Azhar Saeed
As relentless monsoon rains continue to wreak havoc on lives and properties across Pakistan, it is painfully clear that the world’s climate finance pledges, generous as they may sound in speeches or summit declarations, will not bridge the enormous climate finance gap confronting developing countries. For Pakistan, the estimated financing need stands at a staggering $81 billion by 2030, just to meet its mitigation and adaptation targets. Public funds, domestic or international, will simply not be enough. If Pakistan is to build climate resilience, accelerate green growth, and pursue a just energy transition, it must mobilize large-scale private capital. This means creating the enabling conditions for the private sector to step forward as a key driver of sustainable finance.
One of the most promising avenues for mobilizing private capital is through active participation in international carbon markets. These markets, especially those evolving under Article 6 of the Paris Agreement, offer Pakistani businesses a pathway to access global climate finance while generating measurable benefits for people, the planet, and the economy. The focus should be on high-impact sectors such as renewable energy, agriculture, forestry, waste management, transport, and manufacturing industry, where Pakistan has untapped mitigation potential and developmental co-benefits.
However, seizing this opportunity requires infrastructure, expertise, and trust. Pakistan must invest in the simultaneous development of technical capabilities and institutional frameworks. Encouragingly, the Government of Pakistan has already initiated foundational steps to anchor environmental accountability within the country’s broader governance landscape. In a significant move, the Securities and Exchange Commission of Pakistan (SECP) has begun adopting the IFRS Sustainability Disclosure Standards, signaling the start of a new era in mandatory environmental reporting. This marks a fundamental shift, elevating climate-related disclosures to the same level of importance as financial reporting. Under SECP’s phased implementation plan, large companies, especially those with material environmental footprints, will begin reporting on emissions, climate risks, and sustainability metrics starting January 1, 2025, with wider coverage in 2026 and 2027.
Meanwhile, at COP29 in November 2024, Pakistan unveiled its Carbon Market Policy Guidelines aimed at mobilizing private finance, accelerating low-carbon investments, and enabling participation in both the Voluntary Carbon Market (VCM) and Article 6 mechanisms. These guidelines establish a comprehensive governance and regulatory framework for the emerging carbon market. The Ministry of Climate Change and Environmental Coordination (MoCC&EC), which serves as the Designated National Authority (DNA) for international carbon trading, is spearheading the effort and will host a Carbon Market Secretariat to manage a digital platform for project registration, tracking, and policy support.
Crucially, the government is in the process of developing a National Carbon Registry to oversee the issuance, transfer, and retirement of carbon credits. All project developers, including those operating in the VCM, will be required to register through this digital system, ensuring transparency, traceability, and alignment with Pakistan’s international commitments. The evolving Carbon Market Framework will also delineate clear roles for developers, verifiers, and regulators, laying the groundwork for a credible, well-regulated carbon ecosystem in the country.
To build the technical foundation for this ecosystem, Pakistan needs to develop and operationalize MRV systems aligned with international standards; while ensuring they are sector-specific, cost-effective, and scalable. Without high-integrity emissions data, verified at regular intervals, the carbon credits generated by Pakistani entities will not meet the expectations of international buyers. Alongside this, there must be significant investment in training a national cadre of carbon project developers, validators, and verifiers. This skilled workforce will be essential to build trust with credit buyers and to ensure that projects comply with global standards for environmental integrity and additionality.
Strategic partnerships with international standard-setters such as the UNFCCC, Verra, or Gold Standard can play a pivotal role in transferring technical know-how and certifying Pakistani professionals. Pakistan can also benefit from engaging with platforms like the Climate Warehouse or the Article 6 Implementation Partnership, which offer learning networks and digital infrastructure to support transparent credit tracking.
Equally important is the need for sector-specific readiness plans to identify which industries and technologies are best suited for early engagement with carbon markets. These plans should outline emissions baselines, define standardized methodologies for mitigation measurement, and include feasibility assessments for project aggregation. Agriculture, for instance, holds vast potential for soil carbon sequestration, sustainable livestock, and methane reduction, yet few farmers or cooperatives currently understand how to monetize these efforts. Similarly, forestry-based projects, if designed with local participation and safeguards, can yield both carbon credits and biodiversity benefits.
A supportive regulatory environment will be essential to reduce uncertainty and attract investment. Pakistan must put in place clear procedures for authorizing projects, issuing credits, and making corresponding adjustments to avoid double counting under Article 6.2 and 6.4 of the Paris Agreement. These procedures must be predictable, timely, and transparent. Effective coordination between federal and provincial authorities will also be critical, especially in areas like land-use approvals, forestry management, or waste sector regulation, where mandates often overlap.
To succeed, carbon market development cannot be treated as a standalone climate initiative. It must be embedded in Pakistan’s broader economic and development strategy. This means aligning it with Pakistan Vision 2025, the Green Stimulus Package, the National Energy Efficiency and Conservation Strategy, and CPEC Phase II. Linking carbon finance to mainstream development priorities will also help crowd in concessional capital, build political will, and position private climate investments as a core driver of inclusive growth.
A comprehensive approach must also include technical assistance, innovation promotion, and financial incentives tailored to the private sector. Sector-specific toolkits, simplified guidance documents, and step-by-step playbooks can help SMEs, start-ups, and cooperatives understand how to design eligible carbon projects. In transport, for example, project pipelines could be built around low-emission freight corridors or the electrification of public buses. In the waste sector, decentralized composting, methane capture, and circular economy business models could generate saleable offsets while improving urban sustainability.
To build credibility and stimulate demand, demonstration projects must be prioritized in each sector. These proof-of-concept initiatives can serve as templates for scale-up, attract early credit buyers, and test the readiness of MRV systems. Such projects should be supported through performance-based grants, concessional loans, or tax incentives, ideally linked to verified emissions reductions. Public-private partnerships or blended finance mechanisms can also help de-risk early investments.
Building collaborative ecosystems and sectoral consortia will be vital to overcome fragmentation and build scale. A dairy cooperative, for instance, can aggregate methane reduction across multiple farms into a single, bankable project. Technology providers can partner with SMEs to embed emissions tracking into their production systems. Such partnerships will reduce transaction costs, build market confidence, and expand the pipeline of investable projects.
The credibility of Pakistani carbon credits will increasingly depend on their traceability, transparency, and verification. Investing in digital MRV platforms, potentially using blockchain or remote sensing, will enhance data integrity and appeal to buyers with ESG and compliance requirements. Countries like Kenya, Brazil, and Indonesia have already begun experimenting with these technologies, and Pakistan must not lag behind.
The Ministry of Climate Change must fast-track operational readiness, SECP and MoF should jointly incentivize the private sector, and Pakistan’s business community must step up to seize the opportunity.
Finally, international visibility matters. Pakistan should proactively engage with climate investors, development finance institutions, and international buyers through carbon finance roundtables, investor roadshows, and strategic matchmaking platforms. These engagements can help showcase Pakistan’s reforms, build investor confidence, and unlock new partnerships with carbon funds, sovereign buyers, and multinational corporations with net-zero commitments.
Climate resilience and economic competitiveness now go hand in hand. If the country can rapidly build a credible carbon market ecosystem, grounded in transparency, supported by institutions, and driven by the private sector, it will not only unlock the much-needed climate finance, but also help Pakistan become a regional leader in tapping carbon credits.
