Pakistan Could Earn $2 Billion Yearly Through Carbon Trading | Climate Finance Opportunity

Pakistan has a massive chance to strengthen its economy while fighting climate change. According to a new report by Transparency International Pakistan (TI Pakistan), the country could earn up to $2.25 billion every year by selling 10–15% of its greenhouse gas emissions as verified carbon credits on global markets. For a nation struggling with economic challenges, this could open the doors to a new stream of sustainable income. The report highlights that while Pakistan contributes less than 0.8% of the world’s greenhouse gas emissions, it remains one of the most climate-vulnerable countries. Severe floods, glacier melt, and heatwaves have shown the urgent need for climate action and investment.

What Is Carbon Trading and How It Works

Carbon trading is a market-based system that helps countries and companies reduce carbon emissions. In simple terms, it allows organizations that produce fewer emissions to sell their extra carbon credits to those who emit more than their allocated limit. Governments set a total cap on carbon emissions. Companies that stay under the cap can sell their unused credits, while those exceeding their limits have to buy more credits. This creates a financial incentive for businesses to reduce pollution and invest in clean technologies. There are two types of carbon markets: compliance markets, regulated by governments, and voluntary markets, where companies voluntarily offset their emissions through environmental projects.

Transparency International Pakistan’s Findings

The Transparency International Pakistan report emphasizes that Pakistan has huge potential to benefit from carbon trading, but weak governance and lack of clear policies are major obstacles. The organization points out several issues: unclear legal ownership of carbon as an asset, overlapping mandates between federal and provincial governments, poor emissions data, and a lack of technical expertise to verify carbon projects. TI Pakistan recommends that the government take immediate steps to create a central carbon registry, pass a clear carbon ownership law, and define revenue-sharing rules among stakeholders. It also suggests improving transparency and public reporting to build investor confidence and ensure fair distribution of profits.

Why Pakistan Needs a Structured Carbon Market

A structured carbon market would not only bring billions of dollars into Pakistan but also help address environmental challenges. Such a market could encourage both the public and private sectors to launch green projects like mangrove restoration, renewable energy, waste recycling, and reforestation. It would also create thousands of new jobs in environmental research, project verification, and sustainability reporting. Carbon trading can also help the country meet its Paris Agreement commitments, reduce pollution, and attract global investors who are increasingly prioritizing ESG (Environmental, Social, and Governance) projects.

Local Projects Showing Success

Despite the challenges, several local carbon projects in Pakistan have already shown promising results. One of the best examples is the Delta Blue Carbon Project in Sindh, which focuses on mangrove restoration. This project alone has generated over $40 million by selling carbon credits on international markets. Other notable initiatives include the Lakhodair Landfill Gas Recovery Project and the Jhimpir Wind Farm Project, both of which contribute to reducing emissions and promoting renewable energy. These success stories show that with proper structure and support, Pakistan can become a major player in the global carbon credit market.

Government’s Role and Recent Approvals

In early 2025, the Ministry of Climate Change took a significant step by approving Pakistan’s first market-eligible carbon-credit projects. One of the first approvals went to a clean-water project by Korean firm ATR Inc., which received the Host Country Approval under Article 6.4 of the Paris Agreement. Another important milestone was the approval of the Mehmood Booti Dumpsite Rehabilitation Project by the Ravi Urban Development Authority, which received a Letter of Intent under Article 6.2 and voluntary market rules. These actions mark the beginning of Pakistan’s journey into structured carbon trading, setting the stage for both domestic and international collaboration.

Weak Governance Slowing Down Progress

While the potential is massive, the weak governance structure in Pakistan continues to slow progress. According to TI Pakistan, unclear policies, poor coordination between provinces, and a lack of expertise in emissions measurement have limited Pakistan’s ability to capitalize on carbon trading opportunities. Many local companies and government departments still lack awareness of carbon credits and how they can be monetized. Without clear legal frameworks, investors hesitate to put money into long-term projects. Transparency International stresses that establishing a clear regulatory framework is the key to success.

Importance of a Central Carbon Registry

A central carbon registry would act as a national database for carbon projects, helping track emission reductions, credit issuance, and trading activities. It would prevent duplication and fraud, ensuring credibility for both local and international buyers. Countries like India, Brazil, and Indonesia have already set up such systems, gaining investor confidence and international recognition. Pakistan must follow a similar approach to make its carbon market transparent and globally accepted.

Learning from Other Countries

Pakistan can learn valuable lessons from nations that have successfully implemented carbon trading systems. China, for instance, operates the world’s largest carbon market, covering thousands of industries. India has developed a strong voluntary carbon credit system that supports green energy projects and rural development. Kenya and Indonesia are also using carbon markets to fund reforestation and conservation projects. If Pakistan adopts best practices from these countries — like strict verification standards, clear ownership laws, and fair revenue sharing — it could position itself as a regional leader in climate finance.

The Economic Potential of Carbon Trading

Earning $2.25 billion annually could transform Pakistan’s economic landscape. This income can be directed toward infrastructure development, renewable energy projects, flood protection systems, and poverty reduction programs. It could also reduce dependence on foreign loans and help stabilize the national currency. With proper investment in green projects, Pakistan can achieve economic growth while protecting the environment, aligning with its Sustainable Development Goals (SDGs).

Early Corporate and International Interest

Some international firms have already expressed interest in supporting Pakistan’s carbon market. Partnerships with companies from Korea, Japan, and the European Union are being explored for technology sharing, training, and certification. Local corporations are also beginning to understand the financial and reputational benefits of going green. The textile, energy, and transport sectors have started exploring carbon offset options to meet international sustainability standards and access premium global markets.

The Role of Technology in Carbon Verification

Modern technology such as AI, blockchain, and satellite monitoring can play a major role in ensuring transparency in carbon trading. Blockchain-based registries can track every credit issued and traded, reducing corruption risks. Remote sensing and AI-powered data analysis can verify forest cover, emission reductions, and project compliance without relying solely on manual audits. This technology-driven approach could make Pakistan’s carbon market both credible and efficient.

Public Awareness and Capacity Building

For carbon trading to succeed, public and private awareness must grow. The government, in collaboration with universities and think tanks, should launch capacity-building programs to train professionals in climate finance, carbon accounting, and environmental policy. Local communities should also be educated about the benefits of participating in carbon projects, such as reforestation and renewable energy initiatives.

Challenges That Need Attention

Despite the optimism, there are still major challenges. Pakistan must ensure accurate emissions data collection, develop independent verification systems, and prevent misuse of funds. Delays in implementing legal frameworks could discourage investors. It’s also vital to ensure that the profits from carbon credits benefit local communities directly rather than being centralized.

A Green Path Forward

Carbon trading represents a golden opportunity for Pakistan to address two major problems at once — economic instability and environmental degradation. By tapping into global carbon markets, Pakistan can generate billions in sustainable revenue while contributing to the global fight against climate change. However, the path forward will require strong governance, clear policies, and transparent implementation. With the right leadership, Pakistan could become one of South Asia’s top destinations for climate investment and green finance.

Final Thoughts

Pakistan’s entry into the global carbon trading system could redefine its future. The potential to earn over $2 billion annually offers not just financial benefits but also environmental relief. If the government and private sector work together to create a transparent, efficient, and globally recognized carbon market, Pakistan could transform itself from a climate victim into a climate leader. This is not just an opportunity — it’s a necessity for a sustainable future.