News Analysis: Pakistan needs robust policy to profit from world carbon credits market

KARACHI: The global market for voluntary carbon credits could reach $50 billion by 2030 but without a carbon policy Pakistan will be unable to benefit from this, say experts. “Without a robust carbon market policy, Pakistan will be unable to tap into this potential financial support, which is crucial for the development of mitigation projects,” says Basit Ghauri — a senior programme associate at an Islamabad-based think tank for energy and environment, Renewables First.

He further explains, “The absence of a carbon market policy also poses challenges for initiatives like carbon offset projects. One major issue is the inability to access international carbon markets. Pakistan could miss out on the opportunity to leverage additional international finance tailored towards carbon markets.”

Carbon credits allow carbon emitters to carry on with their activities without worrying about the environmental impact as their investments in eco-friendly ventures will help offset the emissions produced. Carbon-removal credits are produced through schemes like tree plantation or forest protection that could otherwise be destroyed for development activities.

Speaking to The News, Head of Sustainable Development Policy Institute Dr Abid Qaiyum Suleri says when it comes to “developing and implementing a carbon market policy, Pakistan faces several challenges including the lack of institutional capacity and coordination among relevant stakeholders; lack of awareness and understanding of the benefits and opportunities of carbon markets among potential project developers and buyers; lack of access to finance and technology for low-carbon development; and the lack of robust data and monitoring systems for measuring and verifying emissions reductions.”

Basit says that yet another challenge regarding generating carbon credits “is the potential for double counting. Pakistan has set ambitious targets for emission reductions based on its nationally determined contributions (NDCs). While carbon offset projects can contribute to these targets, leveraging international finance through the export of carbon credits to the global market could result in a scarcity of projects at the national level. This issue highlights the need for careful consideration and coordination to ensure that carbon offset projects align with Pakistan’s NDC commitments.”

Even though Pakistan has taken several initiatives to reduce its gas emissions, only one of these projects -- the Delta Blue Carbon Project -- has the green signal from the federal government to trade its credits in the global carbon market. It recently sold 50,000 tons of carbon-removal credits issued in 2020 during the auction organized by the Singapore-based carbon exchange Climate Impact X (CIX) on June 16.

Basit adds, “The Delta Blue Carbon project serves as an exemplary cross-cutting project that addresses both mitigation and adaptation outcomes by creating resilience within local communities. However, the lack of policy frameworks surrounding carbon offset markets, such as the sustainable development mechanism or compliance markets, hampers the progress of carbon offset projects in Pakistan.”

The Delta Blue Carbon project started in 2015 and has a lifetime of 60 years, ending on February 18, 2075. It aims at offsetting 142,050,139 tCO2e of emissions by restoring and conserving 247,112 hectares of mangroves in Sindh’s coastal areas.

Freelance journalist on environment and climate change Afia Salam calls mangroves conservation in Pakistan a huge success story acknowledged by the UN and by countries during climate conferences (COP) and at Davos. She adds that even though in Karachi the area is threatened by the land mafia, authorities have collaborated with multiple institutions including the World Wildlife Fund (WWF) and the Sindh forestry department to keep the areas protected.

Pakistan’s Delta Blue project – a blue carbon project that uses marine and coastal ecosystems’ climate change mitigation value to support their restoration and conservation -- has attracted big names. Even though the CIX does not list down the name of companies that show interest in buying credits of a particular project, the UAE-based Majid Al Futtaim Group -- in its 2022 ESG report (the disclosure of environmental, social and corporate governance data) -- mentions investing in the Delta Blue Carbon Project “to account for an embodied carbon reduction shortfall at City Centre Almaza and City Centre Al Zahia.” The group adds that the project “was one of the highest quality carbon credits available at the time of purchase.”

Since Pakistan has no formal carbon market policy, Suleri believes that “initiatives like carbon offset projects may face difficulties in securing approval and recognition from the government and other authorities; attracting investment and buyers for their carbon credits; and ensuring quality and credibility of their emissions reductions.”

To reduce these gaps, “we (the SDPI) signed a project with the Danish embassy called ‘Unlocking pathways to support implementation of carbon markets in Pakistan’ on June 15th, 2023.”

“This project will focus on addressing current knowledge gaps in implementing the framework of carbon markets and expedite the discourse at both provincial and federal levels through capacity building and through advocacy, communications and outreach activities.”

In 2018, Pakistani authorities established the National Committee on the Establishment of Carbon Market (NCEC). According to Afia, the NCEC has collaborated with the UN Environment Programme (UNEP) to prepare a coherent framework. Suleri also agrees that the NCEC will help projects access the global carbon markets.

Basit concludes, “the voluntary carbon market holds potential for Pakistan, particularly due to the private sector’s ability to engage in global transactions without heavy public-sector involvement. However, the lack of a framework and the limited capacity to access international buyers impede the inclusion of many projects that could benefit from financial support within this market.”

“It is crucial to establish clear policies and frameworks that enable the implementation and scaling up of carbon offset projects, benefiting both the financial aspects and the country’s efforts in tackling climate change and its associated challenges.”