Pakistan’s Carbon Credits Policy 2024: Building the Foundation for a Credible Carbon Economy

A New Era for Carbon Credits in Pakistan

In 2024, Pakistan entered a new phase of climate policy by approving the Pakistan Policy Guidelines for Trading in Carbon Markets, a landmark document that formalizes the country’s participation in global and domestic carbon trading under the Paris Agreement’s Article 6 framework.

Although Pakistan has participated in carbon markets since 2006 through projects registered under the Clean Development Mechanism (CDM) and later under Verra and Gold Standard, these initiatives largely operated in isolation. There was no unified system to authorize, monitor, or safeguard credits at the national level. The 2024 Guidelines change that. For the first time, Pakistan now has a transparent, rules-based framework for carbon credit generation, authorization, and trading, backed by a national registry and digital monitoring systems.

The policy’s ambition is transformative: to decarbonize the national economy, mobilize private finance, and generate exportable mitigation outcomes (MOs) — while ensuring communities where these credits originate receive a fair share of the benefits.

Aligning with Global Commitments and Domestic Priorities

The Carbon Market Policy 2024 aligns directly with Pakistan’s Nationally Determined Contributions (NDCs) 2021, which commit to reducing emissions by 15% unconditionally and another 35% conditionally by 2030, subject to international financial support.

The Guidelines interpret this dual commitment through a pragmatic lens. They seek to build a domestic market that can attract investment while generating internationally transferrable mitigation outcomes (ITMOs). By formalizing Pakistan’s participation in both Voluntary Carbon Markets (VCM) and Compliance Markets, the policy positions the country as a credible partner in Article 6 transactions, a step that few developing countries have achieved.

Importantly, the framework integrates sustainable development objectives within its market design. Projects must demonstrate measurable co-benefits such as job creation, biodiversity conservation, or social welfare improvements. This dual emphasis — climate integrity and community impact — reflects Pakistan’s attempt to balance economic growth with its Paris-aligned commitments.

From Fragmented Projects to a National Market Framework

Historically, Pakistan’s carbon projects were fragmented, developed by isolated private proponents with limited institutional backing. The 2024 Guidelines seek to resolve that fragmentation through a national architecture that defines how credits are created, approved, and accounted for.

At the institutional level, the Ministry of Climate Change and Environmental Coordination (MoCC&EC) acts as the National Designated Authority (NDA). All project proponents, whether public or private, must now submit a Project Idea Note (PIN), first to the provincial ministry of the province where the project is happening and subsequently to the Federal Ministry for initial screening. If approved, the NDA issues a Letter of Intent (LOI) valid for two years, during which the developer must complete and register a Project Design Document (PDD).

Once the project reaches registration, a No Objection Certificate (NOC) is required for the sale or transfer of carbon credits, particularly those intended as ITMOs. This multi-stage process ensures that only projects aligned with Pakistan’s conditional NDC ceiling (approximately 280 MtCO₂e) are authorized for corresponding adjustments, thus protecting national emission inventories from double counting.

By introducing these procedures, Pakistan joins countries like Singapore, Ghana, and Chile that have established Article 6 authorization pathways, a prerequisite for credible international carbon trading.

Principles Anchoring Pakistan’s Carbon Market

The Guidelines are structured around seven core principles that collectively ensure environmental integrity and investor confidence:

1. Harnessing Low-Hanging Fruits – Priority is given to sectors offering rapid, cost-effective emission reductions, such as renewable energy, energy efficiency, and improved waste management.
2. Authorization Criteria – Projects must align with NDC sectors and demonstrate regional development benefits.
3. Corresponding Adjustments – Managed by MoCC&EC to ensure that exported ITMOs are properly deducted from Pakistan’s national accounts.
4. Ensuring Additionality – Developers must prove that emissions reductions would not have occurred without carbon finance, using recognized analytical tests.
5. Transparency and Disclosure – All mitigation activities must be documented in publicly accessible databases to maintain market credibility.
6. Prevention of Double Counting – Safeguards ensure that credits are not issued or claimed more than once, a critical aspect for international buyers.
7. Permanence and Long-Term Integrity – Projects must include risk mitigation measures to prevent reversal of emission reductions, particularly in land-use and forestry sectors.

Together, these principles form the backbone of a credible carbon market, aligning Pakistan’s framework with the standards of the Integrity Council for the Voluntary Carbon Market (ICVCM) and the forthcoming UNFCCC Article 6 Supervisory Body.

Governance and Oversight: A Digital and Transparent System

The 2024 Policy places transparency at its core. The Government is establishing a National Carbon Registry — a digital platform designed to track issuance, transfer, and retirement of carbon credits in real time. This registry will interface with provincial databases, ensuring decentralized participation while maintaining national oversight.

