Recommendations: (a). The Accounting system needs to be simplified based on the Income statement format, instead of making deductions at both Net and Gross income stages, which will cause reconciliation problems due to the pendency of settlement of accounts.
(b) Reduce bureaucratic delays by simplifying and streamlining the regulatory processes by clearly defining the roles among the regulators and provincial entities, thereby facilitating smoother operation of both voluntary and compliance markets by the development of a centralised, single-window approval platform to manage documentation such as NOCs, LOIs, and PDDs. If implemented within one year under the Ministry, this system could reduce bureaucratic delays by half and boost investor confidence. The Policy should provide for the signing of Treaties with the countries that are signatories to the Paris Accord. Any bilateral Agreement signed must satisfy the requirements of International Law necessary for this purpose.
(c) The legal framework should be strengthened through the introduction of enforceable penalties for violations. The Ministry of Law & Justice, in collaboration with the Ministry of Climate Change and Environment Coordination (MoCC&EC), should ensure that these provisions are fully implemented within the first year. This will provide necessary accountability and signal a serious commitment to market integrity.
(d) The Ministry of Finance and the Board of Investment should launch a green investment package within two years. The package may include a reduction in fees, tax breaks, risk-sharing mechanisms, concessional loans, carbon offset credits, and direct funding support for renewable and forestry projects. The target should be to onboard at least 25 private sector-led projects by the end of year two. Alongside this effort, financial transparency must be prioritised through the implementation of digital tracking tools for revenue collected via the Corresponding Adjustment Fee.
(e). The Greenhouse Gas emissions are currently being calculated on static data, Excel sheet-based calculations, mainly focusing on carbon dioxide emissions. To meet global standards, there is a need to shift to real-time-based calculations, handling dynamic real-time data of all the relevant variables. Thus, the direct and primary evidence can be recorded, which can be deemed sufficient to establish a legitimate claim against the carbon credits earned.
Pakistan’s Policy guidelines for trading in carbon markets lay a foundation for a regulatory framework to govern both voluntary and compliance market activities aligned with the Paris Agreement.
(f). Establish a robust and transparent decentralised digital MRV structure with accredited and independent verifiers to maintain environmental integrity, prevent double counting of carbon credits, and inculcate trust in market transactions. By the end of year two, each province should have at least one MRV centre equipped with real-time data systems. These centres should be capable of verifying at least 50 projects per year by the third year. Integration with international carbon registries should also be pursued to ensure compatibility and credibility at the global level.
(g) The GHG emissions factor may be calculated as per IPCC Guidelines. To achieve this, focused research needs to be carried out at the GCISC Islamabad, where the scientists may develop an algorithm for calculating the GHG emission factor from dynamic and real-time data inflow.
(h). Active community involvement is essential for the success of carbon projects, like afforestation and land-use initiatives. In the absence of a transparent and equitable income distribution and revenue-sharing formula, the communities, stakeholders, and even provinces will lose interest and may resist the implementation of these projects. The MOCC&EC may devise and introduce transparent policies and viable mechanisms that allow all stakeholders, local communities, and provinces to receive their due share in the revenue from these projects.
(i). The Ministry, in coordination with the Higher Education Commission and national universities, should launch a nationwide training initiative within the next 18 months. This program should aim to train at least 500 individuals in carbon market functions such as emissions accounting, verification, and finance. By developing a homegrown talent pool, Pakistan can reduce reliance on foreign consultants and build a self-sustaining market ecosystem.
(j). To create awareness at the grassroots level, the solid waste management programs should be linked with calculating carbon footprints and made part of the projects submitted for approval. This can be implemented through the concerned Assistant Commissioner as the focal person.
(k). To have an efficient implementation mechanism, a statutory framework based upon legislation may be passed to create a focused Institutional mechanism with rules and regulations to deal with carbon credits. The body shall seek reports from the entities dealing in carbon credits. The Approval of the Project may be granted to entities only if they are registered with the SECP.
Pakistan’s Policy guidelines for trading in carbon markets lay a foundation for a regulatory framework to govern both voluntary and compliance market activities aligned with the Paris Agreement. The Policy aims to generate economic opportunities, attract investments, and support climate mitigation by ensuring environmental integrity, institutional coordination, and private sector engagement. The Policy Guidelines are already ten years late. However, challenges include regulatory complexity coupled with institutional inefficiencies and limited private sector incentives, which require streamlined procedures, better agency coordination, and financial incentives for effective implementation.
Additionally, adopting international best practices, a strong monitoring, reporting, and verification system, and capacity building are essential for the successful implementation of the Policy. Overall, the guidelines represent a major milestone but need further reforms and clear implementation measures to unlock the full potential of Pakistan’s carbon market.
(Concluded)
The writer works at a public policy think tank and can be reached at [email protected].