Toby Tiktinsky is an Environmental Market Professional.  He is experienced in carbons emissions trading, sourcing carbon credits from a variety of sectors, including oil & gas, energy, waste management, heavy industry and biofuels.  Just after the Kyoto Protocol Treaty took affect in 2005, Toby moved to Pakistan.  He lived and worked there for 3 years, where he was responsible for originating new projects that reduce greenhouse gas emissions and earn carbon credits under the Kyoto Protocol's Clean Development Mechanism.  He travelled through Pakistan extensively, from 2005 through 2008.  We spoke to him about his work, the state of the carbon industry in Pakistan and his experience in Pakistan as a Caucasian American.   

Q. Could you please tell us a bit about yourself and your background?

A. The first 22 years of my life were spent largely in the San Francisco Bay Area. I attended the University of San Francisco, a small liberal arts Jesuit college whose motto is "Educating minds and hearts to change the world." I studied philosophy, with a minor in environmental science. After I graduated I took an internship with the US Environmental Protection Agency in Washington, DC. There I worked in the Office of Pesticide Programs communications department, where I drafted letters, briefing sheets, talking points, and reports related to policies, actions, and public announcements. After my internship I was hired on full time.

The experience was good, but I knew it was not what I wanted to do with my life. I always wanted to live and work internationally, which was an important reason for my applying to the London School of Economics. I was fascinated by the idea of "sustainable development", that we could somehow balance the material needs of an industrialized economy with the need to protect the natural resources upon which we all depend; this issue formed the foundation of my master's degree at LSE. I also met the woman who would become my wife and my international travel partner.

After LSE I returned to California, where I continued working for EPA. I ended up working in air planning, where we worked with regions of the west that were suffering severe air quality problems and were required by law to develop mitigation plans.  The experience I gained helping regions evaluate measures to control air pollution became the springboard from which I was able to launch into a career in carbon trading.

Meeting with the managing committee of a local cattle colony. The manure, if not disposed of properly, can result in the emission of methane, a greenhouse gas 21 times more potent than carbon dioxide

A visit to one of the many small farms in the colony

Q. What led you to the work that you did in Pakistan? What were some of your motivations, and how did the opportunity come about?

A. As I mentioned, I was interested in the idea of sustainable development. Whereas the concept can be applied equally to developed and developing economies, at LSE I had studied sustainable development in the context of developing nations. The challenges these countries face in trying to build a thriving economy are hard enough, let alone trying to accomplish this goal without exacting significant damage on a country’s natural environment. So while I enjoyed my work at EPA, I really wanted to work in a developing country.

I had a natural interest in Pakistan, given that is where my wife is from. Unfortunately, it also happened to be the center of US news attention for all of the wrong reasons. From the earthquake in 2004 to the situation on the Afghan border, western media suggested that Pakistan was unsafe and inhospitable. Yet I knew this was an exaggeration. My wife’s family is there; she and her friends routinely visited for holidays; not to mention that the country has 160 million people who are clearly carrying on with life. Going to Pakistan would give me an opportunity to learn more about the country from which my wife came; it would give me an opportunity to get to know her family; and it gave me a chance to radically change the direction of my career.

When we made the decision to go to Pakistan, neither of us knew what we could do to earn a living. We had heard stories of people going and just showing up at non-profits or aide agencies and landing jobs. So we decided that we would give ourselves six months to find work; if nothing materialized we would return to the US.

We didn’t leave it to chance, however. Both of us did a lot of research on available opportunities and began contacting people who might help guide us. For myself, I did a lot of research on opportunities related to the environment.  In particular, I focused on a new program created by the international community under the Kyoto Protocol, a treaty to combat climate change. Under the program, developing countries such as Pakistan are eligible to reduce greenhouse gases at home, for example by installing solar panels or wind farms, which create clean, emission free electricity. The UN program, called the Clean Development Mechanism (or CDM), allows companies to quantify how many tons of greenhouse gases they reduce (or prevent) and receive credit for those reductions. The credited reductions, or carbon credits, can be sold to developed countries, such as United Kingdom, France, Japan, or New Zealand, which can use those credits to count toward their emission reduction commitments under the Kyoto Protocol. The opportunity, in short, lies in the ability to find projects that qualify to generate carbon credits and bring those credits to market in developed countries.

