation of a scheme to provide support in conducting energy audits and incentives to implement EE solutions.standards and M6. Creation of a program to disseminate information and to raise awareness of industry decision makers in using EE technologies.labelling for EE M7. Creation of a program to develop and implement energy standards and labelling, including the applicationof appropriate penalties andproducts incentivesBarriers related to M8. Creation of a program to provide support (incl. financial)to ESCOsand EE technology manufacturerslocal capacity in M9. Creation of a program to providesupport (incl.financial) to R&D activities on EE solutions/technologiesEE&CThe policies that have been recommended will have high-level provisions that will provide theoverarching basis and guidelines for the objectives being pursued. Further to this, theimplementing rules and regulations, as well as the implementation roadmap, are also elaboratedfor the guidance of the implementing agencies and those affected by the policies. This reportthus provides the guideposts and suggestions in drafting these documents once the policieshave been approved. Page 5 of 123

Table of ContentsForeword ...........................................................................................................................................3Acknowledgements ...........................................................................................................................4Executive Summary..........................................................................................................................5List of Figures ...................................................................................................................................8List of Tables .....................................................................................................................................8Acronyms and Abbreviations ..........................................................................................................9Units .................................................................................................................................................12Currencies .......................................................................................................................................121. INTRODUCTION ..................................................................................................................132. TYPES AND OBJECTIVES OF EE POLICIES ................................................................163. RECENT EE DEVELOPMENT IN PAKISTAN ................................................................184. REVIEW OF EXISTING EE INSTITUTIONAL AND POLICY FRAMEWORK INPAKISTAN......................................................................................................................................25 4.1 Existing EE Institutional Framework in Pakistan.............................................................25 4.2Existing EE Policy Framework in Pakistan .............................................................................33 4.2.1 Introduction .....................................................................................................................33 4.2.2EE Targets and Planning ..................................................................................................36 4.2.3Financial Incentives for EE Projects.................................................................................37 4.2.4Fiscal Incentives for EE Projects ......................................................................................39 4.2.5Mandatory Measures on Energy Performance & Management........................................39 4.2.6Other EE Policy Measures................................................................................................415. GENDER MAINSTREAMING IN EE POLICY IN PAKISTAN .....................................42 5.1Gender in the National Policy..................................................................................................42 5.2 Gender in the EE Policy....................................................................................................436. INTERNATIONAL BEST PRACTICES AND EXPERIENCE IN EE POLICYDEPLOYMENT..............................................................................................................................45 6.1 International EE Policy Best Practices and Experience....................................................45 6.1.1 China.........................................................................................................................45 6.1.2 India ..........................................................................................................................54 6.1.3 Philippines ................................................................................................................65 6.1.4 Thailand ....................................................................................................................70 6.1.5 Vietnam.....................................................................................................................77 6.2 Gender in EE Policies and Programmes in Asian Countries ............................................83 6.2.1 Gender in National Policies in Asia.................................................................................83 6.2.2 Gender in EE-Related Policies in Asia .....................................................................847. EE POLICY GAP ANALYSIS..............................................................................................86 7.1 Barriersto EE Application in the Industrial Sector of Pakistan ........................................86 7.2GapAnalysis of EE Policies in Pakistan and five Asian Countries based on their best practices ........................................................................................................................................88 7.2.1 Summary of existing EE policy instruments in Pakistan and five studied countries.......88 7.2.2 Best practices and lessons learned from the five studied countries .................................89 7.2.3 Policy gap analysis ..........................................................................................................92 7.3Gaps and Lessons for Gender Mainstreaming in EE Policy....................................................95 Page 6 of 123

8. POLICY RECOMMENDATIONSFOR THE PROMOTION OF EEIN THEINDUSTRIAL SECTOROFPAKISTAN......................................................................................99 8.1Policy Recommendations for EE Promotion in the Industrial Sector of Pakistan ...................99 8.2 Implementing Rules and Regulations&Implementation Roadmap for the Recommended Policies...............................................................................................................100REFERENCES .............................................................................................................................115 Page 7 of 123

List of FiguresFigure 1: Overall approach and methodology of the study ....................................................................... 14Figure 2: Existing institutional framework for EE sector in Pakistan ....................................................... 26Figure 3: Structure of PEECA and EMCOP (2015-18) ............................................................................ 29Figure 4: Total Primary Energy Consumption (TPEC) by sector in Pakistan (2015) ............................... 34Figure 5: Pakistan Energy Labels for Electric Fans .................................................................................. 40Figure 6: Share of TPEC by sector in China (2014) ................................................................................. 45Figure 7: Samples of China Energy Label (Tier 5 and Tier 3).................................................................. 50Figure 8: Share of TFEC by sector in India (2013)................................................................................... 55Figure 9: PAT Scheme Mechanism .......................................................................................................... 60Figure 10: Implications of PAT Scheme on DCs...................................................................................... 60Figure 11: Sample of BEE Star Label....................................................................................................... 62Figure 12: Share of TFEC by sector in the Philippines (2013) ................................................................. 65Figure 13: Samples of Philippine EE Label .............................................................................................. 68Figure 14: Share of TFEC by sector in Thailand (2015)........................................................................... 70Figure 15: Samples of EGAT and DEDE Energy Saving Label............................................................... 74Figure 16: Share of TFEC by sector in Vietnam (2013) ........................................................................... 77Figure 17: Samples of Vietnam Energy Label .......................................................................................... 82List of TablesTable 1: Types of EE policy instruments .................................................................................................. 17Table 2: List of EE projects implemented by international organizations ................................................ 18Table 3: Share of TPES by fuel type in Pakistan (2015)........................................................................... 33Table 4: Industrial TPEC by type of fuel in Pakistan ............................................................................... 34Table 5: List of key EE-related existing policies of Pakistan ................................................................... 35Table 6: Industrial energy consumption and realizable energy savings in Pakistan ................................. 36Table 7: Annual budget estimation of Punjab EE&C Programme............................................................ 38Table 8: Regional targets for energy intensity reduction in China............................................................ 46Table 9: Types of EPCs used by ESCOs in China .................................................................................... 52Table 10: EE targets for key industries in India........................................................................................ 56Table 11: Types of ESCOs operating in India .......................................................................................... 64Table 12: Philippines energy efficiency targets (2014-2030) ................................................................... 66Table 13: Thailand energy efficiency targets (2015-2035) ....................................................................... 71Table 14: Financial incentives for promoting of ESCO investments in EE sector in Thailand ................ 75Table 15: Comparison of EE policies in Pakistan and five other Asian countries .................................... 88Table 16: Analysis of EE policy gaps in Pakistan .................................................................................... 93Table 17: Recommended policy instruments for promotion of EE adoption in the industrial sector ofPakistan..................................................................................................................................................... 99 Page 8 of 123

Acronyms and AbbreviationsACE ASEAN Center for EnergyADB Asian Development BankAE Alternative EnergyAEDP Alternative Energy Development PlanAFD Agence Française de DéveloppementAPEC Asia-Pacific Economic CooperationAPTMA All Pakistan Textile Mills AssociationASEAN Association of Southeast Asian NationsASU Arizona State UniversityBAU Business as usualBEE Bureau of Energy EfficiencyBOI Board of InvestmentCDM Clean Development MechanismCER Certified Emission ReductionCFL Compact Fluorescent LampCIT Corporate Income TaxCPI Cleaner Production InstituteDC Designated ConsumerDEDE Department of Alternative Energy Development and EfficiencyDISCO Distribution CompanyDOE Department of EnergyDSM Demand Side ManagementECF Energy Conservation FundEE Energy EfficiencyEE&C Energy Efficiency and ConservationEECO Energy Efficiency and Conservation OfficeEEO Energy Efficiency ObligationEEDP Energy Efficiency Development PlanEGAT Electricity Generating Authority of ThailandEMC Energy Management ContractEMCOP Energy Management Company of PunjabEMS Energy Management SystemENERCON Energy Conservation CenterEPA Environmental Protection AgencyEPC Energy Performance ContractERC Energy Regulatory CommissionESCO Energy Service CompanyES&L Energy Standards and LabellingESMAP Energy Sector Management Assistance ProgramESS Energy Storage SystemEU European UnionFBR Federal Board of RevenueFERTS Fuel Efficiency in Road Transport SectorFTI Federation of Thai IndustriesFY Fiscal YearGDP Gross Domestic Product Page 9 of 123

GEF Global Environment FacilityGEMP Government Energy Management ProgrammeGHG Greenhouse GasGIZ Gesellschaft für Internationale ZusammenarbeitGOC Government of ChinaGOI Government of IndiaGOP Government of PakistanGOPH Government of the PhilippinesGOT Government of ThailandGOV Government of VietnamHDIP Hydrocarbon Development Institute of PakistanHVAC Heating, Ventilating and Air ConditioningICICI Industrial Credit and Investment Corporation of IndiaIDBI Industrial Development Bank of IndiaID&T Import Duty and TaxIFC International Finance CorporationIREDA Indian Renewable Energy Development Agency Ltd.IRENA International Renewable Energy AgencyIRR Implementing Rules and RegulationsISO International Organization for StandardizationJICA Japan International Cooperation AgencyKfW Kreditanstalt für WiederaufbauKP Khyber PakhtunkhwaMEPS Minimum Energy Performance StandardMOCC Ministry of Climate ChangeMOE Ministry of EnergyMOEn Ministry of EnvironmentMOF Ministry of FinanceMOI Ministry of IndustryMOIP Ministry of Industries and ProductionMOIT Ministry of Industry and TradeMOPD Ministry of Planning and DevelopmentMOPDR Ministry of Planning Development and ReformMOWP Ministry of Water and PowerMSME Micro, Small and Medium-Sized EnterpriseNAMA National Appropriate Mitigation ActionNDRC National Development and Reform CommissionNGO Non-Government OrganizationNECP National Energy Conservation PolicyNEECA National Energy Efficiency and Conservation AuthorityNEECP National Energy Efficiency and Conservation ProgramNEPRA National Electric Power Regulatory AuthorityNPO National Productivity OrganizationNUST National University of Science and TechnologyPAT Perform, Achieve, TradePEECA Punjab Energy Efficiency and Conservation AgencyPEECB Pakistan Energy Efficiency and Conservation BoardPISD Program for Industrial Sustainable Development Page 10 of 123

PIT Personal Income TaxPSQCA Pakistan Standards and Quality Control AuthorityRA Republic ActR&D Research and DevelopmentRD Revenue DepartmentRE&EE Renewable Energy and Energy EfficiencyRE Renewable EnergyRNE Royal Netherlands EmbassySBP State Bank of PakistanSDG Sustainable Development GoalSEC Specific Energy ConsumptionSIDBI Small Industries Development Bank of IndiaSMEDA Small and Medium Enterprise Development AuthorityTFEC Total Final Energy ConsumptionTIEB Thailand Integrated Energy BlueprintTPEC Total Primary Energy ConsumptionUET University of Engineering and TechnologyUNDP United Nations Development ProgrammeUNECE United Nations Economic Commission for EuropeUNEP United Nations Environment ProgrammeUNIDO United Nations Industrial Development OrganizationUSAID United States Agency for International DevelopmentVAT Value-Added TaxVNEEP Vietnam National Energy Efficiency ProgramWAPDA Water and Power Development AuthorityWB World Bank Page 11 of 123

Units kilogram of oil equivalent kilowattkgoe kilowatt-hourkW megawattkWh megawatt-hourMW gigawattMWh gigawatt-hourGW tetawatt-hourGWh megajouleTWh gigajouleMJ gram of coal equivalentGJ tonne of coal equivalentgce Million tonnes of coal equivalenttce tonne of oil equivalentMtce Million tonnes of oil equivalenttoe square meterMtoe cubic meterm2 kilometerm3kmCurrenciesEUR EuroINR Indian RupeePHP Philippine PesoPKR Pakistani RupeeRMB Renminbi (Chinese Yuan)THB Thai BahtUSD United States DollarVND Vietnamese DongJPY Japanese Yen Page 12 of 123

