Daily Times

Pakistan’s journey toward sustainable industrial growth has been impeded by economic challenges, energy shortages, and environmental degradation. Yet, amidst these challenges lies an untapped opportunity that can transform the country’s economic trajectory: carbon credits.

As global economies increasingly pivot toward sustainability, Pakistan’s industrial sectors are well-positioned to benefit from this mechanism. By integrating carbon credits into its economic framework, Pakistan can address climate concerns, generate substantial revenue, and establish itself as a significant player in the green economy. The global carbon credit market is projected to be worth over $50 billion by 2030, and with proper policy and industry alignment, Pakistan could secure up to $10 billion annually from this evolving sector.

Carbon credits, introduced under mechanisms like the Kyoto Protocol and strengthened through the Paris Agreement, offer a market-driven approach to reducing carbon emissions. Each credit represents one ton of carbon dioxide mitigated or avoided.

This allows countries and corporations exceeding their emission limits to purchase credits from those that have reduced emissions below their thresholds. The system incentivizes green projects and penalizes excessive emissions, creating a dual benefit of environmental improvement and financial reward. As of 2024, the global price for carbon credits ranges between $10 and $120 per ton, with substantial revenue generated by countries adept at leveraging this mechanism.

China, for instance, earned over $6 billion in 2023 through its domestic carbon trading market, while Brazil’s Amazon Fund brought in more than $1.2 billion by monetizing its forest conservation efforts. For Pakistan, this global trend offers a transformative opportunity.

Pakistan’s annual greenhouse gas emissions, estimated at 490 million tons, primarily stem from the energy, agriculture, and industrial sectors. The energy sector alone accounts for nearly half of these emissions due to the country’s heavy reliance on fossil fuels.

Pakistan’s proximity to China, the world’s largest carbon emitter and a key player in the carbon market, presents unique opportunities for regional collaboration.

Transitioning to renewable energy sources presents a compelling opportunity to not only reduce emissions but also earn substantial revenue through carbon credits. Pakistan possesses immense renewable energy potential, particularly in wind and solar power. The wind corridors in Jhimpir and Gharo in Sindh have the capacity to generate up to 50,000 MW of power, yet only a fraction of this potential has been realized.

Projects within these regions could tap into international carbon markets, emulating India, whose solar and wind initiatives earned $350 million in credits in 2022. Similarly, small and medium hydropower projects across Pakistan could serve as dual-purpose ventures, generating energy while earning tradable carbon credits.

The agriculture sector, which contributes over 41 percent of Pakistan’s emissions, is another domain ripe for intervention. Methane emissions from livestock and rice paddies, along with inefficient farming practices, are primary contributors to greenhouse gases.

Adopting modern agricultural techniques, such as methane capture systems and sustainable farming methods, could significantly reduce emissions. New Zealand’s dairy industry, which has successfully implemented methane management projects, generated credits worth over $200 million annually, showcasing the economic potential of such initiatives.

With Pakistan being the world’s 5th-largest milk producer, there is immense scope for replicating these practices. Additionally, the introduction of climate-resilient crops and efficient irrigation systems could further reduce agricultural emissions while enhancing productivity.

Pakistan’s manufacturing sector, particularly industries such as cement, steel, and textiles, accounts for about seven percent of the country’s total emissions. Transitioning to cleaner production technologies can substantially lower these emissions. For instance, the European Union’s cement producers have adopted carbon capture and storage technologies, generating billions of euros in carbon credit revenue.

With Pakistan producing approximately 44 million tons of cement annually, the industry is well-positioned to benefit from similar strategies. The textile industry, which contributes significantly to the country’s GDP and export revenues, can also capitalize on carbon credit mechanisms by integrating renewable energy solutions and adopting sustainable practices. Bangladesh’s garment sector, for instance, has utilized rooftop solar projects to generate carbon credits, earning millions while reducing its carbon footprint.

Forestry and land use represent perhaps the most straightforward avenues for earning carbon credits. Forest conservation, afforestation, and reforestation projects can create vast reservoirs of carbon credits while addressing Pakistan’s alarming deforestation rates. Brazil’s Amazon Fund serves as a global example of how forest conservation efforts can be monetized.