2005 was a watershed year for the Kyoto Protocol, because it was the year the treaty took effect. Companies were beginning to grow and take advantage of the opportunities the treaty presented; but there was little activity in Pakistan. As such, I saw an opportunity. I set up a company in San Francisco, Economic Solutions for the Environment, Inc, and created a business plan around carbon credits in Pakistan.

Once I had the business plan in place and the company set up, I approached carbon companies that were actively expanding internationally. These companies were part financial--that is they had the wherewithal to cover costs of applying for carbon credits and purchasing them--and part technical--they employed engineers who could write the technical documents and work with third-party auditors to get projects qualified with the United Nations. London was fast becoming a hub of carbon trading, with multiple companies listing on the London Stock Exchange's Alternative Investment Market. Importantly, these companies were actively setting up offices in developing countries because they needed people on the ground to do the business development.

The business development component required people with enough technical understanding to be able to evaluate potential projects, while also being able to pitch, negotiate and close deals. The business development piece, which we call origination, was the segment of the business I targeted.  My business plan allowed me to position myself as a local representative of an international carbon company. One thing led to another and I ultimately became the Pakistan representative for EcoSecurities. When we arrived in Islamabad we stayed in a hotel; it was there I launched the business on behalf of EcoSecurities.  

                                      
                                      A urea plant in Mianwalli  

Q. Please tell us what work you were doing in Pakistan – alternative energy, carbon market and industry, its competitiveness, situation on the ground when you arrived in Pakistan in 2005 with regards to carbon/energy/industry etc. 

I find the carbon market fascinating because it cuts across a country’s entire economy. Everything we do, practically, results in emissions of greenhouse gases. From cooking to turning on the lights, from producing sugar to shipping goods, one cannot expend energy without engaging in an activity that releases greenhouse gases.The problem, of course, is that the majority of fuel we use for energy in the world derives from fossil fuels, the consumption of which results in the release of billions of tons of carbon dioxide in the atmosphere. To address this problem, the global community banded together within the framework of the Kyoto Protocol.

Under this treaty, developed countries, such as United Kingdom, France, Japan, etc,  must commit to firm greenhouse gas reduction targets. As mentioned above, these countries can purchase carbon credits from countries such as Pakistan to help supplement any domestic emission reductions. The carbon credits are created by investments in projects that are cleaner and more efficient from a greenhouse gas perspective. There are many types of projects that can qualify to earn carbon credits: setting up a wind farm or small hydropower plant; capturing fugitive methane emissions from natural gas systems; switching from fuel oil to natural gas in a power plant; improving the efficiency of an industrial process; or preventing waste water at an ethanol plant from generating methane. Before projects can be qualified to generate carbon credits, host countries must meet certain requirements, such as ratifying the Kyoto Protocol, drafting a national sustainable development plan, and setting up an office or agency dedicated to reviewing projects against that plan. Once these requirements are met, the private sector (or public bodies, but generally it is the private sector) can make the investments and submit applications for qualifying to generate carbon credits. The application must be approved by an accredited third party, the host country's designated office, and the UN. After the carbon credits are issued by the UN, they can be sold to buyers in the EU, for example, who must comply with their country's emission reduction targets.  

The goal of this program (again, called the Clean Development Mechanism, or CDM) is to help finance the transfer of new, more efficient technology to developing countries and assist in a country's sustainable development. Ultimately the goal is to help developing countries industrialize without going through the same pollution intensive development path as other countries such as the United States and the United Kingdom. The carbon market, then, offers a way to help finance the transfer of technology, knowledge and capital to developing countries, all while providing low cost carbon credits to developed countries. This, of course, is how it should work in theory.  