To coordinate implementation, a Carbon Market Working Group (CMWG) will be created. It will include representatives from federal and provincial governments, academia, civil society, and the private sector. The group will advise on governance standards, project selection, and market integrity — effectively acting as the policy’s steering committee.

Moreover, Pakistan will develop a Measurement, Reporting, and Verification (MRV) System that meets the transparency obligations under Article 13 of the Paris Agreement. This will be integrated with the country’s Biennial Transparency Reports (BTR) to the UNFCCC, ensuring international accountability.

For a country previously constrained by weak monitoring systems under CDM, this digital, MRV-linked structure represents a major institutional leap.

Revenue Sharing and Benefit Distribution

One of the most progressive aspects of Pakistan’s carbon market design is its equitable benefit-sharing mechanism. The policy prescribes a transparent fee structure designed to reinvest proceeds into both national and provincial climate priorities:

• 5% of credits generated by any project are automatically reserved for Pakistan’s voluntary NDC contribution.
• 12% Corresponding Adjustment Fee (CAF) is charged on net revenues, with 50% allocated to the host province and 50% to the Pakistan Climate Change Fund.
• 1% Administrative Fee of gross revenues goes to the Federal Government to cover transaction costs.

By distributing half of the CAF to the provinces where projects are located, the policy embeds fiscal incentives at the subnational level — ensuring that provincial authorities have a tangible stake in project facilitation and governance.

In principle, this model mirrors best practices from decentralized carbon economies such as Indonesia and Colombia, where regional governments play a direct role in carbon revenue management.

Priority Sectors and Project Eligibility

While the Guidelines outline general eligibility across all emission-reducing activities, several sectors have been highlighted as high priority:

• Renewable Energy: Solar, wind, and hydropower projects that displace fossil fuel use.
• Energy Efficiency: Industrial and building efficiency programs reducing energy intensity.
• Forestry and Land Use: Afforestation, reforestation, and forest conservation initiatives under REDD+ methodologies.
• Agriculture and Manure Management: Projects reducing methane emissions from livestock and crop residues.
• Waste-to-Energy: Conversion of municipal or industrial waste into biogas or electricity.
• Clean Transport: Electric mobility and logistics efficiency programs.

Particular preference is granted to Nature-Based Solutions (NbS) that deliver ecosystem services and community resilience. Such projects receive prioritized authorization, recognizing their social, biodiversity, and adaptation co-benefits.

Institutional Capacity and Long-Term Support

Recognizing that carbon markets are technically demanding, the Government intends to launch a comprehensive capacity-building program for provincial agencies, private developers, verifiers, and financial institutions. These programs will focus on carbon accounting, MRV design, and Article 6 readiness.

The policy also calls for clear sectoral guidelines to be developed in consultation with provinces, defining eligibility thresholds, baseline methodologies, and monitoring protocols. Parallel to this, the MoCC&EC will run public awareness and communication campaigns to demystify carbon markets for domestic investors — a critical step toward mobilizing private finance.

Such institutional investments are vital: without local technical capacity and investor literacy, even the most sophisticated carbon frameworks risk underperformance.

The Strategic Significance of Pakistan’s Carbon Market Policy

Pakistan’s Carbon Market Policy have the potential to mobilize hundreds of millions of dollars in carbon credits over the next decade, while catalyzing projects that improve energy access, restore degraded land, and reduce pollution. If implemented effectively, the policy could make Pakistan one of South Asia’s first functional Article 6 economies — comparable to early movers like Singapore, Japan, and Ghana.

Yet challenges remain. Capacity gaps in MRV, limited private sector awareness, and the need for legal clarity on credit ownership will require sustained coordination. Nevertheless, the institutional architecture now in place provides a strong foundation to build on.

Resources Future: Supporting Pakistan’s Carbon Market Transition

As Pakistan operationalizes its new carbon trading system, Resources Future (RF) stands at the forefront of this transformation. RF offers end-to-end carbon market services — from early-stage screening to full registration and trading — making it one of the few local firms equipped to navigate the technical and policy complexities of this evolving landscape.

RF’s integrated services include:

• Pre-Feasibility Assessments to identify eligible technologies and baseline scenarios.
• Full Ground Feasibility Studies covering technical, financial, and environmental dimensions.
• Carbon Methodology Selection (Verra, Gold Standard, ART TREES, Article 6.4).
• Validation and Verification Management, including MRV setup and documentation.
• Advisory on Credit Authorization and Corresponding Adjustments.

With experience across diverse project types — from manure management and clean cookstoves to solar+BESS and nature-based agroforestry — RF enables Pakistani developers to align with global standards while leveraging the country’s new policy environment.

For local governments and private proponents alike, RF provides a bridge between Pakistan’s regulatory framework and the international carbon marketplace.