1. INTRODUCTIONThe industrial sector is one of the most important sectors of the economy of Pakistan, whichcontributed to around 21%of the GDP in FY 2015-161. The sector is characterized by a highdependence on fossil fuels, such as natural gas, furnace oil, diesel, and coal for heat and/orpower generation.Small and medium enterpises (SMEs) in the textile, leather, pulp & paper andsugar sector constitute the major portion of the industial sector in Pakistan. In these SMEs,fossil fuels are used inefficient and old machinery and technologies, thereby incurring highenergy production costs for industries. In addition, the use of fossil fuels for energy generationis harmful to the environment. Therefore, Pakistan’s industries have a large potential to reducetheir energy production costs and mitigate pollution emissions by increasing the efficiency offossil fuels and electricity use as well as adopting renewable energy (RE) technologies.Presently, UNIDO, one of the implementing agencies of the Global Environment Facility(GEF), is working with the Government of Pakistan (GOP) to promote inclusive andsustainable industrial development in line with its key thematic areas, one of which is energyand environment. Upon the request of GOP, UNIDO developed a project, namely, “SustainableEnergy Initiative for Industries in Pakistan”, which seeks to promote market-based adoption ofRE and energy efficiency (EE) technologies and services in the industrial sector of Pakistan.The ultimate goal of this UNIDO/GEF project is to mitigate GHG emissions by developing andpromoting a market environment that will stimulate investments in RE and EE projects. Theproject consists of three components: 1) Developing a policy and regulatory framework for incentivizing and promoting RE and EE application in the industrial sector of Pakistan; 2) Promoting RE and EE investments in industry through supporting RE and EE demonstration projects, facilitating EE audits, ISO 50001 Energy Management System (EMS) and energy use optimization; 3) Creating a robust and sustainable market for RE and EE investments through a series of capacity development and awareness initiatives for industrial establishments, energy service companies (ESCO), public sector organizations, financial institutions, academia, etc.This study is related to component 1 of the project. Its objective is to develop and propose a setof appropriate RE and EE policies and their implementation roadmap, which could be includedin existing government policies and regulatory framework or form a basis for formulating newlegislation for promoting RE and EE adaptation in the industrial sector of Pakistan.The overall approach and methodology for conducting the study are shown in Figure 1. Thestudy consists of five tasks:  Task 1: Collection and review of the existing RE and EE policy and regulatory frameworks in Pakistan and five other countries with relevant policy experience, and preparation of a First Draft Report on RE and EE preliminary policy recommendations for Pakistan;1 In Pakistan, fiscal (or financial) year starts on 1 July of previous calendar year and concludes on 30 June Page 13 of 123

 Task 2: Consultations with project partners and key stakeholders on the First Draft Report, and preparation of the Second Draft Report based on the feedback from these consultation meetings; Task 3: Preparation of the Third Draft Report on RE and EE policy recommendations including Implementing Rules and Regulations (IRRs) and an Implementation Roadmap for these recommended policies; Task 4: Presentation of the Third Draft Report to the stakeholders in a National Stakeholder Workshop, and preparation of the Draft Final Report based on the feedback from the participants in the workshop; Task 5: Finalization of the Final Draft Report based on the final comments of UNIDO and its project partners, and submission of the Final Report to UNIDO.Review and Analysis Existing RE & EE Policy/Regulatoryof RE & EE Policy / Framework of Pakistan Regulatory International best practices and lessons learned Framework Re Individual Consultation Meetings por with Local Stakeholders ts Meetings with UNIDO and its project partners1st Draft2nd Draft National Multi-3rd Draft Stakeholder ConsultationFinal Draft Workshop ConsultationFinal Report Feedback / Revise Figure 1: Overall approach and methodology of the studyThis approach is stakeholder driven. Local stakeholders participate through the whole processof the study to make sure that the recommended policies are balanced in terms of benefits to theproject developers, the government and other relevant partners.The First Draft Report including the preliminary policy recommendations was prepared inOctober 2016, based on the review and analysis of the policy gaps between the existing RE andEE policies in Pakistan and the international best practices and lessons learned from five Asiancountries in similar circumstances, namely China, India, the Philippines, Thailand and Page 14 of 123

Vietnam. This report was used as background document for consultation with the stakeholdersin Pakistan.The First Draft Report and preliminary policy recommendations were presented to variousstakeholders during the consultation meetings organized from 27 October to 9 November 2016in Lahore, Karachi and Islamabad.The Second Draft Report was prepared based on the feedback of the stakeholders. It consists oftwo volumes:Volume 1 addresses RE policy, andVolume 2 addresses EE policy. The SecondDraft Report (both Volumes) was submitted to UNIDO in December 2016. They were sent tothe key stakeholders of the project for their comments. In January 2017,feedback on the SecondDraft Report was received from UNIDO, AEDB, NEECA, SMEDA, GIZ and KSP Pumps.The Third Draft Report (Volume 2) was prepared based on that feedback. It included also onenew section on the Implementing Rules and Regulations (IRRs) and an ImplementationRoadmap for the recommended policies. The report was submitted to UNIDO in April 2016,and subsquently presented to the local stakeholders during the consultation meetings withUNIDO, AEDB, NEECA, NPO, NEPRA, PCRET and CPPA held on 20-21 April 2017, and onthe Validation Workshop organized on 25 April 2017 in Islamabad.The Draft Final Report (Volume 2) was developed based on the feedback on the Third DraftReport received during the consultation meetings and the Validation Workshop.The report wassubmitted to UNIDO on 30 May 2017 for the final comments. There were no additionalcomments received from UNIDO and its project partners on the Draft Final Report.This report is the Final Report (Volume 2) on the policy review and recommendations on thepromotion of energy efficiency in the industrial sector of Pakistan. Page 15 of 123

2. TYPES AND OBJECTIVES OF EE POLICIESThis study focuses on the state policies, i.e., EE policies and regulatory framework (laws,regulations, decisions, guidance, plans, strategies, etc.) promulgated by government authorities.Furthermore, emphasis is placed on policies which impact on the EE adoption in the industrialsector.Policies and regulatory frameworks play an essential role in the promotion of EE adoption inany country. They can support the EE development by2:  creating markets (e.g., government/public procurement of EE products, setting government requirements, taxing negative externalities, subsidizing positive externalities, eco-labelling, and other voluntary approaches);  establishing governance and the regulatory framework (e.g., setting targets, setting standards, taxing negative externalities, subsidizing positive externalities, eco-labelling and other voluntary approaches, and tradable permits);  providing finance (e.g., loan guarantees, “green” banks, and EE funds);  developing infrastructure (e.g., public-private partnerships, incentivizing private development, etc.);  building competence and human capital (e.g., subsidies and incentives for education and training, fellowships, scholarships, etc.);  creating and sharing new knowledge (e.g.,subsidies and incentives for new research, contest and prizes, intellectual property protection, etc.);  creating collaborative networks (e.g., joining or initiating international cooperation, supporting industry associations, etc.).There are best practices (success stories) as well as lessons learned from the deployment ofpolicy instruments to support the development of EE in different countries. Based oninternational experience, the key policy instruments for successful promotion of EE inindustries are:  Realistic and achievable targets for EE adoption;  Suitable financial support to EE projects (e.g., subsidies, soft loans, grants, etc.)  Appropriate fiscal incentive mechanisms applied to EE projects (e.g.,value-added tax (VAT), corporate income tax (CIT), import duty and tax (ID&T) exemption or reduction);  Mandatory requirements (e.g.,energy performance targets (EE obligation), mandatory energy management, audit and reporting, forced retirement of inefficient equipment, penalties/fines, technical standards, eco-labelling, etc.);  Gender mainstreaming in EE policy.The different types of EE policy instruments, their objective/expected impacts, and someexamples policy instruments are summarized in Table 1.2 IRENA (2013) Page 16 of 123

Table 1: Types of EE policy instrumentsType of policy instruments Objective/Expected impact of the policyFinancial incentives To reduce EE project investment costs for EE technologies and activities to be more competitive and at par with conventional energy technologies and solutions.Fiscal incentives To help improve the financial performance of the EE projects and make them more commercially attractive to facility owners and/or investors.Mandatory measures on energy To mandate a certain percentage or absoluteperformance and management quantity of energy saved (especially for energy- intensive enterprises), and to mandate the minimum energy efficiency of EE products.Other EE policy measures To support the capacity development of local stakeholders such as R&D institutions, academic instutions, consultants, equipment manufacturers, and service providers (ESCOs).Gender mainstreaming To include the considerations, needs and priorities of both men and women in EE development and involve men and women equally in all EE policies and programmes. Expected impact: gender-balanced involvement and optimal benefits equally for both men and women.Sources: compiled from UNECE (2015), WEC (2013) and IDFC (2013)

Examplepolicy instruments • Soft loan • Investment grant • Financial subsidy • Carbon/CDM credit transaction • Accelerated depreciation • Tax exemption/reduction(VAT, CIT, ID&T, etc.) • Exemption/reduction of licensing fees • Exemption/reduction of land use fees • Mandatory energy performance targets- • Mandatory energy management, audit and reporting • EE product standards and labelling • Forced retirement of low efficient equipment • Penalties for non-compliance to energy saving/conservation obligations • Financial and other support for R&D activities • Financial and other support for knowledge development activities • Financial and other support for capacity building activities • Financial and other support for local equipment manufacturers • Financial and other support for localenergy service providers (ESCOs) • Clearly stated goals, requirements, guidelines, roles and resource allocation for gender mainstreaming • Gender-sensitive targets and indicators for EE programs • Gender analysis as a required standard procedure in planningt • Gender-separated monitoring and evaluation system • Earmarked human and financial resource allocation for gender mainstreaming and women-focused incentives • Capacity building and training of women in EE technology • Capacity building programs for women in business and management • Loan programs for female EE entrepreneurs

3. RECENT EE DEVELOPMENT IN PAKISTANWork on Energy Efficiency and Conservation in Pakistan started in 1986 through theestablishment of the National Energy Conservation Centre (ENERCON) under the Ministry ofPlanning & Development (MOPD) with the assistance of USAID. Initially, it worked very well indifferent sectors of the economy. However, it could not continue its progress due to lack ofinstitutional framework and financial resources. Therefore, the activities undertaken byENERCONwere based on the availability of donor funding with limited sectoral impacts.Possible savings for Pakistan through energy conservation are estimated to be 5 billion USD ayear. Energy conservation potential estimates in various sectors are 25% for industry, 20% fortransport, 20% for agriculture, and 30% for buildings3. Official statistical data for the energy savedthrough various measures are not available in the country.It must be noted that energy efficiency investment requirements for Pakistan are estimated at 8.16billion USD over the ten-year period (2010-2019). Recently, energy efficiency improvement hasbeen identified as one of the key elements for achieving energy security plan in the PakistanVision2025. It has been stated that an efficiency improvement programme will be undertaken with theaim of sustaining and improving the current activities in various sectors of the economy, with aprimary focus on identification, demonstration, data gathering and systematic implementation oflow and medium cost measures to achieve conservation.In 2005, the ENERCON and the MOE issued the “National Energy Conservation Policy (NECP)2006”. It included guidelines and possible actions that could enhance end-use efficiency forvarious energy-consuming sectors of the economy. Based on the NECP, GOP is now in theprocess of establishing the policy framework for EE. Under this framework, ENERCON is beingmandated to act as national coordinator for energy conservation measures and strategy. So far,ENERCON has issued over 400 technical reports and project studies. It has undertaken 4,000energy audits and tune-ups across the country. It has trained over 7,000 persons ranging fromcorporate managers, technical operators, to service providers and local consumers4.Recently, theNational Energy Efficiency and Conservation Act, 2016 has been enacted by the NationalAssembly. As a consequence, ENERCON has been turned into the National Energy Efficiency &Conservation Authority (NEECA). Now, NEECA is acting as focal Federal agency for initiating,catalyzing and coordinating the implementation of energy conservation activities in all sectors ofthe economy under the auspices of the Pakistan Energy Efficiency and Conservation Board(PEECB) headed by the Federal Minister for Water & Power.Several EE projects and programs have been implemented with financial support frominternational cooperation and financing organizations (see Table 2).Table 2: List of EE projects implemented by international organizationsYear Name Of Project International Local Partners Donors/Implementing GOP1983 Pakistan Energy Planning and Development Project & Foundation of Organizations ENERCON USAID3http://energyefficiency.gov.np/uploads/14promotion_of__1449654042.pdf4http://eeasia.unescap.org/PDFs/Gap-Analysis-Pakistan.pdf

1986 Energy Efficiency & Conservation in USAID MOPD,ENERCON2005 Pakistan RNE/CPI Pakistan Tanneries2005 Energy Conservation Project for Punjab GIZ Association (PTA)2007 Tanneries RNE/CPI APTMA, MOIP2009 Renewable Energy and Energy Efficiency EU APTMA, PSMA, PTA2009 Project (Phase I) USAID AEDB2009 Program for Industrial Sustainable ADB DISCOs2010 Developmen ADB & AFD GOP2010 Sustainable and Cleaner Production in the UNDP/GEF DISCOs, NTDC Manufacturing Industries of Pakistan ENERCON, MOWP2010 Energy Efficiency and Capacity Project USAID2011 Framework Financing Agreement JICA DISCOs2013 National Compact Fluorescent Lamps IFC/CPI NTDC2013 Project GIZ GOP2014 Barrier Removal to the Cost-Effective Ernest and Young GOP2014 Development and Implementation of GIZ NPO and CPI2014 Energy Efficiency Standards and Labelling EU APTMA, MOIP Power Distribution Program AEDB, NEPRA, SBP2014 Upgrade of Technical Services Group of UNIDO/GEF2015 NTDC JICA AEDB, NEECA2015 Promotion of Energy Efficient Boilers USAID/ASU SMEDA2015 A Center for Energy Research and USAID NUST, UET Peshawar2016 Development at Kalashah Kaku Campus JICA NEECA2016 Study of Pakistan’s Industrial Energy UNEP SMEDA Usage NEECA2016 Renewable Energy and Energy Efficiency JICA Project (Phase II) SMEDA High Pressure Cogeneration Projects for the Sugar Sector of Pakistan under the Switch Asia Program Sustainable Energy Initiative for Industries In Pakistan Energy Efficiency Management Project for Industrial Sector in Pakistan U.S.-Pakistan Centers for Advance Studies (CAS) In Energy International Energy Efficiency Webinar Energy Manager Training Programme Delivering the Transition to Energy Efficient Lighting in Residential, Commercial, Industrial, and Outdoor Sectors Development of Energy Service Companies (ESCOs)In 1983, the United States Agency for International Development (USAID) provided funds toimplement the USAID/Pakistan Energy Planning and Development (EP&D) project. Part of thisfund was used for Pakistan’s energy conservation program, which financed most of thecostsrelated to the creation and initial operations of a National Energy ConservationCenter(ENERCON). Page 19 of 123

