On January 10, Transparency International organized a webinar titled “Unlocking the Potential of Carbon Markets in Pakistan – Safeguards for Transparency and Equitable Climate Solutions.” The event brought together three distinguished speakers, each offering valuable insights into the challenges and opportunities in carbon markets. Mr. Brice Böhmer, Climate & Environment Lead in Policy & Advocacy at Transparency International, addressed global transparency risks in carbon markets. Ms. Sana Rasool, Carbon Market Specialist at Pakistan’s Ministry of Climate Change & Environmental Coordination, shared an overview of Pakistan’s policy framework and ongoing initiatives. Mr. Zarak Pasha, Head of Carbon Finance at Standard Chartered, discussed sectoral opportunities and pricing mechanisms in Pakistan, drawing on lessons from international markets.

Opening Remarks

Mr. Kashif Ali, Executive Director of Transparency International Pakistan, highlighted in his opening remarks the critical recommendations provided by TIP to the Ministry of Climate Change and Environmental Coordination (MoCC&EC), aimed at enhancing transparency and accountability in high-integrity projects. These recommendations include the establishment of robust oversight mechanisms to protect against fraud and conflicts of interest. Mr. Kashif also emphasized the importance of prioritizing local communities by encouraging their active participation in project design and implementing a Benefit Sharing Mechanism to ensure equitable financial and social gains. These measures collectively aim to strengthen governance, promote fairness, and enhance the credibility of Pakistan’s carbon market framework.

Overview of Policy Guidelines and Project Process

Ms. Sana Rasool detailed the upcoming comprehensive rules and regulations derived from Pakistan’s policy guidelines, emphasizing their importance in structuring carbon market participation. The process begins with submitting a Project Idea Note to the Ministry of Climate Change, which serves as the nationally designated authority. This document, formatted per the guidelines, undergoes technical evaluation. If deemed viable, a Letter of Intent is issued, allowing project developers to proceed with creating a detailed Project Design Document (PDD). The PDD includes critical elements such as cost analysis, abatement potential, risk mitigation strategies, and monitoring frameworks. Once thoroughly reviewed by national and international bodies, the Ministry issues a No Objection Certificate (NOC), enabling the project to be traded internationally. Transparency and integrity measures, such as accreditation by recognized bodies and a robust Monitoring, Reporting, and Verification (MRV) framework, ensure the quality and accountability of projects. Furthermore, a benefit-sharing mechanism prioritizes community welfare and projects aligned with Sustainable Development Goals (SDGs), ensuring maximum stakeholder benefits.

Global Transparency Risks in Carbon Markets

Mr. Brice Böhmer highlighted the global challenges and risks associated with carbon markets, including corruption and lack of accountability. He provided examples of failures, such as the forced relocation of communities in Kenya’s “Blue Carbon” project and kickbacks demanded from participants in Mexico’s reforestation schemes. Additionally, several projects in Zimbabwe and other countries failed to deliver promised benefits due to manipulative practices. The lack of market transparency was identified as a critical issue, with undisclosed intermediary fees and conflicts of interest in the verification process undermining credibility. Weak regulatory frameworks exacerbate these risks, allowing for fraud, price manipulation, and even money laundering. To address these challenges, Mr. Brice emphasized the need for independent verification, transparent pricing, and stringent regulations to ensure that carbon markets effectively benefit communities and achieve their environmental goals.

Sectoral Opportunities and Pricing Mechanisms for Pakistan

Mr. Zarak Pasha identified key sectors in Pakistan with significant potential for carbon credit generation. The energy sector, responsible for a substantial portion of emissions, offers opportunities through early decommissioning of coal-fired plants and grid decarbonization. In agriculture, projects reducing methane emissions from farming and livestock waste can provide substantial credits while supporting rural energy needs. Transport electrification in urban areas and nature-based solutions, like reforestation and carbon sequestration through initiatives such as Delta Blue, were also highlighted as lucrative opportunities. Mr. Zarak stressed the importance of clear regulatory frameworks and incentive structures to create demand for carbon credits locally and internationally. Transparent systems and robust quality control mechanisms can build confidence among buyers and sellers, helping Pakistan leverage its emissions reduction projects and attract international investment.

Concluding Thoughts

Ms. Raima Mahmood, Policy and Research Coordinator at Transparency International Pakistan, commended the country’s proactive approach to developing its carbon market framework, positioning Pakistan as a leader in the region. The discussion underscored the importance of transparency, regulatory clarity, and inclusivity to foster carbon market integrity and effectiveness. By leveraging sectoral opportunities and implementing robust systems, Pakistan can develop a sustainable carbon market that benefits communities and addresses global climate challenges.

The webinar offered a roadmap for scaling efforts to meet national and international climate goals, emphasizing the transformative potential of carbon markets in bridging the climate finance gap while promoting equitable and transparent solutions.