Hot steaming sugar rich waste water from an ethanol plant

A local cement plant needing to install technology to control dust emissions

Just before I arrived in Pakistan in December 2005, the Pakistan Environment Ministry had just approved its carbon credit strategy. At the time I did not realize that what prompted the government to set up this infrastructure was the implementation of a very large project by Mitsubishi at a fertilizer plant in Multan. This project would go on to be the very first Clean Development Mechanism project approved in Pakistan by the UN, and by far the largest of any of the projects completed to date in the country.

Thus, my arrival was fortuitously well timed. For the first couple of weeks we lived in a hotel in Islamabad, it was there that I launched my business. Using a laptop and my cell phone, I began contacting companies and trying to identify opportunities. At the same time I also needed to promote a brand, educate people about the market, and build up a presence in a country that had never really heard about carbon credits. To achieve this I tried to target some members of the press who may be interested in picking up my story. At one point I randomly met a reporter on the street who was working on a story entirely unrelated to the environment, and I asked him to round up a few reporter friends to have breakfast with me at a local 5 star hotel so they could learn about carbon trading. He managed to bring along two additional reporters, and the three of them sat very patiently as I went through my spiel. They ate their food and left. The next day I bought 5 different papers, not one of which carried anything even remotely related to carbon trading. Sigh . . .

A few weeks after my arrival I caught a break. Through a contact I was able to get a meeting with the Environment Minister. His office had put in place the infrastructure for approving carbon projects in the country, and they were looking for companies to invest. At the same time, the government was proceeding with a very big push to develop wind power in Sindh. The meeting resulted in our co-sponsoring a workshop for all of the wind developers in the country to educate them on the process of earning carbon credits. This was a great very early entry into the alternative energy space in Pakistan and provided me a list of potential clients whom I would meet regularly over the following couple of years. Unfortunately I would learn over the subsequent two and a half years that it would go nowhere, a point I will come back to.

 
A urea plant in interior Sindh                  

Carbon credits were entirely new, meaning I had to educate clients on the potential. Once clients came to understand the concept, they became very excited about the potential.Many activities could qualify to earn carbon credits: capturing methane emissions from municipal solid waste dumps or wastewater ponds at ethanol plants; capturing waste heat from industrial processes, such as cement plants; switching from a dirty fuel to a cleaner one; and numerous other activities. This provided me an opportunity to visit plants throughout Pakistan, from Mianwalli to Sukkur, from Lahore to Karachi, I got the chance to see a lot of Pakistan.

Q. What challenges did you encounter when trying to implement the carbon credits concept?

A. The challenges I encountered were legion. Once people learned about the potential, they thought it was easy and figured they could do it themselves. First, the process is expensive and involves all sorts of arcane terms and acronyms. Second, the process is excruciatingly bureaucratic. Third, the protocols for accounting for carbon credits are extremely rigid, meaning many projects that looked eligible at first blush, turned out not to qualify. Add to this competing factions in the Pakistan government that did not see eye to eye on how to treat carbon revenue; and business owners who thought the price of carbon would rise indefinitely, then you can see how such a scheme could encounter numerous difficulties.

Back to wind power, which includes a few more layers of challenges. The government entity ultimately responsible for purchasing the wind power was different than the Minister who originally created the incentives for investing in wind power. The power purchaser is very conservative and is comfortable with traditional fossil fuel plants: they are predictable, reliable, etc. Wind farms are at the mercy of the wind. At the time steel prices were skyrocketing and turbines were in short supply; so every time the power purchaser became comfortable with a price and set the tariff, the investor would come back and need higher prices to accommodate for rising commodity prices. This would then upset the power purchaser who was never really comfortable paying such high prices in the first place. In addition, the government became enamored with the idea that they could get a higher price for carbon credits if they managed the carbon credits from all wind farms as a portfolio. The government, without any understanding of the process for claiming carbon credits, created a very complicated structure for appropriating the carbon credits, and essentially undermined the incentive all together.

