Federal cabinet approves policy guidelines for carbon market trading

The federal cabinet on Friday approved policy guidelines for carbon market trading on recommendations of the Ministry of Climate Change and Environmental Coordination, a statement from the Prime Minister’s Office (PMO) said.

Pakistan unveiled first National Carbon Market Policy in November this year to attract green investment.

“Pakistan is now ready to lead, innovate, and collaborate with local private sector as well as international partners for the development of carbon markets to attract investments in green initiatives for achieving climate goals under the Paris climate pact,” Coordinator to Prime Minister on Climate Change Romina Khurshid Alam said while addressing at ‘Launch of Pakistan’s Carbon market Policy & Panel on Coordinated Access to Net Zero Development Financing Through Paris-Aligned Carbon Markets’ at Pakistan Pavilion on the sidelines of COP29 global climate conference in Baku in November.

Pakistan, the fifth most populous country in the world, faced one of its most significant natural calamities in 2022 as climate-induced floods affected one-third of its population, causing an estimated $40 billion in damages.

International donors pledged over $9 billion in the aftermath of the disastrous floods that left nearly a million people without safe and adequate housing, food, and shelter.

However, experts have noted that the actual disbursement of funds has been slow, representing less than a quarter of the estimated damages.

Carbon credits or offsets are traded after certification by a government or independent body. Carbon offsetting allows entities to compensate for their greenhouse gas emissions by supporting projects that reduce emissions elsewhere, such as forests and promoting renewable energy.

By participating in such markets, Pakistan can incentivise businesses and industries to adopt cleaner technologies and practices, according to Romina Khurshid Alam.

Speaking to Business Recorder earlier this year, Faraz Khan, CEO of US-based SpectrEco – a technology, data, and advisory firm that simplifies and accelerates sustainability and ESG transitions for companies – emphasised the need for Pakistan to transition from the grant and aid model to a value proposition investment pitch.

“Investment is one thing, and grant/aid is another. We really need to move from the grant and aid model to a value proposition investment model, whether it is climate-related, renewable energy, or any other sector.

“After some tough years, Pakistan is gearing up to create a conducive environment for FDI (Foreign Direct Investments), carbon-related investments, and climate-related investments,” Faraz Khan said then.