The ENERCON Technical Assistance Project began in January 1986. The objective of the projectwas to assist the Government of Pakistan to develop and effectively implement a nationalenergyconservation program that would reduce energy waste and improve the efficiency of energy use.5Since its establishment in 1986, ENERCON arranged training, education, outreach, and awarenessprograms for the general public and specific energy users with guidance from a U.S. technicaladvisory firm. ENERCON also engaged private engineering consulting firms to conduct \"energyaudits\" and provide energy conservation advisory support in the industrial, agricultural,transportation, and constructionsectors.6In the industrial sector,ENERCON conducted the tune-up of 600 boilers and 72 furnaces in 387companies with average efficiency improvement of 6.3%. Steam system diagnostic surveys werecarried out in 84 units with 8% of realized efficiency improvement. For electrical systemefficiency improvement 40 firms were audited and average efficiency improvement of 5% wasrealized.Since 2005, GIZ’s Renewable Energy and Energy Efficiency (RE&EE) project has beenimplemented in 42 units in the textile sector, 5 units in the foundry sector, 2 units in the steel re-rolling sector, 4 units in the edible oil sector, 1 unit in the dairy sector and in eight hospitals whichresulted in overall energy savings of 9,340 toe7.The initial phase of the project was completed in2014. Phase II is expected to be completed in 2017.8During the project, in collaboration with APTMA and the Ministry of Industries, Production(MOIP) and special initiatives, various savings potentials have been quantified through energyaudits. An energy management system has also been introduced in the textile sector leading to thesuccessful roll-out of measures to improve energy supply. Textile companies are making energysavings of 10%to 20%when compared with their baseline energy consumption.Different training workshops for Industry Energy Managers were conducted in liasion withAPTMA. From September 2011 (during the third phase of the project), the services of EE andenergy management were extended to the food, metal processing, sugar and pulp and papersectors.9In August 2005,the “Energy Conservation Project for Punjab Tanneries” (ECPT), a three-yearprogram, was launched for the leather sector to reduce energy wastage throughthe implementationof EE measures in tanneries. The project, which was funded by the Royal Netherlands Embassy(RNE)was implemented by the Cleaner Production Institute (CPI) in collaboration with PakistanTanners Association North Zone (PTA-NZ). Around 80 tanneries partnered with the project andreceived services in Energy Efficiency Audits. Action plans were also prepared for theimplementation of EE initiatives. The energy conservation and efficienct initiatives wereimplemented in 55 tanneries. Tanneries invested around 22 million PKR for implementation of EEtechnologies and realized the savings of 34 million PKR over the project period of three years.105 ENERCON Technical Assistance Project. First Quarter Report 1986 by Hagler, Bailly & Company6 Assessment of A.I.D. Environmental Programs Energy Conservation in Pakistan, USAID 19937http://energyefficiency.gov.np/uploads/14promotion_of__1449654042.pdf8https://www.giz.de/projektdaten/index.action?request_locale=en_EN#?region=2&countries=PK9https://www.giz.de/en/worldwide/17995.html10http://www.cpi.org.pk/ECPTPFirstPagePDF/Success%20Stories.pdf Page 20 of 123

In December 2005, the National Productivity Organization (NPO) signed the agreement with GTZ(now GIZ) to launch energy audits in the textile sector under Renewable Energy & EnergyEfficiency (RE&EE) framework to enhance productivity and quality. In this regard, energyauditswere conducted in six units under the supervision of German experts11. From 2009 to 2012,NPO conducted around 212EE audits in 2 phases in the textile sector. In the same period, NPOconducted energy audits in67 steel units12.In July 2007, a comprehensive three-year “Program for Industrial Sustainable Development”(PISD) was launched for the Sugar, Textile, Leather and Pulp & Paper sectors of Pakistan with theassitance of Royal Netherlands Embassy (RNE). The main object of the program was to enable theindustrial sectors of Pakistan to comply with national and international environmentalrequirements and to adopt better EE practices. The project was implemented by the CleanerProduction Institute (CPI) in collaboration with sector specific associations i.e. APTMA, PSMA,PTA. During the project, environmental and energy audits were performed in Karachi, Lahore andFaisalabad. Environmental Management Systems were also developed in the four industrialsectors. The services of the program were provided to 257 industrial units all over Pakistan. Theprogram resulted in an investment of 566 million PKR and realized savings of 782 million PKRother the project period of three years.After successful implementation of Phase 1 of the project,Phase II (three-year program) was launched in 2010 to replicate and scale up the technical outputsof phase I in other industries as well. The services of the program were also extended to threeIndustrial Estates (Quaid-e-Azam, Sundar and Korangi). In Phase II, an environmental study wasprepared on existing environmental policies and regulations. A Sustainability Framework forindustrial estates was also developed under the program. Integrated environmental and energyaction plans were prepared for 233 industrial units. A wastewater treatment plant design wasprovided to 17 industries and 6 industries received support for the implementation of the treatmentplants.13In March 2009, a three-year project,“SCI-Pak Sustainable and Cleaner Production in theManufacturing Industries of Pakistan”, was launched under the SWITCH-Asia programme of theEuropeon Unions. The main objective of the project wasto improve the Energy and ResourceEfficiency (E&RE) of the textile and tannery industries in Pakistan with potential replication inother industrial sectors.14In March 2009, the Energy Efficiency and Capacity Project (EECP),a three-year effort funded byUSAID, was initiated. The aim of the project was to conduct training and capacity building in theenergy sector of Pakistan through the development of industrial energy conservation plans andequipment upgrade for improvement of the power supply situation in Pakistan. One of thecomponents of the project was the Industrial Motors Replacement Program. This program wasimplemented across all nine DISCOs of Pakistan and resulted in the replacement of 2,100inefficient industrial motors.In August 2009, the Government of Pakistan (GOP) entered into a Framework FinancingAgreement (FFA) with the Asian Development Bank (ADB) to implement the MultitrancheFinancing Facility (MFF). This Facility aimed at financing EE projects under the SustainableEnergy Efficiency Investment Program (now, the Energy Efficiency Investment Program -11http://www.npo.gov.pk/npo-services/energy-%5E-environment/12 http://www.npo.gov.pk/download.php?ufile=NPO%20Presentation-English.pdf13 www.pisd.org14 http://www.sci-pak.org/ Page 21 of 123

EEIP).The total cost of the EEIP over the period 2009-2018 was expected to be 1,180 million USDwhich is contributed from ADB, ADF (Asian Development Facility), AFD (Agence Française deDéveloppement), and GOP.15The National Compact Fluorescent Lamps (CFL) Project is one of the tranches of the EEIPimplemented since August 2010. This project is co-financed by ADB & the AFD. This ongoingprojectaims to replace 30 million inefficient incandescent bulbs (40W, 60W and 100W) in theresidential sector with efficient, high-qualitycompact fluorescent lamps (CFLs). As of June 2016,93% of the 30 million CFLs have been distributed to households. The remaining CFLs are beingdistributed by DISCOs under the CFL distribution contingency plan. The Investment ProgramImplementation and Management Support Project has been implementing to help GOP to managethe EEIP, and execute projects under each tranch. It helps with policy and institutional reform,safeguard management, gender mainstreaming, financing controls, monitoring, evaluation, resultsreporting, as well as design and due diligence for future tranches.16Pakistan developed and adopted a National Conservation Strategy (NCS) in 1992, whichemphasizes the adoption of Energy Conservation activities. It includes, among others, energystandards & labelling of household equipment and appliances. As a follow-up to the NCS, aNational Environmental Action Plan (NEAP) was formulated, which employed a cross-sectoraland holistic approach in achieving EE&C in the use of household equipment and appliances. ThePakistan Standards and Quality Control Authority Act of 1996 also provides some directions forthe energy standardization and labelling (ES&L) of products, processes or services. But no activelegislation was available for EE standards. Therefore, for securing a legislative support along withtechnical capacity development, a national ES&L program Barrier Removal to the Cost-EffectiveDevelopment and Implementation of Energy Efficiency Standards and Labelling (BRESL)waslaunched.BRESL, a regional four-year UNDP/GEF funded project, was started in January 2010.ENERCON, under the Ministry of Water & Power (MOWP) is the implementing partner inPakistan. The project aimed at rapidly accelerating the adoption and implementation of energystandards and labels (ES&L) in Asia, and, in so doing, generate energy savings through the use ofenergy efficient appliances/equipment. The project also facilitates harmonization of testprocedures, standards and labels among developing countries in Asia, when appropriate17. TheBRESL has achieved the following results for Pakistan:  EE standards testing protocols have been adopted for all six targeted appliances (i.e., CFLs, ballasts, electric fan, electric motor, refrigerator, and room air conditioner);  Minimum Energy Perfomance Standards (MEPS) have been adopted for CFLs, electronic and magnetic ballasts, fans and motors;  EE labelling procedures for endorsment labels and logos have been approved;  MOUs have been signed with Pakistan Council of Scientific and Industrial Research and Pakistan Standards and Quality Control Authority to ensure effective implementation of the ES & L Scheme;  Three of the ceiling fan manufacturers have been awarded a star rating.15 https://www.adb.org/sites/default/files/project-document/64864/42051-pak-ffa.pdf16 https://www.adb.org/projects/42051-023/main#project-pds17http://bresl.net.pk/content.php?submanuid=25&manuid=11 Page 22 of 123

The University of Gujrat is collaborating with the Government of Punjab and the electrical fanmanufacturing industries to establish a Fan Testing Laboratory (PC-I is submitted) which will helpthe local industry comply with the MEPS.18A comprehensive seven-year project, the “National Transmission Lines and Grid StationsStrengthening Project”, was initiated in March 2010. The main objective of the project istoimprove the reliability and efficiency in the transmission and distribution (T&D) grid. Losses of19.87%19, observed in T&D system in Pakistan, are much higher then neighbouring countries,hence reducing the impact of all the efforts done for attaining the energy security. To reduce theT&D losses, the project aims at constructing new and upgrading existing prioritized 500kV and220 kV transmission lines and grid stations in Punjab and Sindh provinces. The project is beingexecuted by NTDC through a financial assistance of 23,300 million JPY from JICA.20USAID has undertaken extensive projects for EE improvement in the country. A five-year PowerDistribution Program (PDP), funded by USAID, was started inSeptember 201021. PDP aimed toimprove the performance of power distribution utilities (DISCOs) across Pakistan. The project hasinstalled 71,000 smart meters in various DISCOs across the country. It has also involvedGeographic Information System (GIS) mapping, load flow analysis and feeder rehabilitation ofdistribution systems. Rehabilitation of power meters and service cables was also undertaken.In May 2011, JICA intiated a three-year project to support the upgrade of Technical ServicesGroup of NTDC. The training centre of NTDC (Technical Services Group of NTDC) had beenestablished in 1985 through Canadian assistance to provide training to the staff of NTDC andDISCOs. However, most of the training syllabus had become outdated and the testing equipmentobsolete.22In February 2013, the Government of Punjab took an initiative by setting up a Center for EnergyResearch and Development (CERAD) at Kalashah Kaku (KSK) Campus University ofEngineering & Technology (UET) in Lahore. It was a research based project (for a duration of 2years with a budget of 292 millionPKR) which aimed at exploring and utilizing the RE resourcesin Punjab. The centre is going to launch an EE&C Advisor Course. The EE&CLab supported byGIZ is also part of the centre. This centre also has testing facilities for motors, solar PV along witha Heating, Ventilating and Air Conditioning (HVAC) laboratory.23In Ujaala II program, theGovernment of Punjab will be testing the solar panels in this facility.24In 2013, IFC and Cleaner Production Institute(CPI) intiated a project for the Promotion of EnergyEfficient Boilers in Punjab through which detailed boiler efficiency assessment was done at fiveindustries on a cost sharing basis.In 2014, Ernest and Young carried out a study of Pakistan’s industrial energy usage. It was basedon audits of 230 manufacturers (conducted between 2006 and 2014) operating in the textile, sugar,paper and leather industries. The audits, led by National Productivity Organization and Cleaner18 http://uog.edu.pk/uog-academics/department-of-electrical-engineering/programs19 Power System Statistics 2014 – 15 by NTDC20 https://www.jica.go.jp/pakistan/english/activities/activity02_13.html21 http://www.pdip.pk/22 https://www.jica.go.jp/pakistan/english/activities/activity02_14.html23 http://cerad.uet.edu.pk/about-cerad/24 PC-I for “Ujaala- II, Provision of Solar Panels to Households Below the Poverty Line-Chief Minister’s UjaalaProgramme” (2015-18) Page 23 of 123

