Carbon trading deal with Norway inked

Pact enables climate finance and investment in clean energy and agriculture

ISLAMABAD:

Pakistan and Norway on Wednesday signed the country's first bilateral agreement under Article 6.2 of the Paris Agreement, formally opening access to international carbon markets, climate finance and investment in low-carbon sectors.

According to a statement issued on Wednesday, the memorandum of understanding, signed in Islamabad under the Ministry of Climate Change and Environmental Coordination, marks Pakistan's entry into carbon trading mechanisms and signals a shift from policy preparation to implementation. Federal Minister for Climate Change and Environmental Coordination Musadik Malik described the agreement as a milestone, saying it would move Pakistan from carbon market readiness to execution.

"This is Pakistan's first bilateral agreement under Article 6.2 and an important step towards implementation," Malik said. "It creates a credible pathway for international cooperation and investment in Pakistan's climate priorities." Under the agreement, Pakistan will develop projects that generate carbon credits across sectors including clean energy, agriculture, transport and waste management. The resulting emission reductions can be transferred to Norway under the framework of Internationally Transferred Mitigation Outcomes (ITMOs).

Officials said the arrangement could help attract foreign capital at a time when Pakistan faces increasing climate risks, including floods, heatwaves and other extreme weather events.

Malik said the agreement would strengthen Pakistan's position in global carbon markets while supporting the development of a domestic green economy. "Carbon markets cannot be treated as an end in themselves," he said. "They must help countries like Pakistan finance transition pathways, create jobs, attract technology and deliver real benefits to communities."

The minister said Pakistan had already approved national policy guidelines for carbon trading in January 2025 and was now working to establish regulatory systems, reporting frameworks and bilateral agreements required to operationalise the market. He added that Pakistan had "strong mitigation potential" in renewable energy, agriculture, transport and waste management, and that the agreement would encourage investors and project developers to advance climate-related initiatives.

Speaking at the signing ceremony, Norway's Ambassador to Pakistan Per Albert Ilsaas said the agreement marked the beginning of a new phase in bilateral cooperation on climate and environment.

"Pakistan is among the countries most affected by climate change, and we believe this partnership can deliver both measurable emission reductions and real development benefits," he said. Ilsaas said Norway, which aims to become climate neutral by 2030, intends to purchase carbon credits not to meet its formal climate targets but to exceed them. "Norway is not purchasing ITMOs to meet its nationally determined contribution targets. We are purchasing them to achieve climate neutrality beyond those commitments," he said.

He added that Norway's Global Emission Reduction Initiative, launched in 2024 with a budget of $1.5 billion approved by the Norwegian parliament, would provide carbon finance to countries including Pakistan. "Through NOGER, we want to channel carbon finance into countries such as Pakistan and help bridge the gap in climate mitigation finance," he said.

The ambassador said Norway was interested in scaling up cooperation beyond individual projects to sector-wide programmes in renewable energy, industry and agriculture. "We are looking beyond individual projects," he said. "We are interested in cooperation across entire sectors where climate policies can generate emission reductions at scale."

He noted that Norway had already signed similar agreements with Benin, Indonesia, Zambia, Jordan and Senegal and was working to acquire 15 million carbon credits by 2030. Ilsaas also invited Pakistan to present a broader pipeline of projects, pointing to renewable energy initiatives such as the Zhenfa 100-megawatt solar project and the Indus wind energy project as potential areas for collaboration.

Both sides agreed that the agreement could improve Pakistan's access to climate finance and private-sector investment while supporting low-carbon growth.