As it stands, no projects were ever qualified to generate carbon credits in the wind sector in Pakistan.

 
We arranged a press event to announce the signing of our first project in Pakistan. The press event was at the Islamabad Marriott

Q. What was it like to work as a Caucasian American in Pakistan?

 As welcoming as people were, I was always an outsider. This did not prevent people from doing business with me, but it made it more difficult. After some time local entrepreneurs who were well connected jumped into this space and were able to leverage connections that I did not have to generate business. Furthermore there was always an optimism about the direction of the price of carbon and a skepticism about the difficulty of monetizing the carbon value. I wish I couldn’t look back and say “see we were right about the volatility of carbon and the difficulty of the process,”  but, alas, I can. C’est la vie.

Other obstacles were more mundane. Despite an executive’s facility with English, many times the secretary or assistant couldn’t speak English, which could make it difficult to get through to the right person. Nobody uses voicemail or answering machines. Electricity constantly goes out, especially when you need it most in the summer. These things presented challenges, but not insurmountable.  

Q. What advantages do you think you enjoyed as a Caucasian American

A. Certainly I enjoyed an access to people I would not have enjoyed as a local entrepreneur. People hear a foreign accent and they are more willing to hear a person out.

During a visit to a dump site outside Islamabad we met some young people who lived on the site and made their living sorting through the garbage

Q. Why did you leave? Is anyone else carrying on the work you started?

A. Well I left in stages. In summer of 2007 I witnessed more incidents in Pakistan that hit closer to home. My favorite restaurant in Islamabad was bombed. An area of Lahore I frequently visited for meetings was bombed. These things began to rattle me a bit. More troubling, I thought, was the notion that I would need to bring people from abroad to work on technical aspects of these projects who may not be comfortable working in the country. Given the carbon projects proceed for many years, I had to consider that at some point I may move and pass the reigns to someone else; would they be comfortable working in Pakistan? As a British company, were the executives comfortable taking on these risks?

By that time I had built a portfolio of projects and thought that it may not be such a great idea to continue originating new projects. At that point I spoke with my management and we decided that I should move to our Dubai office, where I could continue managing Pakistan, but also expand my origination activities to the Middle East.

Then in summer of 2008 my wife and I decided that we were tired of living on separate continents (by this point she had taken a job in Washington, DC). As such, I decided to leave, passing the management of our projects to our Dubai office, and a fell we hired who is based in Karachi.  

Q. What advice can you give someone who is looking to work/start something in Pakistan?

Q. What are your impressions of Pakistan?

A. Friendly, welcoming, warm, chaotic, anarchistic, fiercely independent, prideful, devoted to friends and family, fantastic mangoes, bountiful lands, desperate poverty, fractured politics, a crossroads of culture, history and language, faithful, unfaithful, generous, crowded, backward, resilient, great at saving, poor at investing . . .

Q. Do you follow the politics in Pakistan? Do you have an opinion on any of the big issues facing the country?

A. I followed national politics pretty closely until Musharraf stepped down. Of course I follow via my wife and her family. My sense was that politics is dominated by landowners and big egos (perhaps these are not unique). That the major parties have factions named after individuals, rather than new political party names, suggests that personality plays a commanding role in Pakistani politics.

Q. What work are you currently doing?

A. Eventually I'd like to move into the business of financing and constructing alternative energy and low carbon projects, both in the US and abroad. The world needs more of such projects, and I'd love to have a hands-on role in facilitating such investment.

Thank you so much for taking the time to talk to us.  We appreciate learning about the carbon industry in general and your efforts in Pakistan in the field.  We wish you the very best for your future.

Till next time,

Khuda Hafiz,
Aaliya Naqvi-Hai
aaliya@pakusonline.com