Production Institute, included information on energy consumption, and costs, recommendations formore efficient energy usage, and estimated payback periods for returns on investment in energyefficient technologies. International Finance Corporation (IFC) published the study as “SustainingGrowth: Cleaner Production in Pakistan” in June 2016.In April 2014, COMSATS set up a Centre for Energy Research (CER) in view of the on-goingenergy crisis and the critical role played by the energy sector in the industrial and economicdevelopment of the country.25 The centre has conducted the energy audit of Jinnah Hospital aspilot project. The centre is equipped with cable testing facilities along with a LED testing Lab.The European Union (EU) is supporting the implementation of the high pressure cogenerationprojects for the sugar sector of Pakistan under the Switch Asia Program. This is a four-yearproject started in March 201426. The specific objective of the project is to promote sustainableproduction of electricity through replication of high pressure cogeneration technologies in thesugar sector. It is estimated that 2,000 MW power could be generated in sugar mills through highpressure cogeneration technologies27.The project has prepared detailed feasibility study reports onHigh Pressure Cogeneration Power Plants for ten sugar mills out of which five sugar mills haveacquired the generation licence from NEPRA.28 Business cases for 15 sugar mills have beenprepared. The project has also provided assistance to the State Bank of Pakistan (SBP)with regardto revision of its existing RE Refinance Facility. The project has also built the capacities of localtechnology providers (sixboiler manufacturers), and regulator (NEPRA) in terms of tariffdetermination, power generation, transmission and distribution.Since April 2014, UNIDO has been implementing a four-year project in the industrial sectorentitled “Sustainable Energy Initiative for industries in Pakistan”. The project, funded by theGlobal Environment Facility (GEF), aimed at stimulating investments in EE projects in industry,which in turn will support industrial development.The project is targeted to address barriersthrough a sustainable approach for promotion of EE and RE in Pakistan’sindustries and by offeringa mix of technical assistance and investment activities. The project is focusing on the followingthree areas:(i) Developing the policy and regulatory framework on the use of RE/EE in Industryfor AEDB/NEECA, (ii) Creating an investment platform for promoting investments in RE/EE andscaling up the market, and(iii) Establishing an accreditation center for energy experts on EMS andRE applications in Industry.29The project has envisaged the reduction of 2 million tonnes of CO2during the project timeline.In March 2015, the SMEDA and Ministry of Industries and Production of Pakistan started theimplementation of a 22-month JICA-funded “Energy Efficiency Management Project (EEMP) forIndustrial Sector in Pakistan”.The project is designed to provide direct benefits to the castingindustry and auto parts manufacturing industry of Pakistan. So far, under the project, the technicalguidance was provided to 13 casting and autopart sector SMEs by four Japanese energy experts.3025 http://www.ciitlahore.edu.pk/erc/26 http://www.switch-asia.eu/projects/hp-cogen-pak/27http://www.hpcogenpak.org/28 Shahtaj, Safina, Ansari, Bandhi, TAY29https://www.thegef.org/project/sustainable-energy-initiative-industries30http://www.smeda.org/index.php?option=com_rseventspro&layout=show&id=56:dissemination-seminar-of-smeda-jica-energy-efficiency-management-project&Itemid=453 Page 24 of 123

In June 2015, U.S.-Pakistan Centers for Advance Studies (CAS) in Energy, Water and Agriculturewere launched with a support of a 127 million USD from USAID.31The USAID fundedprogram,“U.S.-Pakistan Centre for Advance Studies in Energy (USPCAS-E)”, is being carried outto focus on applied research relevant to Pakistan’s energy needs and help produce skilled graduatesin the energy field. Project partners are the Arizona State University and two leading Pakistaniuniversities: the National University of Sciences and Technology (NUST) and the University ofEngineering and Technology (UET) Peshawar. An18 million USD funding has been allocated forthe project.32The core mission of USPCAS-E is to efficiently address and implement the E3criteria (Energy, Environment and Economy) for sustainable social development. The Centre iscommitted to create an ecosystem for addressing energy requirements by influencing policymakers, developing technologies, human resources and mobilizing communities for energyconservation.33In 2015-16, ENERCON, in collaboration with WWF, conducted awareness raising sessions forschools with the participation of5000 to 6000 students.Recently, NEECA, in collaboration with the Pakistan Engineering Council, conducted a specialcourse on industrial energy audits in almost all main engineering universities in Pakistan. Varioustechnical manuals, such as Energy Efficiency in Electrical Systems, Improving Energy Efficiencyin Boilers and Tube wells, have also been upgraded. Another initiative has recently been taken upby NEECA, in collaboration with USAID, for virtual learning through Webinars on varioussectors. Under the initiative, an International Energy Efficiency Webinar was conducted onDecember 20, 2016.In August 2016, GEF approved a project titled “Delivering the Transition to Energy EfficientLighting in Residential, Commercial, Industrial, and Outdoor Sectors”. The project implementingagency is the United Nations Environment Programme (UNEP) and it will be executed byNEECA. The main focus of the project is to work on policies, and creating a framework forinnovative financial mechanisms to promote energy efficient lighting.344. REVIEW OF EXISTING EE INSTITUTIONAL AND POLICY FRAMEWORK IN PAKISTAN4.1 Existing EE Institutional Framework in PakistanThe existing institutional framework for EE sectoris presented in Figure 235. The powers andfunctions of each institution are described as below.31https://uspcase.uetpeshawar.edu.pk/news-events/item/323-official-launching-of-u-s-pakistan-centers-for-advanced-studies32https://uspcase.asu.edu/33http://www.nust.edu.pk/INSTITUTIONS/Centers/CES/AboutUs/Pages/Welcome-to-CES.aspx34 https://www.thegef.org/project/delivering-transition-energy-efficient-lighting-residential-commercial-industrial-and35As per National Energy Efficiency and Conservation Act, 2016 (Published in the Gazzete of Pakistan on July 1,2016) Page 25 of 123

FederalGovernment Pakistan Energy Efficiency andConservation Board (PEECB) Provincial National Energy Government Efficiency and Conservation Provincial Authority (NEECA) Energy DepartmentProvincial Energy Efficiency and Conservation Agencies Figure 2: Existing institutional framework for EE sector in Pakistan1.Federal GovernmentAs per the National Energy Efficiency and Conservation Act 2016 (2016 National EE&C Act), theFederal Govemment may, in consultation with the Authority and National Standards Bodyfacilitate and enforce efficient use of energy and its conservation. The authority and functions ofthe Federal Government are as follows:  Specifyingthe norms and specifications for processes and energy consumption standards for any equipment, appliance which consumes, generates, transmit or supplies energy.  Standardizing the equipment/appliances along with labelling and prohibit manufacturing, sale, purchase or import of energy inefficient equipment.  Directingany designated consumers to comply with energy consumption norms and standards. It can charge penalties to users of inefficient appliances, equipment, and machineries.  Altering the list of energy intensive industries specified by the authority.  Directing any designated consumer for audit or appointement of energy auditor.  Directing any designated consumer to furnish the energy data whenever required.  Prescribing minimum qualification for energy auditors and energy managers to be designated or appointed.  Prescribing or amending the EC building codes and enforcing them to buildings.  Issuing energy saving certificates to a designated consumer whose energy consumption is lower than the prescribed norms and standards.  Accrediting and certifying the testing laboratories.  Providing 1 billion PKR as seed money for the NEECA  Establishing Energy Conservation Tribunals along with specifying their teritorrial limits of the jurisdiction.2. Pakistan Energy Efficiency and Conservation Board (PEECB) Page 26 of 123

According to the 2016 National EE&C Act, PEECB consists of members from Federal Ministriesand Divisions, Designated Departments of four provincial Governments, the Chairman of Oil andGas Regulatory Authority (OGRA), the Chairman of NEPRA, one nominee from the Chambers ofCommerce and Industry, one person from the agriculture sector, five persons from private sector,and the Managing Director of NEECA.The powers and functions of the Board are to administerthe management affairs and give policydirections to NEECA.PEECB can exercise all the powers and do all acts which may be exercisedor done by NEECA.NEECA shall seek approval of the Board for all matters including its budget,plans and projects.The Board will determine the penalty charges incase of noncompliance with theAct. PEECB will be the authority to approve EE standards recommended by NEECA and willensure their enforcement and compliance.363. Provincial GovernmentsThe provincial governments, with the approval of the PEECBand in consultation with NEECA,can exercise the following powers and functions:  Formulating rules in line with the provisions of the 2016 National EE&C Act;  Amending the EC building codes;  Directing designated energy consumers for energy audit by an accredited energy auditor;  Establishing or designating the testing laboratories accredited and certified by the Federal Government.Provincial govemments may also establish anEnergy Conservation Fund to support the efficientuse ofenergy and its conservation within its territory.4.Energy Conservation TribunalsAccording to Article 19 of the EE&C Act 2016, the Federal Government may establish as manyEnergy Conservation Tribunals as it considers necessary. In case, it establishes more than oneEnergy Conservation Tribunal, it shall specify the territorial limits within which each one of themshall exercise its jurisdiction under the Act.The Energy Conservation Tribunal shall exercise such powers/perform such functions which areconferred upon/assigned to it under the Act. In all such matters, wherein no specific procedure hasbeen mentioned in the Act, the Energy Conservation Tribunal shall follow the procedure as laiddown in the Code of Civil Procedure, 1908. Any person/entity, who/which is non-compliant withenergy audits directed by the Authority, could be sued by the Tribunal, which can impose finesbased upon the gravity of the non-compliance, as determined by the Board from time to time.5.National Energy Efficiency and Conservation Authority (NEECA)The National Energy Efficiency and Conservation Act 2016 (2016 National EE&C Act),established the National Energy Efficiency and Conservation Authority (NEECA) to replace theexisting National Energy Conservation Center (ENERCON).36 Final Report: Expert for Energy Conservation and Efficiency Promotion July 2016 by JICA Page 27 of 123

As mentioned in section 3.1, ENERCON was established in 1986 with the assistance of USAID toserve as the main focal body for the EE&C sector in Pakistan. ENERCON prepared the PakistanNational Energy Conservation Policy, whichwas approved in 2006, providing broad guidelines forenhancing end-use efficiency in various sectors of the economy.Fromthe 2016 National EE&C Act, ENERCON is to be transformedinto NEECA. The generaldirection and administration oftheAuthority and its affairs shall vest in the Managing Director whowill be reporting to PEECB. NEECA will serve as a sole focal federal authority for initiating,catalyzing, carrying out and coordinating the implementation of all energy conservation programsin all sectors of the economy. A fund known as theNEECA Fund will be developed, which shallvest in the NEECA and shall be utilized to perform its functions, such as:37  Prepare or updatethe National EE&C Policy.  Administer, implement and enforce the provisions of the 2016 National EE&C Act.  Recommend national EE standards to PEECB and, after approval by the National Standards Body, ensure implementation of these standards.  Coordinate energy conservation policies and programs nationally and intemationally.  Establish protocols ofcoordination between relevant government bodies and serve as the information house on energy conservation and management.  Initiate demonstration and R&D programs in support of its functions.  Establish infrastructure and take appropriate institutional development and capacity building measures for effective implementation of the provisions ofthe 2016 Act.  Establish systems and procedures for surveys, surveillance, monitoring, inspection and audits and recommend implementation of specific energy conservation measures.  Direct the conduct of energy audit of any entity and the implementation of post energy audit steps.  Establish and maintain one or more accredited laboratories for conducting tests and analysis.  Seek information or data relevant to its functions from any person or organization for quantitative or technological analysis.  Recommend to the Federal Govemment or a Provincial Govemment the adoption offinancial and fiscal incentives.  Initiate requests for foreign technical and financial assistance.  Undertake inquiry or investigation into energy conservation issues, and summon any of the concerned personnelto provide clarification.  Direct an initial energy use assessment.  Carry out energy audits, either by itself or direct any person/designated agency to conduct an enerry audit by any certified or designated energy auditor for any facility, enterprise, factory, buildingfor the purpose of identification of energy conservation problems.  Request for tests and analyses from its own laboratory or from any other accredited laboratory of an equipmcnt, gadget, accessory or hardware to measure its energy performance.  Prohibit manufacture, sale or import of equipment orappliances which are not energy efficient by ensuring compliance through enforcement of EE labels for equipment/appliances.  Fix and realize fee, rates and charges for providing any service.  Appoint technical and legal experts and administative staff for the efficient implementation of the 2016 Act.  Perfom any other function assigned by the Federal Govemment or the Board37 National Energy Efficiency & Conservation Act 2016 Page 28 of 123

