The cost of waiting: Pakistan’s decarbonisation dilemma

Since the turn of the millennium, Pakistan has released 26,6 90.1MtCO2 into the atmosphere. Although this is a considerable amount in absolute terms, it is much lower in comparison with large, industrialized economies. However, the core challenge is not historical responsibility, but future strategy. The emission profile of Pakistan, dominated by energy, transport, and industry, mirrors the usual trajectory of developing economies. This brings us to a practical question: Why should an economically stressed state focus on costly decarbonisation over immediate adaptation?

The government has listed mitigation options: low-carbon power supply, sustainable transport, solarisation, and clean cooking, among others. However, the price tag is massive. According to Pakistan’s NDC 3.0, a low-carbon power transition in generation and distribution alone is estimated to be US$ 163.7 billion. It seems logical to concentrate exclusively on the disaster-resilience, including repairing floods and heatwave management, and leave the financial aspect of the mitigation to the traditionally high-emitting countries.

However, it is a false dichotomy between “the fixing of the weather” and “the fixing of the power.” The transition to solar and wind is not only about the global emissions, but also about the decline in the payment of a large import bill of fossil fuels and addressing the structural circular debt that paralyzes the national budget. But the systems in the global markets have considerably evolved over time. Modern systems are built around capital, investment, and returns. Capital does not respond to intentions. Capital responds to incentives and signals. If polluting is free, unmeasured, and unchallenged, why should one bother? If pollution is costly, the behaviour changes.

What does this mean for the Pakistani industry? It means that if our factories and businesses want to access international markets and capital, they will need to demonstrate credible emission management. Mechanisms like the EU’s Carbon Border Adjustment Mechanism (CBAM) signal a future where carbon intensity directly affects export competitiveness. Buyers are increasingly asking for supply chain transparency. Financial institutions are integrating ESG metrics into lending decisions. For an export-dependent economy like Pakistan, particularly in sectors like textiles, cement, and manufacturing, exclusion from low-carbon trade networks becomes a significant macroeconomic threat.

But we must be careful. Investigations have shown that more than 90 percent of rainforest carbon offsets by the biggest certifier are likely phantom credits. They do not represent genuine carbon reductions. It is easy to demonstrate paper compliance without real atmospheric impact. This is called carbon tunnel vision. It means centering on the narrow carbon metrics without paying attention to the ecological integrity, social justice, and other developmental realities. In the case of Pakistan, the illusion of progress caused by blindly relying on low-integrity offsets might have us tied up in a weak financial mechanism.

For Pakistan, the way forward is not simple. We did not create this problem. But we live in a world where capital flows to those who manage risks, insurers walk away from coal, buyers examine emissions, non-disclosure becomes a legal risk, and carbon intensity influences the cost of borrowing. In this system, the inability to participate in decarbonisation does not save sovereignty. But it is significantly threatened with economic segregation. Moreover, for Pakistan, a large part of this transition will likely rely on international climate finance, but global climate finance commitments have, in the past, failed to materialize and tend to be in the form of loans, contributing further to debt burdens.

But ignoring the transition does not make the risk disappear. It simply means our industries are cut out of global markets, our exports face carbon border taxes, our factories cannot get insurance, and our products become uncompetitive. So, yes, we need adaptation. But placing adaptation and mitigation as opposing priorities is a false option. Decarbonisation, when carried out strategically, can promote development and not undermine it. This is why we also need to start the decarbonisation journey, because the alternative is watching our industry become obsolete in a world that has decided pollution must have a price.

Copyright Business Recorder, 2026