Pakistan's carbon trading policy guidelines

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While the issuance of Pakistan's Policy Guidelines for Trading in Carbon Markets is belated, it represents a significant step forward. It's important to acknowledge that Pakistan cannot be directly compared to developed nations where the concept of carbon trading was first discussed in the mid-1980s, subsequently incorporated into the Kyoto Protocol, and finally solidified in the Paris Agreement, now officially ready for implementation.

The development of policy guidelines has taken considerable time, culminating in their unveiling at COP29, which is itself noteworthy as a national document was first publicly presented at a global event. At first glance, the document appears to be more of a preliminary sketch than a comprehensive set of guidelines. Many crucial details are left unaddressed, requiring further clarification through the issuance of supplementary documents. This suggests that establishing a local carbon market will be a lengthy and complex process.

Significant effort is needed to refine this initial document into a complete and effective framework. Considering the well-known pace of government operations, it's likely that the entire process of finalising these documents, obtaining necessary approvals, and providing further clarifications will take considerable time. Our national climate pledges necessitate a 50% GHG emissions reduction by 2030. Carbon trading can be a crucial tool to help us achieve this mid-term target.

A key point to consider is the apparent incongruity between the centralised management of carbon sequestering projects and the principle of provincial autonomy, particularly given that provinces have authority over most commercial and business activities. The current system allocates half of the 12% corresponding adjustment fee (CAF) to the project's province, while 1% goes towards federal administrative costs. Furthermore, 5% of the total carbon credits generated are earmarked to fulfil Pakistan's unconditional Nationally Determined Contributions (NDCs) for emissions reduction. This centralised approach raises questions about the extent of provincial autonomy in this critical area.

Each province possesses unique strengths, particularly Sindh and Balochistan, which boast extensive coastal regions ideal for establishing blue carbon projects. The successful Delta Blue Carbon project in Sindh serves as a compelling case study. By empowering provinces to formulate their own carbon trading regulations and offer attractive incentives to investors, leveraging their blue carbon potential, they can significantly contribute to climate change mitigation. These provincial contributions can be translated into "internally transferred mitigation outcomes," generating substantial foreign exchange.

Furthermore, including the agroforestry projects within the carbon trading framework would enable provinces like Punjab to capitalise on nature-based solutions for carbon sequestration and generate significant foreign exchange. To facilitate this decentralised approach, the 12% CAF should be allocated to the provinces, while the federal government retains 5% of the total carbon credits generated from each project to fulfil its voluntary carbon reduction targets under its NDCs.

The guidelines propose the establishment of an oversight apex committee with provincial representation. However, the lack of specific details regarding its composition raises concerns. If modeled after existing bodies like the Environmental Protection Council or Climate Change Council, the committee may face challenges due to the high-profile nature of its potential members, leading to difficulties in scheduling regular meetings and promptly addressing critical issues essential for the smooth functioning of the carbon market.

Unlike environmental and climate change decision-making, which often focuses on administrative and technical aspects, the successful functioning of a carbon market hinges on direct community involvement. Carbon sequestration projects cannot succeed in a vacuum; they must actively engage and benefit the local communities they impact. Ignoring community interests and failing to provide them with their fair share of benefits, as outlined in global protocols, would constitute a serious violation of climate justice, a fundamental principle of the Paris Agreement. To prevent such issues, genuine representatives of civil society must be included in the apex oversight body. These representatives should be authentic climate activists, not individuals selected by vested interests to serve as token climate champions.

The policy guidelines preamble did not mention a properly publicised consultative process prior to the finalisation of these guidelines. In Sindh, no such consultative process appears to have been conducted, and it's confirmed that the process was not widely publicised. This is particularly concerning given Sindh's, and especially Karachi's, vibrant community of climate activists who are always eager to contribute their expertise and insights to ensure the sustainability of our development sector and the protection of our environment. Since the main document was developed without broad stakeholder consultation, it is highly unlikely that subsequent subsidiary documents, which will contain more specific details, will incorporate stakeholder input.

The guidelines omit any mention of the fate of existing carbon sequestration projects initiated before their issuance. While subsequent documents may clarify this, the omission is concerning, particularly for Sindh, where successful projects implemented without a formal framework could face significant challenges. The Sindh Forest Department's successful carbon trading within the voluntary market demonstrates that competence and commitment can overcome obstacles in the absence of a rigid mechanism. However, concerns regarding the "additionality" of these projects remain, which should be addressed through detailed explanations of the relevant requirements.

The issuance of these initial guidelines signals the beginning of Pakistan's journey towards establishing a functional carbon market. However, the document itself acknowledges a significant gap: a lack of expertise within the country in both policymaking and implementing mechanisms for a field relatively new to the developing world.

A well-developed carbon market not only can contribute to environmental rehabilitation and emissions reduction but also generate substantial foreign exchange through the sale of internationally transferable mitigation outcomes. To realise this potential, a strong and competent team is crucial at both the policymaking and implementation levels.