The general direction and administration oftheAuthority and is affairs shall vest in the ManagingDirector. The Managing Director may exercise all powers and do all acts and things, which may beexercised or done by the Authority. The Managing Director will serve as the Secretary of theBoard, shall report to PEECB and seek its approval for all matters including its budget, plans andprojects.6. Punjab Energy Efficiency and Conservation Agency and Energy Management Companyof PunjabThe energy policies and regulations have been a federal subject until recently. In 2011, after the18th Amendment in the Constitution of Pakistan, the Punjab Energy Department (PED) wasestablished by the Government of Punjab to plan, oversee and administer the development, growthand regulation of the energy sector in Punjab. The issue of energy efficiency was not given muchpriority in the beginning as the PED focused more on energy supply than on energy demand side.In September 2015, during the 8th meeting of Punjab Provincial Development Working Party(PDWP), financial commitments to the tune of 1,209.84 million PKR was approved for the“Punjab Energy Efficiency and Conservation Programme 2015-18 (PEECP)38.The programmeenvisions to decrease the energy deficit by 350 MW within three years.39The Punjab governmenthas set up two bodies to spur progress in EE. One is the Punjab Energy Efficiency andConservation Agency (PEECA). The other one is the Energy Management Company of Punjab(EMCOP)40. The working structure of PEECA and EMCOP is shown in Figure 3. Figure 3: Structure of PEECA and EMCOP (2015-18)38http://www.pndpunjab.gov.pk/8thPDWP39 Punjab Energy Efficiency & Conservation Program Concept Clearance Paper: EMCOP40 http://www.brecorder.com/br-research/999:all/7159:punjab-sustainable-energy-perspective/?date=2016-11-24 Page 29 of 123

The Punjab EE&C Agency (PEECA) is responsible for managing the PEECP41 while EMCOP willundertake the actual implementation of PEECP. The PEECA steering committee was formed andits first meeting was held in January 201642. In collaboration with NEECA, PEECAwill work onimplementation of regulations, policies and standards.The roles and responsibilities of PEECA are:  Certify testing laboratories,  Establish mechanisms to enforce EE&CAct and policies,  Accredit ESCOs,  Amend Energy Building Code and ensure its compliance,  Seek information from Designated Consumers,  Establish a Provincial Energy Conservation Fund,  Appoint a Designated Agency and Inspecting officers,  Enquiries & Investigations.The role of EMCOP will be reduced upon completion of the projects assigned to it and PEECAmay grow into an authority. The financial support for EMCOP to implement EE&C projects willbe provided by Government of Punjab through PEECA. The funds will be transferred to arevolving fund and will be one time seed money of PKR 3.894 billion. Latter on, the funds will beraised in the form of soft loans from international donor agencies and other sources.43NEECA has developed and issued guidelines to all the provincial governments of Pakistan, todevelop Energy Efficiency Conservation Agencies on similar lines as that of PEECA in Punjab.The provincial governments have also nominated their departments, who will establish thesecentres in their respective province.7. Other Key StakeholdersSmall and Medium Enterprises Development Authority (SMEDA)As aPremier institution of GOP under the Ministry of Industries & Production, SMEDA wasestablished in October 1998 to take on the challenge of developing Small & Medium Enterprises(SMEs) in Pakistan. With a futuristic approach and professional management structure, ithas focused on providing an enabling environment and business development services to small andmedium enterprises. SMEDA is not only an SME policy-advisory body for the government ofPakistan but also facilitates other stakeholders in addressing their SME development agendas. Ithas the following objectives:  Formulation of the policy to encourage the growth of SMEs in the country and to advise GOP on fiscal and monetary issues related to SMEs.  Provision of business development services to SMEs.  Facilitation of the development and strengthening of SME representative bodies, such as associations, chambers of commerce, etc.41http://www.energy.punjab.gov.pk/42 Energy Efficiency & Conservation, Asad Rehman Gailani,43Punjab Energy Efficiency and Conservation Program Concept Clearance Paper: EMCOP Page 30 of 123

 Setting-up and management of a service provider’s database including machinery and supplier for SMEs.  Conduct of sector studies and analysis for sector development strategies.  Facilitation of SMEs in securing financing.  Strengthening of SMEs by conducting and facilitating seminars, workshops and training programs.  Donor assistance for development of SMEs through programs and projects.  Assisting SMEs in getting international certifications for their products and processes.National Productivity Organization (NPO)Established in 2001, NPO is the sole government body undertaking the “productivity with quality”initiative in Pakistan. NPO promotes enhancement of productivity in public and private sectororganizations. The main services of NPO include:  Conduct of training and seminars/workshops;  Conduct of research and benchmarking study on productivity, including EE;  Provision of advisory and consultancy support to the organizations in compliance with international standards (e.g. ISO 9000, ISO 14000, etc.);  Conduct of energy audits;  Promotion of a comprehensive understanding of energy and environmental issues.In the field of energy, NPO has taken an initiative in December 2005, and signed the agreementwith GTZ (now GIZ) to launch energy audits in the textile sector under an RE & EE framework toenhance productivity and quality. In this regard, energy audit was conducted in sixtextile mills(spinning and processing) under the supervision of German experts. A generic report of bestpractices for EE in spinning and processing textile mills was also disseminated. NPO has alsocollaborated with other international donors (Asian Productivity Organization, USAID, etc.) andlocal organizations (SMEDA, APTMA, universities, etc.) to conduct several capacity building andawareness sessions on EE in Pakistan.Based on the information presented during the Validation Workshop on 25 April 2017, NPO hasconducted over 300 energy audits and trained over 700 people in energy auditing and EEtechnologies.The Federation of Pakistan Chambers of Commerce & Industry (FPCCI)Since its inception in 1950, FPCCI has advocated and voiced the collective opinion, concern andaspiration of the private sector and offered advice and assistance to the Government in its efforts topromote exports, encourage foreign investment and stimulate economic activity in the country.FPCCI has its fingers on the pulse of the economy and serves as a bridge between the privatesector and the Government.FPCCI, along with the Karachi Chamber of Commerce, one of the largest chambers of Pakistan, isplaying an active role in addressing the problems of trade, industry and environment andsafeguarding the interests of the private sector through constant dialogue with the Government.FPCCI performs a number of export & investment promotional activities and functions, which aresummarized as follows: Page 31 of 123

 Sponsoring general and specialized business & investment delegations to foreign countries.  Organizing Pakistan’s participation in international fairs & exhibitions.  Maintaining constant liaison with Pakistan Diplomatic and Commercial Missions abroad.  Exchanging information relating to trade, industry and economy with foreign Chambers and Institutions.  Encouraging and infusing competition among leading exporters of the country by offering Export Awards every year.  Mediating in the resolution of commercial disputes between Pakistan and foreign businessmen.Key Industrial AssociationsThe Pakistan Sugar Mills Association (PSMA) was established in 1964 with the objective tosupport the sugar industry of Pakistan to develop their competitiveness, capacity and sustainablegrowth. The tasks of PSMA include:  To support best practices in the sugarcane industry, in a competitive market environment;  To promote global expansion of trade volume.  To encourage continuous advancement of sustainability throughout the sugarcane industry;  To play a leading role in negotiations to eliminate trade-distorting barriers against the sugar industry of Pakistan.  To promote bioelectricity as a reliable alternative to fossil fuels.  To support research and new technologies particularly bio refineries from the sugar sector.  To collect, collate and analyze industry statistics and maintain a database for the industry.  To promote efficiency and development of the industry through the establishment of appropriate institutional linkages.PSMA has played a vital role in the promotion of bagasse-based cogeneration in Pakistan. PSMAhas arranged meetings to help sugar mills adopt high-pressure cogeneration technologies. TheAnnual General Meeting of PSMA provides a platform to discuss and review different aspects ofdevelopment over the past years, appraise performance and develop a uniformed opinion on apolicy for the future growth.The All Pakistan Textile Mills Association (APTMA): Established in 1957, APTMA is one ofthe premier industrial associations of Pakistan. APTMA is the largest association of the country, asit represents 396 textile mills out of which 315 are spinning, 44 weaving and 37 composite mills.The main tasks of APTMA are:  To encourage friendly feeling and unanimity amongst Textile Mill owners on all subjects connected with their common good.  To secure good relations between members of the Association.  To promote and protect the trade commerce and manufactures of Pakistan in general and of the cotton trade in particular.  To consider questions connected with the trade commerce and manufactures of its members.  To collect and circulate statistics & information related to the trade, commerce and manufactures of its members.  To take all steps which may be necessary for promoting, supporting or opposing legislative and other measures affecting the trade, commerce or manufactures of its members. Page 32 of 123

 To make representation to local, provincial and central authorities on any matter connected with the trade, commerce and manufactures of its members. To arbitrate in the settlement of disputes arising out of transactions, piece goods, yarn and other manufactured goods between parties willing or agreeing to submit to arbitration in accordance with the Arbitration Rules of the Association. To advance and promote commercial and technical education connected with the trade and commerce of its members. To undertake special inquiries and initiate or support any action for securing the redress of legitimate grievances connected with the trade or commerce of its members. To take any action which may be conducive to the extension of the trade and commerce of its members or incidental to the attainment of this object. To regulate conditions of employment in the industry conducted or carried on by its members.All Pakistan Cement Manufacturers Association (APCMA):APCMA is the apex body of thecement manufacturers of Pakistan. Incorporated in 1992, APCMA plays a significant role incoordinating various activities in respect to formulation of Government policies for the cementindustry through its continuous dialogues and interactions. It collects and provides up-to-datestatistical data/information to the industry and other agencies.In the field of energy, APCMA is supporting cement manufacturers to identify and implement EEmeasures in their cement factories, such as waste heat recovery (WHR) for power generation, useof refuse derived fuel (RDF) and type derived fuel (TDF), etc. Currently, eleven out of twenty fourcement factories of APCMA have installed WHR systems to generate electricity with a totalinstalled capacity of around 110 MW, accounting for 21.1% of the total installed power capacity ofthe 24 cement factories. WHR systems with a combined power capacity of around 39 MW areunder commisioning or installation at four other cement factories. Some factories are usingRDF/TDF up to 33% of their total fuel consumption (on mass basis). Some others use 5 to 10% ofRDF/TDF.4.2Existing EE Policy Framework in Pakistan4.2.1 IntroductionAccording to the Pakistan Energy Yearbook 2015 published by the Hydrocarbon DevelopmentInstitute of Pakistan (HDIP), total primary energy supply(TPES) of Pakistan in 2015 was 70.264Mtoe. The share of TPES by fuel type is presented in Table 3. Oil and gas are the main twosources of primary energy mix, contributing79.53% of the TPES.Table 3: Share of TPES by fuel type in Pakistan (2015) Source Energy Supply (Mtoe) Share (%) Natural Gas 30.450 Crude Oil, Petroleum Products and LPG 25.428 43.34 Nuclear, Hydro and imported 9.433 36.19 Coal 4.953 13.43 Total 70.264Source: Pakistan Energy Yearbook 2015 7.05 100 Page 33 of 123

The total primary energy consumption(TPEC) in Pakistan was 41.98 Mtoe in 2015 (excludingfuels consumed in thermal power generation plants). The share of TPEC by sector is shown inFigure 4. Other Govt. Agriculture 2.2% 1.7% Commercial 4.0%Domestic Industrial 24.5% 35.4% Transport 32.4%Figure 4: Total Primary Energy Consumption (TPEC) by sector in Pakistan (2015)The highest share of total primary energy consumption is in the industrial sector of Pakistan(35.4%). The latter mainly consists of small and medium textile, leather, sugar, pulp and paperenterprises. The contribution of the industrial sector to the GDP is around 19%. Thus, energyefficiency has become a corner stone as far as achieving competitiveness in industry is concerned.Table 4 presents the TPEC by type of fuel in the industrial sector of Pakistan (including fuels usedas feedstock for fertilizer production).Table 4: Industrial TPEC by type of fuel in Pakistan Source Consumption Share (%) (Mtoe) Gas 6.868 46.27 Coal 4.631 31.20 Electricity 2.034 13.70 Oil 1.309 8.82 Total 14.842 100.00Source: Pakistan Energy Yearbook 2015Natural gas consumption in industries holds the largest share (46.27%), followed by coal (31.20%)and electricity (13.7%).In terms of electricity consumption, the industries of Pakistan consumed a total of 24,733 GWh inthe fiscal year 2015 (FY2015).44The industry sector in Punjab province was the largest consumerof electricity with 17,678 GWh (71.5%), followed by Sindh with 4,832 GWh (19.5%), and KPwith 2,083 GWh (8.4%). The industry sector in Baluchistan consumed only 140 GWh in 2014-15,accounting for 0.6% of the total electricity consumption of the industries in Pakistan.4544 In Pakistan, fiscal year starts on 1 July of previous calendar year and concludes on 30 June45 State of the Industry Report 2015 by NEPRA Page 34 of 123

