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The government has decided to establish 'carbon market' in Pakistan with the basic objective of increasing source of revenue; spurring investment into innovative technologies, and engaging the private sector in addressing the climate change issues.

Sources told Business Recorder here on Saturday that the decision was taken during the first meeting of the National Committee on the Establishment of Carbon Market (NCEC), which was held at the Ministry of Climate Change (MoCC) office.

Malik Amin Aslam, advisor to the prime minister on climate change, chaired the meeting.

Carbon markets aim to reduce greenhouse gas (GHG, or "carbon") emissions cost-effectively by setting limits on emissions and enabling the trading of emission units, which are instruments representing emission reductions.

The government has set up a committee to review the proposed mechanisms, which have the potential to expand the global trade in pollution credits and help Chinese companies offset the emissions they produce.

During the meeting, Amin Aslam highlighted the objectives of establishing the NCEC, saying that this particular forum has been set up to examine and prepare recommendations on various aspects linked to carbon markets in the country such as: (i) increasing source of revenue; (ii) spurring investment into innovative technologies; (iii) introducing new financial products in the market; (iv) engaging the private sector in addressing climate change; (v) becoming part of the global carbon market, and (vi) engaging actively witty multilaterals actors on implementing the Article 6.2 of the Paris Agreement.

Under the Paris Agreement on climate change, all nations agreed to take steps to rein in greenhouse gas emissions.

With carbon trading, nations generate credits representing emissions cuts and then sell them to other nations or companies seeking to offset their own pollution. In theory, carbon markets help steer investment toward projects that deliver emissions cuts most efficiently.

It has been decided that establishment of the carbon market is needed in Pakistan.

However, it is important to grapple with its complexities, understand ramifications and build a positive and implementable structure and design.

In order to be able to implement credit-based mechanism, it would require quality data.

Pakistan has the opportunity to sell carbon offsets to China once their National ETS is rolled out but for that Pakistan will need to have basic infrastructure.

Secondly, data on offsets from one billion tree Tsunami programme undertaken in KP is under process. It is however, necessary to define credits created through other interventions like fuel update on Euro-4, which will create carbon credits in transport sector that need to be calculated and added to the carbon bank. Thirdly, carbon emissions should be defined as a commodity product and linked to green bonds.

The price discovery for commodity exchange should be done, which will create interest in the carbon markets for private sector and this will incentivise their participation in the competitive markets both national and international.

Copyright Business Recorder, 2020