Pakistan ‘can generate’ 40-75mn tons of carbon credits annually worth $400mn-2.25bn: report

Pakistan has the potential to generate 40 to 75 million tons of tradable carbon credits per year, worth $400 million to $2.25 billion, said the Transparency International Pakistan in its report on Tuesday.

The TI Pakistan report titled ‘Carbon Markets Readiness in Pakistan: Addressing Governance Gaps and Safeguarding Against Integrity Risks’ is an assessment of gaps in governance of carbon markets in Pakistan, including identifying challenges and opportunities for achieving high integrity projects based on international best practices.

The report notes that Pakistan holds substantial potential in carbon markets, offering both environmental and economic opportunities.

RUDA to transform Booti dumpsite into carbon credit project

“If even 10-15% of Pakistan’s annual greenhouse gas emissions were addressed through carbon projects, Pakistan could generate 40-75 million tons of tradable carbon credits per year. At current voluntary market prices, this translates to a potential revenue stream of USD 400 million to USD 2.25 billion annually for the country,” it said.

However, the report emphasises that within the current policy guidelines on carbon markets, a critical disjuncture exists between the high-level aspiration to mitigate climate change, and the on-the-ground, functional architecture needed to operationalise sophisticated instruments like carbon markets in Pakistan. It highlights lack of a clear, consolidated national emissions baseline as a significant barrier to carbon markets in Pakistan.

The report further emphasises that carbon markets are inherently complex and require a high level of technical sophistication in multiple interrelated areas: emissions accounting, monitoring and verification protocols, legal frameworks for carbon ownership and crediting, and the design of market instruments such as registries, caps, and crediting methodologies.

“While overarching policy frameworks are now present, on-the-ground capacity to implement them remains limited. Pakistan needs a dedicated carbon markets team at the Federal Ministry of Climate Change & Environmental Coordination and provincial climate change departments,” it maintained.

Executive Director TI Pakistan Kashif Ali highlighted: “Transparency is one of the most pressing challenges in the development of carbon markets everywhere. Without clear and accessible information on how decisions are made, how benefits are allocated, and what safeguards exist for affected communities, trust in these mechanisms runs the risk of being affected. Clear reporting standards, publicly accessible benefit-sharing frameworks, and robust channels for community participation in carbon market projects are critical to the success of Pakistan’s carbon markets as well as bridging transparency gap”.

Pakistan’s mangrove carbon market: $20m to $50m annual potential unlocked

The TI Pakistan has provided 10 recommendations to strengthen governance of carbon markets in the country, including:

A) Establish Robust Data Infrastructure along with developing context-specific baselines for key sectors and project types

B) Institutionalise Safeguards, Equity, and Public Participation with clear framework for Free, Prior and Informed Consent (FPIC) and Grievance Redressal Mechanisms to resolve conflicts around land rights, benefit sharing, Monitoring Reporting Verification (MRV) disputes, and consent violations

C) Strengthen Legal and Regulatory Foundations by enacting a Comprehensive Carbon Market Law to serve as the primary legal mandate for all activities related to carbon trading in Pakistan

D) Leverage and Upgrade Existing Institutional Mechanisms through creation of a National Carbon Coordination Council (NCCC), a centralised governance body tasked with overseeing carbon market development and coordinating roles across ministries, provinces, and regulatory agencies.

E) Establish Dedicated Technical Training and Capacity Building Programsthrough vertical and horizontal integration. Vertically, Pakistan requires trained personnel at federal, provincial, and district levels who can implement carbon market operations, such as MRV protocols, benefit-sharing arrangements, registry compliance, and climate finance planning. Horizontally, capacity must be developed across ministries, from the Ministry of Climate Change & Environmental Coordination (MoCC&EC) and the Pakistan Bureau of Statistics (PBS), to the Ministry of Energy, provincial forest departments, and economic planning commissions.

F) Adopt a Phased, Realistic, and Adaptive Strategy through evaluation of promising pilot projects, such as the Lakhodair Landfill Gas Project, the Sapphire Wind Farm, and the Delta Blue Carbon Mangrove Initiative by feeding learnings into regulatory frameworks

G) Strengthen International Linkages for Credibility and Market Access through institutionalising transparency and disclosure such as public platform or registry that provides visibility into carbon market transactions, authorisations, or project-level safeguards.

Chairman TI Pakistan Justice (retd) Zia Perwez said it is hoped that federal and provincial governments, international development partners and civil society stakeholders will take key lessons and recommendations provided in the report to help guide Pakistan benefit better from the carbon markets as strategic tool for climate finance.