In order to promote EE&C in Pakistan, in particular in the industry sector, some key EE policieswere promulgated by the Federal and Provincial Governments. Table 5 lists the key EE-relatedexisting policies of Pakistan.Table 5: List of key EE-related existing policies of PakistanYear Policy issued Issuing institution2005 National Environmental Policy MOEn (now MOCC)2006 National Energy Conservation Policy ENERCON2012 National Climate Change Policy MOCC2012 National Sustainable Development Strategy MOCC2013 Framework for Implementation of Climate Change Policy MOCC2014 Pakistan Vision 2025 MOPDR2016 Pakistan Energy Efficiency and Conservation Act GOPThe National Energy Conservation Policy (NECP) published by ENERCON in 2006 is one of thekey policies that enumerate broad guidelines to enhance end-use efficiency in various energy-consuming sectors of the economy. The 2006 NECP includes several policies and sectoralinitiatives to be taken at various levels during the short, medium and long term.In terms of policy initiatives, the 2006 NECP sets the targets to formulate and enact acomprehensive legislation on energy conservation and management, to develop energyconservation codes and standards, to declare EE&C as an industry priority, and allow fiscal andfinancial incentives to be available for EE&C pursuits. For the industrial sector, the 2006 NEPCsupports the following initiatives: Introduce and facilitate energy audits in industries and promote targeted technical services; Encourage and promote better housekeeping and implementation of low-cost, fast payback EE&C measures in industry; Promote energy efficient combustion processes, instrumentation and control and metering practices in industry; Develop a Management Information System (MIS) on energy consumption, efficiency indices, EE potentials, and best available practices in various industrial sub-sectors; Promote nationwide small-scale technology programs in industrial sub-sectors, particularly in the small and medium enterprises (SMEs) to demonstrate the efficiency of energy conservation such as waste heat recovery, combustion control systems, energy efficient motors, power factor improvements, etc.As described in detail in chapter 3, during the last 10 years, several industrial initiatives have beendeveloped and implemented with the technical and financial assistance from various internationalcooperation and financing organization. However, despite that, the development and deploymentof EE&C policies are still in an early stage.Some policies and strategies published by GOP and the ministries in the 2012 - 2014 period aremainly to set the strategic goals for EE&C development.The Parliament of Pakistan enacted the 2016 National EE&C Act. It aims at establishinginstitutions and enunciating mechanisms and procedures for an effective conservation and efficientuse of energy. Page 35 of 123

4.2.2EE Targets and PlanningPakistan has neither set EE targets for the country, nor for the industrial sector. In 2007, GOPconducted a preliminary assessment of EE potential under the ADB’s EE initiative. Later on, theEE&C Sector Roadmap for the period of 2009-19 was prepared by a government based EnergyEfficiency and Conservation Consultative Group (EECCG)46 with the assistance of ADB under theSustainable Energy Efficiency Development Program. This roadmap does not only provide thepotential for energy saving at national level, but also gives a comprehensive investment plan forthe EE sector in the country. It was a first of its kind of analysis done in the EE&C sector ofPakistan. The Planning Commission was designated as the focal agency for the Roadmap. Theoverall identified investment requirement is 8,518 million USD in the EE sector for the period of2009-2019 with potential savings of 9,475 ktoe in all economic sectors until 201947. The share ofDSM in potential savings is 7,145 ktoe.Table 6 presents industrial energy consumption, technical and realizable EE potential in FY 2019for various industries of Pakistan. The total increase in energy consumption inthe industry sectorwas estimated at 15,779 ktoe for the 2008-2019 period. The estimated technical EE potentialis3,170 ktoe in FY 2019, which corresponds to around 20% of the total increase in energyconsumption. However, due to a number of barriers and constraints in implementing EE in theindustrial sector (such as local capacity, existing price structure and non-competitive industry), therealizable EE potential was expected to be 1,940 ktoe (61% of the technical EE potential) only.Table 6: Industrial energy consumption and realizable energy savings in PakistanSubsector Increase in energy Total energy Total energy Technical EE Realizable EE consumption consumption consumption potential potential in FY 2008 forecast for during 2008- (ktoe) (ktoe) Iron & Steel 830 FY 2019 2019 70 35 Pulp & Paper 1,244 (ktoe) 245 170 Textile 2,952 1,276 594 289 Cement 4,169 2,517 446 546 477 Brick Kilns 1,683 5,977 1,273 845 431 Other Industry 4,834 8,526 3,025 870 538 Total 15,712 3,407 4,357 3,170 1,940Source: ADB, 2009 9,788 1,724 31,491 4,954 15,779The studies carried out by ENERCON and HDIP endorsed the potential of EE&C sector andestimated the saving potential at 11,160ktoe in all sectors.48ENERCON projects with annual energy savings of up to 25% are possible in all sectors, whichcorresponds to approximately 3 to 5 billion USD/year.49 Sector-wise energy saving potential isgiven as follows:46 EECCG is chaired by the Planning Commission and consists of Economic Affairs Division, Ministries of Finance,Water and Power, Petroleum and Natural Resources, Environment, Industry and Production, National EnergyConservation Centre, Pakistan Electric Power Company, Pakistan Standards and Quality Control Authority,Hydrocarbon Development Institute, Pakistan Council for Industrial and Scientific Research, and development partners(ADB, AFD, JICA, UNDP, UNIDO, GTZ, WB, USAID).47 Sustainable Energy Efficiency Development Program, Final Report, by ADB48 Rapid Assessment Gap Analysis: Pakistan, 2014 by S4ALL Page 36 of 123

 25% in industry;  20% in transport;  20% in agriculture; and  30% in buildingsThe Pakistan Integrated Energy Model (Pak-IEM) developed by IRG indicates a net energy savingworth 41 billion PKR at user end50.4.2.3Financial Incentives for EE ProjectsThe National Energy Conservation Fund (ECF) was initially part of ENERCON but, later on, ECFregistered as a corporate body with the Security & Exchange Commission of Pakistan (SECP),Islamabad in 2002. The fund amounting to 3 million USD was converted into PKR and parkedwith ECF. The main objective of the fund is \"energy conservation through EE, use of alternativeeconomical non-polluting energy and better maintenance techniques for all types of vehicles,equipment, devices and machinery in use in Pakistan\". The scope of ECF was previously limited tothe leasing/financing of vehicle tune-up equipment. However, ECF decided to enhance its scope,and included all energy conservation initiatives under its mandate.51The ECF intends to offer soft loans to SME’s for the promotion of EE technologies incollaboration with banks and financial institutions. ECF has also attempted to educate the bankingand leasing firms in EE financing.Presently, the ECF signs agreements to provide financial solutions for energy conservationequipment through leasing. These agreements extend funds to well-rated leasing institutions topromote the use of fuel-efficient devices and equipment. The ECF lends the fund with amanagement fee of 3-4% to leasing companies. In the cases where the fee is lower than the interestrate of banks, ECF lends the fund with an added 10% margin. The ECF is safely retained bylending to leasing companies and not directly to consumer.52The ECF is an active revolving fund governed by a board of public and private sector entities. Asper the memorandum and articles of association of the ECF, it can create a separate fundingwindow for various sectors. A financial support for efficient lighting installation projects in theresidential, commercial, industrial, and outdoor sectors is available under a recently approvedproject of GEF (August 2016) 53.The textile sector represents a majority of SME’s in Pakistan and the government has established aTechnology Upgrading Fund (TUF) Scheme to support the textile sector. The scheme has been ineffect since July 01, 2016 and shall continue until June 30, 2019. GOP allocated 6 billion PKR fortextile policy initiatives for 2016-1754. In this scheme, measures related to improvement inproductivity, EE and environmental compliance in the textile sector are eligible for support55.49 http://energyefficiency.gov.np/uploads/14promotion_of__1449654042.pdf50 Pakistan Integrated Energy Model, Model Design Report51http://202.83.164.26/enercon/enercon.php?mc_id=3652 Pakistan-Institution-Building and Promotion of Energy Saving by JICA, March 201653https://www.thegef.org/project/delivering-transition-energy-efficient-lighting-residential-commercial-industrial-and54 http://www.brecorder.com/pakistan/industries-a-sectors/317324-technology-upgradation-fund-scheme-formulated-to-facilitate-textile-sector.html55 http://202.83.164.29/moti/frmDetails.aspx?opt=publicnotices&id=13 Page 37 of 123

A budgetary allocation of 1,209.84 million PKR for a period of 3 years (2015-18) is made underthe Punjab EE&C Programme 2015-18.56The budget allocation of PEECP is given in Table 7.57Table 7: Annual budget estimation of Punjab EE&C ProgrammeProgram Components Year 01 Year 02 Year 03 TotalPEEC Cell 15 8 - 23Designated Consumers 37 60Standards and Labelling 65 11.5 11.5 360Energy Conservation Building Code 12 167.5 127.5 50Media Campaign Print 63 28.5 151Media Campaign Outdoor 40 9.5 120Training and Workshop 21.1 49 39 64Total 40 40 828Contingency @ 3% 253.1 21.3 21.6Grand Total 7.593 325.8 249.1 24.84O & M Cost 260.693 9.774 7.473 852.84Project Cost 103 335.574 256.573 363.693 129 125 357 464.574 381.573 1209.84The State Bank of Pakistan (SBP), in collaboration with GIZ, is currently working on thedevelopment of a financing scheme for EE projects. GIZ is also supporting SBP in developing theGreen Banking Guidelines (GBG)and conducting awareness/training sessions on RE and EEfinancing and green banking for commercial banks, energy service companies (ESCOs), andprospective investors.58A financial regime is also being developed by NEECA to finance projects identified by EnergyAuditing Firms /companies and enlist them with NEECA/ECF.SBP is working to establish a Credit Enhancement Mechanism for sustainable energy financingprojects of banks which will primarily be a risk sharing facility for RE and EE projects. Theproposed facility will provide guarantee cover on sustainable energy financing, mainly for EEprojects. Specifically, loans will be of 3-10 years tenor with shorter term loans primarily used forEE.SBP has also developed Green Banking guidelines, which entail that the industry has tocomply with environmental issues to get loans. UNIDO has also assured SBP of its support for theresolution of Environmental and Clean Energy/Energy Efficiency issues in industry.The facility will be divided in two parts. Under part I, guarantee coverage of upto 20% will beprovided for loans to RE projects of upto 1 MW and EE projects of upto 30 million PKR.Withlarge guarantee coverage on relatively large expected loan sizes, this guarantee coverage willbe extended on an individual loan basis and the banks will be required to approach the State Bankfor guarantee coverage on each loan separately. The average loan size under this scheme will be20 million PKR with EE loan encompassing a higher number of loans. The expected number ofloans will be around 1,250 in the initial phase of the Scheme. Part II of thefacility is designed tocater to the financing needs of small sized EE and RE projects of agricultural borrowers, smallbusinesses and commercial enterprises.5956http://www.pndpunjab.gov.pk/8thPDWP57 Energy Efficiency and Conservation in Punjab, Energy Dept. Punjab, Oct 2015 by Iftikhar Randhawa58http://energyefficiency.gov.np/uploads/14promotion_of__1449654042.pdf59 Promoting Green Finance – Refinance and Guarantees, October 19, 2016, GIZ Pakistan Page 38 of 123

