By Azam Tariq

Pakistan can use carbon markets to mobilise private investment for emissions-reduction projects as the country faces annual climate investment needs of around $65 billion, but experts say success will depend on developing measurable, verifiable and bankable projects rather than treating carbon credits merely as a source of revenue.

The Pakistan Economic Survey 2025-26 says the Pakistan Climate Prosperity Plan (CPP), launched by the Finance Division in April 2026, estimates an overall investment requirement of about $1.6 trillion by 2050, with annual needs of around $65 billion and projected investments of $565.7 billion by 2035.

The plan's investor framework identifies bankable projects across areas including climate-smart agriculture, waste management, biochar and carbon markets, while emphasising financing instruments aimed at attracting private capital and easing financing constraints.

Experts say carbon markets could support this effort by enabling projects that deliver credible emissions reductions to generate carbon credits, thereby enhancing their appeal to buyers and investors.

Speaking to Wealth Pakistan, Asif Ahuja, former Director General of the Pakistan Environmental Protection Agency (Pak-EPA), said Pakistan's ability to secure greater environmental financing would depend heavily on the quality and bankability of projects it presented.

He said inadequate project preparation remained a major obstacle to attracting international finance. New green projects, he added, should be supported by proper Environmental Impact Assessments (EIAs), demonstrate clear environmental outcomes and be structured in a way that gives financing organisations confidence in their implementation.

Ahuja said Pakistan needed more solution-oriented projects capable of responding to identifiable climate risks and meeting the requirements of potential financiers, rather than relying mainly on proposals seeking external assistance.

Official data indicate that a domestic carbon-project pipeline has begun to emerge.

According to the Pakistan Economic Survey 2025-26, four projects were issued Letters of Intent under the country's carbon-market policy guidelines during July-March 2026.

These include the Biomethane, Bio-Pellets and Organic Fertilizer Project, expected to achieve emissions reductions of 12.30 million tonnes of carbon dioxide equivalent (tCO2e) over a 25-year operational lifetime, averaging 491,977 tCO2e annually. The project has a 15-year crediting period.

The Lakhodair Landfill Site Methane Capturing Project has estimated credit generation of 225,000 tCO2e annually over a 10-year crediting period, with its first issuance expected in 2027.

Muhammad Hassan Dajana, Associate Industry Liaison at Renewables First, told Wealth Pakistan that the emerging pipeline should be viewed as an investment opportunity rather than simply a mechanism for earning revenue from carbon credits.

“Pakistan should not treat carbon markets primarily as a revenue tool. It should use it as a project financing tool,” he said.

Dajana identified methane, biochar, agriculture and industrial decarbonisation as areas with significant potential.

He said Measurement, Reporting and Verification (MRV), documentation and additionality requirements needed to be incorporated from the beginning so that projects could generate credible credits and become more attractive to buyers and investors.

He also stressed the importance of aggregation for smaller projects. Individual farmers, for example, could struggle to meet the technical and transaction requirements of carbon-credit mechanisms, while aggregating multiple farms could create larger investible portfolios with sufficient scale to attract financing.

Pakistan has also opened an international channel for carbon finance.

On April 1, 2026, Pakistan and Norway signed an agreement under Article 6 of the Paris Agreement that allows emissions reductions generated in Pakistan to potentially be converted into climate credits purchased by Norway.

Norway's Ministry of Climate and Environment said the agreement could also help trigger private investment and create green jobs in Pakistan.

The potential financing role of carbon markets is gaining importance as carbon pricing and carbon-credit activity expand globally.

The World Bank Group's State and Trends of Carbon Pricing 2026 report estimates that $12-16 billion in capital was committed to future carbon-credit projects in 2025 through offtake purchases and direct project investments. It separately estimates the traded value of voluntary carbon credits at about $535 million in 2024.

Emissions trading systems and carbon taxes generated more than $107 billion for public budgets in 2025, while direct carbon pricing covered just over 29% of global greenhouse-gas emissions.

Dajana said Pakistan's ability to benefit from the expanding market would depend on developing projects with credible emissions reductions, robust MRV systems and sufficient scale to meet investor requirements, allowing carbon finance to complement other sources of investment in the country's climate transition.

Credit: INP-WealthPk