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Carbon Markets in Pakistan

Despite its shortcomings and weaknesses, the Clean Development Mechanism (CDM) under the Kyoto Protocol demonstrated the concept
that carbon trading can make a significant contribution to achieving global carbon mitigation targets in a cost-effective manner. It also
ensures flexibility within the broader system of regulatory requirements for compliance with the targets and commitments outlined in the
Nationally Determined Contributions. When designed intelligently and applied robustly, carbon markets have the potential to offer numerous
co-benefits, particularly to developing countries.
Evidently, these factors are why carbon markets are an integral component of The Paris Climate Agreement. Article 6 of the Paris
Agreement introduces the concept of Cooperative Mechanisms, encompassing both Market (Article 6.2 & 6.4) and Non-Market
Mechanisms (Article 6.8). The overarching goal of Article 6 is to enable international cooperation and market-based principles for reducing
greenhouse gas emissions globally. This is based on the understanding that developing countries possess the potential for cost-effective GHG
emissions reductions, which can be unlocked through private sector investments.
Like many other developing nations, Pakistan also has substantial, as of yet untapped potential for carbon investments, coupled with a few
added advantages. To begin with, Pakistan, in its NDCs, has committed to reducing its overall projected emissions by 50% from the projected
levels by 2030. While significant efforts are underway in various sectors such as energy, transportation, and agriculture, some sectors have
remained largely untouched. The industry is one such sector where sporadic individual efforts are being made, but given its potential, much
more remains to be done. The industrial sector’s contributions to the overall emissions inventory amount to 25.76 MtCO2e, and estimates
indicate that the major contributing sectors in the coming years will be
energy, agriculture, and industry.
Additionally, as per a study conducted in 2016, the industry, energy, and agriculture sectors in Pakistan exhibit low marginal abatement
costs for emissions reductions compared to countries in the region. Although the study is in need of updating and alignment with new
economic and industrial growth realities, it is reasonable to assume that many sectors of Pakistan’s economy will fit into an attractive carbon
investment profile for both domestic and international investors.
NDRMF believes that Pakistan, as one of the top ten vulnerable and climatically at-risk countries, stands to benefit significantly from
international carbon markets. Opportunities in carbon reductions can assist in achieving much-needed energy and process efficiencies in the
industry, contribute to energy transition, and support the ongoing transformation of the agriculture sector. Similarly, prospects for
decarbonizing the urban transport sector are substantial and largely untapped, ultimately helping Pakistan meet its NDC commitments
through a combination of concessional finance and carbon-focused investments. It is also believed that the operationalization of Carbon
Markets is a complex task, and the industry and private sector at large require support. In addition to guidance on technical and regulatory
requirements, facilitating international interlinkages and establishing cooperation is critically important.
To this end, NDRMF has initiated numerous information sharing and knowledge-building events and sessions. Going forward, NDRMF will
offer a suite of tailor-made technical solutions and transaction advisory services to the industry.
In this context, NDRMF organized a Seminar on “Leveraging Carbon
Markets to Enable Private Investment” to enhance the private sector’s understanding of Carbon Markets, explore the private sector’s potential
role, and devise a roadmap to seize this opportunity promptly. The seminar brought together a significant number of participants from the
private sector and experts from international organizations to discuss and share their experiences and gain a deeper understanding of the
rapidly evolving carbon markets.
The seminar’s overarching objective was to enhance the private sector’s understanding of Carbon Markets, explore their potential role,
and create a roadmap for timely engagement, ultimately leading to protection against the adverse impacts of climate change. Carbon
Markets are globally recognized mechanisms for carbon financing and cost-effective mitigation actions. Pakistan can benefit by participating
in Carbon Markets, including voluntary emissions trading schemes, which would enable Pakistan to unlock private finance through carbon
credits. Various organizations shared their initiatives and perspectives on reducing carbon emissions and leveraging carbon markets.
Representatives from Engro Foundation, Shell, Serena Hotels, Pakistan Business Council, K-electric, iTecknologi, Daraz, National
Insurance Company Ltd, Loreal Pakistan, Artistic Milliners, Baig Group, Amreli Steels Ltd., Strategic Initiative, Control Union Pakistan, Pakistan
Business Council, and Utopia shared their initiatives and how they are leveraging Carbon Markets.
Participants gained insights into Pakistan’s commitment to climate change mitigation, the role of carbon markets, potential sectors for
carbon trading, and case studies demonstrating successful carbon projects within the country.

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