4.2.4Fiscal Incentives for EE ProjectsExempted/reduced ID&T: The proposal for exemption of duties on import of LED bulbs/lightshas been approved in the 2016 Finance Act. In order to provide a level-playing field to local LEDbulb assembling companies and to compete with importers of LED bulbs, a reduction of duties hasalso been applied on imports of components used in LED bulbs. This measure will reduce theprices of LED lights and hence improve the EE in the local and industrial sectors.Recommendations for Custom & Regulatory Duty Exemptions on import of electric steel sheetshas been prepared by ENERCON with technical assistance of JICA which will enhance thecapacity of local manufacturers to supply energy efficient fans and motors in the market atcompetitive prices.4.2.5Mandatory Measures on Energy Performance & ManagementEnergy audit, management and reporting are not yet mandatory in Pakistan. However, as per the2016 National EE&C Act, NEECA can carry out an energy audit of any facility, enterprise, factoryand building, by itself or through a designated auditor. Federal and provincial authorities areevaluating the capacity of ESCOs60 and have plans to introduce a certification course on energymanagement.In this regard, NEECA has requested an immediate initial handholding support from the ClimateTechnology Center and Network (CTCN) for developing, institutionalizing and executing anational certification scheme for energy auditors and energy managers. The technical assistancerequested from CTCN consists of the following aspects:  Development of national certification scheme for energy auditors and energy managers including the application process, course curriculum and syllabus, eligibility (educational and professional) criteria, etc.;  Development of the course content and guidebooks and of a first set of questions banks for energy auditor and manager examination;  Organization of a preparatory technical training program on energy audit. This will cover all aspects of energy auditing, including pre-audit work, data collection procedures, equipment familiarization and utility analysis. The training will further discuss the end-use equipment and systems in details with the primary focus being on identifying energy conservation opportunities and project prioritization using economic analyses;  Preparation of the guidelines by keeping in view the best practices in the region for correctly analyzing the energy threshold levels for designated consumers and identification;  Preparation of a report on necessary rules and regulations for effectively amalgamating the national certification scheme for energy auditors and energy managers with the mandatory energy audits of designated consumers also covering the Energy Conservation Tribunals role in case of non-compliance of the provisions of the Act; and  Preparation of the draft rules and regulations required for making the scheme effective.60An energy service company (ESCO) is a business that develops, installs, and finances projects designed to improve EEand reduce operations and maintenance costs for its customers' facilities. ESCOs generally act as project developers for awide range of tasks and assume the technical and performance risks associated with the EE projects. What sets ESCOsapart from other firms that offer EE improvements is the concept of performance-based contracting. When an ESCOundertakes an EE project, the company's compensation is directly linked to the amount of energy that is actually saved. Page 39 of 123

ENERCON initiated studies to introduce the labeling scheme with the support of UNDP in 2010,and then developed the Guidelines for Implementation of Energy Standards & Labeling Scheme inPakistan through the assistance of JICA.Minimum Energy Performance Standards (MEPS) for AC Electric Fans, Self-BallastedFluorescent Lamps, AC Induction Motors (0.37-7.5 kW) and Air-conditioning Units (12,000-48,000 Btu/hr) have been developed. These were officially launched in May 2016.61NEECA has developed a voluntary scheme for EE labeling of equipment. It is the focal agency toimplement an energy-labeling scheme for EE appliances and products in Pakistan. The voluntaryscheme started in May 2016 and will continue for a period of two years. It can bereviewed/extended. The first “Pakistan Energy Label” was introduced for electric fans. The formatof the Pakistan Energy Label (Energy Star Rating Label) for electric fans is shown in Figure 5.From the scheme guidelines, the manufacturers or importers of electric fans can apply to NEECAfor the registration of their products to get permission to use/affix the Pakistan Energy Label to theenclosure of the fan motor and to print it on the packing. The fan(s) should conform to all therequirements of Pakistan Standard PS:1/2010 (Performance and Construction of ElectricCirculating Fans and Regulators) with all its amendments. The applicants will submit the TestReport issued by an ISO / IEC 17025 Accredited Laboratory for the particular model(s) of electricfan(s) for which the grant of the Pakistan Energy Label is required. In July 2016, the PakistanEnergy Label was given to three qualified fan manufacturers.Figure 5: Pakistan Energy Labels for Electric Fans61 https://www.jica.go.jp/pakistan/english/office/topics/press160727.html Page 40 of 123

4.2.6Other EE Policy MeasuresPEECA is providing financial support for EE-related capacity building activities. A fund of 64million PKR is allocated by PEECA to trainings and workshops. Under its RE&EE Programme,GIZ, in collaboration with SBP, is building the capacity of ESCOs and commercial banks onfinancial modeling of EE projects.The 2016 National EE&C Act authorizes NEECA to initiate demonstration and R&D programs insupport of its functions.ENERCON has introduced National EE&C Awards 2015-2016 to encourage the EE&C activitiesin the industrial sector under the ECF. Page 41 of 123

5. GENDER MAINSTREAMING IN EE POLICY IN PAKISTANWhy is gender mainstreaming needed in EE policy? Reliable and affordable energy is globallyrecognized as a crucial prerequisite for human and economic development. National energypolicies that underlie access and use of energy fundamentally affect living standards, livelihoodsand economic options of both households and communities, organizations and enterprises. Energyneeds and priorities of men and women are known to be different, based on their traditionallydifferent roles in society. However, women are grossly under-represented – or entirely absent – inthe energy sector. Gender mainstreaming is therefore imperative for the development of energypolicies that can serve different groups of people and provide them incentives for economicdevelopment options, including industries and other enterprises.Mainstreaming a gender perspective means assessing the implications for women and men of anyplanned action, including legislation, policies or programs. It is a strategy for making women's aswell as men's concerns and experiences an integral dimension of the design, implementation,monitoring and evaluation of policies and programs in all political, economic and societal spheresand at all levels so that women and men benefit equally and inequality is not perpetuated. Theultimate goal is to achieve gender equality.62 Accordingly, due to the under-representation ofwomen and women’s perspective in the energy sector, gender mainstreaming in the EE policy inPakistan requires special attention to be given to the needs and priorities, barriers and opportunitiesof women as both energy consumers and energy entrepreneurs, suppliers and managers.5.1Gender in the National PolicyThe Government of Pakistan state its 10-year development aims in the Pakistan Vision 2025, aplan that lays the ground for reaching the UN SDGs (Sustainable Development Goals63) before thetarget date of 2030. The Vision has seven priority areas, or Pillars, among them Pillar 1: PeopleFirst - Developing social and human capital and empowering women (linking e.g. to SDG 1 onpoverty eradication, SDG 3 on health and SDG 5 on gender equality) and Pillar 4: Security –energy, water and food security (linking e.g. to SDG 7 on affordable and clean energy).The Vision rightly acknowledges the low ranking of Pakistan in the global Human DevelopmentIndex (UN Human Development Report 201564 places Pakistan as 147 out of totally 185 countries)and the bottom place in the Global Gender Gap Index65 (144/145 countries in 2015) measuringgender equality. Consequently, the Pakistan Vision realizes the unequal access between men andwomen to opportunities, resources and benefits, and the importance of legislative and policymeasures for enhancing women’s participation in different areas in society, including decisionmaking and women’s economic empowerment through access to education and enterprise.62Definition by UN Economic and Social Council63 http://www.un.org/sustainabledevelopment/sustainable-development-goals/64 http://hdr.undp.org/en65 http://reports.weforum.org/global-gender-gap-report-2015/The Global Gender Gap Index measures gender equality internally within each country, not between different countries.It shows the relative gender gap between men and women in one country across four key areas: health, education,economy and politics. Pakistan demonstrates a large difference between men and women in all these areas, which placesthe country among the least gender equal ones in the world (In the Index Pakistan is the least gender equal country afterYemen. N.B. Afghanistan is not included). Page 42 of 123

As expressed in the Vision, GOP is committed to achieving the targets of the 5th SDG on gender,building upon the previous pursuit of the MDGs (Millennium Development Goals66) up to 2015.Connecting to both the MDGs and the 1995 Beijing Platform for Action agenda for women’sdevelopment,67 the 2002 National Policy on Development and Empowerment of Women(NPDEW) is a statement of intent of GOP to ensure that gender perspective is reflected in allnational policies and plans. Accordingly, the NPDEW strategy is to increase women’sempowerment through mainstreaming of gender issues into all national development sectors.NPDEW promotes women’s social, economic and political empowerment as a driving force forreducing social exclusion, accelerating poverty alleviation and ensuring more sustainabledevelopment results.5.2 Gender in the EE PolicyThe National Sustainable Development Strategy (NSDS) (2012) which is “an attempt to definesustainable development and the pathway to green economy in Pakistan” identifies four keyoverall areas for development: (1) Sustainable and Inclusive Economic Growth; (2) Social andHuman Development; (3) Environmentally Sustainable Development; and (4) the Emerging Issueof Climate Change and Sustainable Development. Among the general strategic social goals arepoverty alleviation and promotion of social equity; extending social safety nets for the poorest andmost vulnerable, especially women; and to productively enable the increasing young populationand empowering women. Focus on empowerment of women through education and awarenessraising and removing discrimination barriers to ensure productive interaction of women towardseconomic development are listed among the strategies of the sub-theme Population Dynamics andSustainability within the first key area for sustainable development. Under the sub-theme Energyfor Sustainable Development, introduction of awareness raising campaigns to explain benefits ofenergy efficiency and to change overall energy-use consumption behavior is listed, but no specificpopulation groups (such as rural men and women) are mentioned to be in focus for the informationcommunication.The Social and Human Development theme of the NSDS recognizes social vulnerabilities, and oneof the strategies for poverty reduction is to initiate programs for low-cost and energy efficienthousing. Women’s empowerment and gender equality are seen as fundamental conditions forsustainable development. Accordingly, one of the seven sub-areas for social and humandevelopment, Gender Equality and Women Development, has strategic goals of: (i) increasing therole of women and integrating gender balance into national sustainable development processes; (ii)enforcing protection and implementation of women’s rights; (iii) providing equitable access toeducation, health, and work force; and (iv) introducing program for land allotments to empowerwomen and improve their right to ensure family food security.Under the key area of Environmentally Sustainable Development, women’s empowerment ismentioned as one of the effects of the strategy to introduce clean cooking stoves and solar lanternsas part of the Air Quality and Pollution theme.The implementation mechanism of the NSDS has ten core program areas, where Promotinginclusive and sustainable growth through engaging the poor, women and youth is one of the fourprograms within the Economic development theme. Two of the three social core programs mention66 http://www.undp.org/content/undp/en/home/sdgoverview/mdg_goals.html67agenda for women’s empowerment agreed by different countries, among them Pakistan (in1996),http://www.un.org/womenwatch/daw/beijing/platform/ Page 43 of 123

specifically women: Social protection and safety nets for the poorest and most vulnerableparticularly women; and productively enabling the expanding “youth bulge” present in thecountry as well as empowering women. The core program on Environment also mentionstrengthening community-based interventions but without further specifying any involvement ofwomen or other groups within communities.The National Climate Change Policy (2012) has totally ten policy objectives, one of them tofocus on pro-poor gender sensitive adaptation while also promoting mitigation to the extentpossible in a cost-effective manner. Participation of women and female gender experts isrecognized as crucial for policy development, initiatives and decision making. The socio-economicpolicy measures contain (I) mainstreaming gender perspectives into climate change efforts atnational and regional levels; (II) reducing vulnerability of women to CC impacts; and (III)recognizing women’s contribution in the use and management of natural resources and otheractivities impacted by CC. The more specific measures to be taken are to: (i) undertake a study ongender-differentiated impacts of CC with focus on capacity to cope with the adaptation andmitigation strategies; (ii) develop a gender-sensitive criteria and indicators related to adaptationand vulnerability; (iii) develop and implement CC vulnerability-reduction measures that focusparticularly on women’s needs; (iv) integrate women and give them a role in the decision-makingprocess on CC mitigation and adaptation initiatives; and (v) develop CC adaptation measuresbased on local and indigenous knowledge particularly held by women.The Framework for Implementation of Climate Change Policy 2014–2030 (2013) recognizesthe gender differences to CC impacts and adaptation, and expresses GOP determination to supportgender integration into various efforts to address climate change. Yet there is no mention of genderor women’s participation in the eleven different sector strategies and in the listed implementationactions of each sector.Pakistan National Environmental Policy (2005) has no mention of social or gender issues in thenine sectoral guidelines (including EE), however it provides cross-sectoral guidelines on poverty,population, gender, health, trade, local governance and disaster management. The specificguideline on gender and environment demands gender sensitivity and the promotion of women’sempowerment in all environmental policies, projects and programs. Specific measures that GOPmay apply include: (i) compiling gender-disaggregated statistics of environmental goods andservices; (ii) ensuring participation of women in environmental projects and programs; (iii)mainstreaming gender in all relevant policies and plans; (iv) addressing environmental issues thatimpact women more adversely than men (such as indoor air pollution and access to water sources);and (v) including gender and environment in the environmental education and training curricula.The four goals of the National Energy Conservation Policy (2006) are: (i) Sustainabledevelopment; (ii) Improve economic productivity and poverty alleviation; (iii) GHG mitigationand climate control; and (iv) Gender mainstreaming, with the rationale that energy conservation,especially integrated into rural development policies, will contribute to gender mainstreaming andthe recognition of women’s role in the rural development context and in local communities.Gender mainstreaming is also one of the cross-sectoral guidelines of the energy conservationpolicy, highlighting its importance especially in the rural context. Energy conservation efforts mayalso lead to special interventions for reducing women’s work burden, considering women’s specialneeds and improving opportunities for female entrepreneurs.The other reviewed Pakistan EE related policy documents (see the full list in Table 5) do notmention any gender, poverty or social issues. Page 44 of 123