Through the REDD+ mechanism, Brazil generated over $1.2 billion in revenue in 2022. Pakistan’s afforestation initiatives, such as the Billion Tree Tsunami project, have already garnered international recognition. If structured effectively under mechanisms like REDD+, these projects could generate millions annually. Furthermore, Pakistan’s mangrove forests, which sequester up to ten times more carbon than terrestrial forests, offer additional opportunities. Investing in mangrove restoration along the country’s coastal areas could yield significant financial and environmental benefits.

Pakistan is one of the most climate-vulnerable countries in the world, ranked fifth on the Global Climate Risk Index. The devastating floods of 2022, which displaced millions and caused losses exceeding $30 billion, underscore the urgent need for climate adaptation and mitigation strategies. Leveraging carbon credits can help finance these strategies while reducing Pakistan’s reliance on international aid. Furthermore, the revenues from carbon credits could be channeled into projects that enhance Pakistan’s climate durability, such as building resilient infrastructure, modernizing irrigation systems, and implementing early warning systems for natural disasters.

The global carbon credit market is growing rapidly, with potential buyers including multinational corporations, governments, and international organizations committed to achieving net-zero emissions. Major markets for carbon credits include the European Union Emissions Trading System, the largest carbon market globally, and voluntary markets dominated by companies like Microsoft, Amazon, and Shell. These companies are actively seeking high-quality credits from developing countries to offset their emissions. Pakistan’s proximity to China, the world’s largest carbon emitter and a key player in the carbon market, also presents unique opportunities for regional collaboration.

Despite these global successes, Pakistan’s participation in carbon credit markets remains limited. While initiatives like the Clean Green Pakistan Movement and the Billion Tree Tsunami demonstrate intent, the lack of a structured policy framework has hindered progress. Pakistan currently lacks a national carbon registry to monitor emissions and facilitate credit trading. Moreover, limited awareness among industries, inadequate technical expertise, and restricted access to international markets have further curtailed the country’s ability to capitalize on this opportunity.

The economic benefits of leveraging carbon credits are undeniable. If Pakistan captures just five percent of its annual emissions as carbon credits, it could generate approximately $2 billion annually at current market rates. Beyond direct revenue generation, the adoption of green projects would also create employment opportunities in emerging sectors. Germany’s renewable energy sector employs over 300,000 people, showcasing the potential for job creation in green industries. Moreover, transitioning to renewable energy sources would reduce Pakistan’s dependence on imported fossil fuels, saving billions in foreign exchange and enhancing energy security.

To fully realize the potential of carbon credits, Pakistan must adopt a strategic and systematic approach. Establishing a national carbon registry is essential for tracking emissions and managing credit trading. Incentivizing industries through subsidies, tax benefits, and grants for green projects can encourage participation. Furthermore, forging international partnerships and aligning with global standards will provide Pakistan access to lucrative carbon markets. Capacity-building programs and awareness campaigns targeting policymakers, industries, and communities are equally crucial for successful implementation. Transparency and accountability in project execution will be vital to building trust with international buyers and ensuring long-term sustainability.

The challenges in leveraging carbon credits, although significant, are not insurmountable. The lack of infrastructure and technical expertise can be addressed through collaborations with international organizations and technical training programs. Establishing bilateral agreements with key trading partners can facilitate market access and improve Pakistan’s standing in global carbon markets. A concerted effort to integrate carbon credits into the country’s economic framework will not only address existing challenges but also unlock new opportunities for growth and development.

Pakistan stands at a critical juncture where environmental responsibility and economic opportunity converge. By aligning its industrial sectors with carbon credit mechanisms, the country can address its climate challenges while driving economic growth. Industries such as energy, agriculture, and manufacturing have the potential to lead this transformation. With global carbon markets set to expand exponentially, Pakistan must act swiftly to position itself as a key player in this emerging economy.

Carbon credits offer Pakistan a unique opportunity to transform its emissions into economic gold. With proper policies, strategic investments, and international collaborations, Pakistan can generate billions in revenue while contributing to global climate goals. This journey will require determination, innovation, and commitment, but the rewards – economic stability, environmental resilience, and international recognition – are well worth the effort. By embracing this mechanism, Pakistan can chart a path toward a greener, more prosperous future for its industries and citizens alike.

The writer is a financial expert and can be reached at jawadsaleem.1982@gmail.com. He tweets @JawadSaleem1982.