6. INTERNATIONAL BEST PRACTICES AND EXPERIENCE IN EE POLICY DEPLOYMENTThis chapter reviews the international best practices, lessons learned and experience in EE policydevelopment and deployment in five Asian countries in similar circumstances: China, India, thePhilippines, Thailand and Vietnam.6.1 International EE Policy Best Practices and Experience6.1.1 ChinaThe total primary energy consumption (TPEC) in China increased from 602.8 Mtce68 in 1980 toaround 4,260 Mtce in 201469. The share of TPEC by sector is shown in Figure 6. The industrysector was the largest energy user, accounting for 65.0% of TPEC of the country, followed bybuildings (16.4%), the transportation sector (15.2%), and agriculture (3.4%). Agriculture, 3.4%Transport, 15.2%Buildings, 16.4% Industry, 65.0% Figure 6: Share of TPEC by sector in China (2014)In China, the industry sector is divided between light and heavy industry, reflecting the relativeenergy-intensity of the manufacturing processes. In 2013, the heavy industry consumed around80% of the total energy used in the industry sector. The largest industrial energy consumers are thechemical industry, the steel and iron industry, and the building material production industry.Theindustry sector has a great potential for EE&C improvement. According to the 12th Five-Year Plan(2011-2015), the potential for EE&C in the industry sector is 21% compared to the 2010 level.EE Targets and PlanningIn its 11th Five-Year Plan (2006-2010), the Chinese government set goals that would cut thecountry’s primary energy intensity (energy use per unit of GDP) by 20%. The following 12th Five-68 China typically converts all its energy statistics into “metric tons of standard coal equivalent” (tce).1 tce equals to 29.31 GJ (LHV) or 31.52 GJ (HHV)69 Ying Chen (2015) Page 45 of 123

Year Plan (2011-2015) called for a 16% reduction in energy intensity. The plans further allocatedthe targets to provinces as shown in Table8.Table 8: Regional targets for energy intensity reduction in China Region Energy intensity reduction Energy intensity reduction (2006-2010) (2011-2015) North China 20-22% 15-18% Northeastern China 20-22% 16-17% Eastern China 16-22% 16-18% Central and South China 12-20% 10-18% Southwestern China 17-20% 15-16% Northwestern China 12-20% 10-16%Source: Zhu Liu (2015)The 12th Five-Year Plan has set EE&C targets for the nine key industries: 18% for each the steeland iron, non-ferrous metal, petroleum, and electronics & information industries; 20% for each theproduction of chemical products, production of building materials, light industry and textileindustry; and 22% for the mechanical industry.The energy intensity of China was decreased by 19.1%, as compared to the 20% target for the2006-2010 period. For the period 2011-2015, the energy intensity was reduced by 18.2% ascompared to the original16% target70.In March 2016, China has announced the 13th Five-Year Plan. According to this plan, the nationaltarget for energy intensity reduction will likely be set at 15% for the 2016-2020 period71.The promulgation of the Energy Conservation Law of China in 1997 and the creation of theEnergy Conservation Information Dissemination Center in 1998 have played an important role inpromoting EE&C in China. The Law (amended in 2007) mandates that an energy-consumingentity shall, in accordance with the principle of rational use of energy, strengthen its managementof energy conservation, formulate and implement energy conservation plans and technologicalmeasures, and reduce energy consumption. In 2003, the National Development and ReformCommission (NDRC) was established to be responsible for administrative and planning controlover the energy sector through its National Energy Bureau (NEB). In 2008, the National EnergyAdminstration (NEA) was created to replace the NEB. Since then, NEAhas worked on theformulation of a solid package of policy instruments that has helped significantly promote EE&Cin China.Financial Incentives for EE ProjectsSoft loans and financial guarantees: Compared to other types of projects, EE projects in Chinaare quite likely to receive preferential treatment in interest rates. However, attractive, low interestrates appear to be of secondary importance in the context of difficulties that the borrowers for EEprojects are facing. Most of the difficulties are to achieve borrower eligibility and to meetcollateral requirements. With the establishment of the government supportive policies, externalsupport by international organizations, and the rising awareness of EE projects, more Chinese70 TERI (2016)71 CSIS (2016) Page 46 of 123

banks are seeking to expand their business in “green credit”, especially in creating proper financialproducts for ESCOs. For examples72:  ESCO savings loan scheme introduced by the Bank of Beijing (BoB), the Shanghai branch of the Shanghai Pudong Development Bank (SPDB), and the China Construction Bank (CCB) and Ping An Bank. In this scheme, the registered ESCO can collateralize the loan with its future receivables pledge, and the risk coverage depends on the quality and nature of those future receivables;  Low-interest loans to banks provided by the China CDM Fund: The China CDM Fund had been built from the fees accumulated through the certification of GHG emissions reductions achieved under CDM projects in China. As of the end of 2011, the fund managed 10 billion RMB (1.58 billion USD) with the granting and investment portfolio of approximately of 285 million RMB (4.5 million USD) and 1.6 billion RMB (253 million USD) respectively. In line with the national regulations, the CDM Fund was used to support development of GHG emissions reduction projects through equity investments, on-lending loans by banks, financial guarantees, and capacity building. As of December 2011, the CDM Fund had provided concessional loans of around 1.54 billion RMB to 31 projects, of which 12 were EE projects.  The WB’s China Energy Efficiency Financing (CEEF) project: CEEF was set up by the WB as an international corporation project with GOC to promote energy savings and emission reduction. The project was implemented from 2008 to 2011. In total, the WB has provided 400 million USD to three Chinese banks (China EXIM, Huaxia Bank and China Minsheng Bank) for them to finance EE projects. The three participating local banks were required to provide matching money from their own capital sources in proportions of 1:1 or 2:1 to the WB loans. CEEF provided eligible loans to EE projects73 at a floating interest rate, usually 10-20% below conventional loan products and at or above the prime rate74 level. The loan repayment term was 3 to 5 years. Collateral conditions were dependent on the requirements of the participating local banks. This financing was targeted to large-scale EE projects with an investment of 5 to 25 million USD, with the borrowers contributing not less than 30% of the investment cost.  The AFD’s loan: In March 2010, AFD lent 120 million EUR to GOC, which, in turn, on-lent to three local banks: SPDB, Huaxia Bank and China Merchants Bank, each with 40 million EUR for a term of 10 years at 6-months London Interbank Offered Rate (LIBOR). The local banks lent to the EE projects at a floating interest rate, usually 10-20% below conventional loan products and at or above prime rate level. The loan repayment term was 3 to 5 years. The borrowers shall meet the collateral conditions required by the participating banks. This financing focused on the medium-sized RE and EE projects.  The ADB’s loan: The ADB has implemented three EE loan projects with three Chinese provinces: Guangdong (2009), Shandong (2011) and Hebei (2012). ADB loans provided 100 million USD to each respective provincial government and were re-lent to EE projects72 IIP (2012)73 Under CEEF, eligible loan included medium and large-scale energy conservation investments in which the primaryincremental benefits are cost savings associated with reduced energy consumption. The EE projects are not eligible forsuch financing if their incremental benefits are primarily derived from capacity expansion or non-energy related costsavings.74 In China, the loan prime rate (LPR) is the commercial banks loan rate providing to their best customers. The otherloan rates are based on it. Page 47 of 123

through a financial intermediary that manages and reuses the funds during the 15-year loan term. The interest rate was floating, 10% discount from the prime interest rate. The loan repayment term was 3 to 5 years. Loan guarantee was required, typically from the local government. Medium-sized EE projects and ESCOs were eligible borrowers.Financial subsidies: During the China’s 12th Five-Year Plan (2011-2015), the central governmentoffered special subsidies to support the EE&C projects. In order to achieve the optimum energyconservation goals, the financial subsidies were closely linked to the quantity of energy saved on aproject basis. The project companies would be granted financial subsidies (rewards) if they wouldfully achieve the expected goals of energy conservation. The EE projects with an annual energysavings of more than 5,000 tce (i.e.+/-15 million kWh of electricity) are eligible for governmentrewards. This threshold was reduced from 10,000 tce under the 11th Five-Year Plan (2006-2010),allowing many medium-sized EE projects to qualify for the reward and stimulating more industrialenterprises to initiate EE projects. For EE projects in the eastern regions of China, qualifiedcompanies were granted a one-time reward subsidy of 240 RMB/tce saved annually (increasedfrom 200 RMB/tce during 2006-2010 period). For EE projects in the central and western regions, aone-time reward subsidy of 300 RMB/tce saved (raised from 250 RMB/tce in 2006-2010) wasgranted.If approved by NDRC and MOF, 60% of the estimated amount of rewards can beadvanced before the project has been commisioned. After project completion and commissioning,the remaining incentive funds are paid based on a third-party audit of the energy savings. Fund forthe financial rewards come from the central government’s budget.Fiscal Incentives for EE ProjectsCIT exemption and reduction: Presently, a three-year CIT exemption, followed by a 50%reduction for another three years of the standard CIT rate (25%) is granted to qualified EE&Cprojects. This reduction starts from the year in which the first revenue is generated. In addition,10% of the amount invested in the qualified equipment is credited against CIT payable for thecurrent year, with any unutilized investment credit eligible to be carried forward for five tax years.This applies only if such equipment is qualified as special equipment used in EE&C projects.Mandatory Measures on Energy Performance and ManagementEE obligation (EEO): EEO was first used in China in 2006 by the NDRC after experimentingwith voluntary agreement schemes for energy conservation in the industry sector. Under China’sEEO scheme, officially called the “Top 1,000 Energy-Consuming Enterprise Programme” (Top1,000 ECEP), enterprises would be penalized for not meeting their assigned energy-saving targets.The programme targeted the 1,008 largest enterprises in nine energy-intensive industries75 withindividual total energy consumption of 0.18 Mtce or more. Their combined energy use was 670Mtce, which accounted for 33% of China’s total energy use (47% of total energy consumption inindustry) in 2005.The top-1,000 enterprises should realize total energy savings of 100 Mtce for theperiod of 2006-2010.The Top 1,000 Program was significantly expanded in 2011 and renamed the “Top 10,000 Energy-Consuming Enterprises Programme” (Top 10,000 ECEP). The “Top 10,000 ECEP” aimed to save250 Mtce by 2015 in 15,000 industrial enterprises that use more than 10,000 tce/year, in around160 large transportation enterprises (such as large shipping companies), and in public buildings75 Iron & Steel, Non-Ferrous Metal, Chemicals, Petroleum/Petrochemicals, Construction Materials, Textile, Pulp &Paper, Coal Mining and Power Generation. Page 48 of 123

that use more than 5,000 tce/year. The total number of enterprises covered by this programmereaches to around 17,000. The target of the Top10,000 Program is to save 250 Mtce by 2015.The target setting process in both Top 1,000 and Top 10,000 Programs was the following: The participating enterprises reported their estimated energy-saving potentials (based on the results of energy audits conducted by accredited energy auditors) to the provincial government; The provincial government estimated the total energy targets for the province and submitted its proposed targets to the central government; The central government reviewed the proposed energy-saving targets; Provincial and central governments negotiated and finalised the targets.The Top 1,000 and Top 10,000 Programs were led by NDRC, with collaborations from theMinistry of Industry and Information Technology (MIIT), the National Bureau of Statistics (NBS),the General Administration of Quality Supervision, Inspection and Quarantine (AQSIQ), the State-Owned Assets Supervision and Administration Commission of the State Council (SASAC) andindustrial associations.NDRC established a comprehensive management, supervion and overall coordination, allocatingenergy-saving targets to the enterprises, providing guidance, and supervising the programimplementation. NBS was responsible for collecting data on energy consumption and EE, trackingand verifying the reported data, and annually publishing the energy utilization status of theenterprises. AQSIQ was in charge of reinforcing energy measurement work by encouraging theenterprises to improve their energy measurement systems. SASAC’s role was to strengthen EEsupervision in the state-owned enterprises by incorporating EE targets into their leader’s annualperformance evaluation system. Industrial associations were also involved in implementing theprograms by helping upgrade EE standards, collecting benchmarking information on EE, buildingindustrial EE databases and providing training and consultation.EEO proved to be effective in stimulating EE&C practices and investments among the regulatedenterprises. By the end of 2010, 866 enterprises regulated by the “Top 1,000 ECEP” have met theirEE targets. Overall, the “Top 1,000 ECEP” conserved 165 Mtce of energy, which was 165% of theoriginal target76. According to an intermediary evaluation in 2012, about 10% of evaluatedenterprises of the “Top 10,000 ECEP” failed to achieve their energy-saving targets77.Mandatory energy management, audit and reporting: The mandatory energy management, auditand reporting have been applied in China since 2006 for the largest energy-intensive enterprisesincluded in the “Top 1,000 ECEP” and “Top 10,000 ECEP”. The key elements of the “Top 1,000ECEP” and “Top 10,000 ECEP” related to mandatory energy management, audit and reportingincluded:  to set up an energy conservation working group in the enterprise;  to establish an energy conservation targeting and accounting system;  to conduct energy audits and develop energy conservation plans;  to implement energy audit systems;  to conduct energy efficiency benchmarking;76 Kevin Lo (2014)77 IEPD (Industrial Efficiency Policy Database) website Page 49 of 123