ISLAMABAD: Carbon trading provides developing nations with cutting-edge and creative trade and commercial options so they may make money while reducing greenhouse gas (GHG) emissions.
A carbon credit, also known as a carbon offset, is a payment for the greenhouse gas (GHG) emissions that have been decreased or eliminated from the atmosphere due to emission-reducing actions taken by a government, company, or private person to make up for emissions produced elsewhere.
During the Glasgow COP26 climate change summit in November 2021, it was decided to establish a global market for selling carbon credit offsets. Every action that may confirm the control, reduction, avoidance, or destruction of one metric ton of GHG will create one carbon credit.
Avoiding natural loss due to deforestation or degradation, nature-based sequestration such as reforestation, reducing emissions (methane) from animal dung/landfills, and removing carbon dioxide from the atmosphere and its destruction using various techniques are the main emission-control tools and techniques eligible for carbon credits.
Carbon credits can be acquired in the voluntary markets, which operate outside the compliance markets and allow businesses and people to buy carbon offsets, or in the compliance markets, which are established and controlled by national, regional, or worldwide carbon-reduction regimes. Carbon credits are bought on the voluntary carbon market, typically by organizations, for voluntary usage. In part, voluntary carbon markets are expanding due to demand from companies trying to reduce their emissions.
International, regional, and subnational carbon-reduction programmes, including the California Carbon Market, the European Union Emissions Trading System (EU-ETS), and the Clean Development Mechanism (CDM) under the Kyoto Protocol, govern the carbon market.
From 2021 to 2025, Pakistan’s cooperation with China’s carbon emission trading system presents enormous prospects. Countries can trade in the global carbon credit market under the International Emissions Trading (IET) system to make up for any shortage in the designated number of units.
According to Annex B of the Kyoto Protocol, nations with excess units can sell them to countries that are exceeding their emission objectives. Land can store carbon. Therefore, farmers and other landowners may trade carbon credits. You must have available land maps that prove your ownership of the land and the legal description of the land to enlist.
On the voluntary carbon markets, landowners can sell carbon offsets. These buyers of carbon credits do so as investments or because their companies have internal standards for reducing their carbon impact. Anybody who owns and maintains forested land may be allowed to market carbon credits produced by management practices on their property. But, before investigating specific qualifying requirements, there are a few issues to consider.
Governments with excess units may sell them to nations not meeting their Kyoto Protocol emission objectives. The Kyoto Protocol’s Article 17 defines the idea of trading carbon credits. Nowadays, European nations are the significant consumers of carbon credits, while India and China are the most outstanding suppliers. A project will be qualified to get carbon credits if it can consistently and quantitatively create fewer GHG than the present alternative.
For instance, replacing a coal plant with a solar farm after five years would prevent 25 years’ worth of emissions from coal. Personal carbon credits are a voluntary way for people to reduce their energy use and the associated GHG emissions directly. Lower electricity bills and the value of the generated personal carbon credits serve as rewards for successful individual reductions.
Plantations, reforestation, other types of greenery, solar and wind energy, reducing methane emissions from livestock and paddy fields, and other GHG emission-controlling activities may help Pakistan earn carbon credits.
The government of Sindh has already received the first tranche of $14.75 million in 2022, which may climb to $24-25 million in the next five years, and this increase will continue for the 60-year commitment period. Pakistan has completed a project that earned carbon credits. There is, therefore, a lot of room and potential for obtaining carbon credits on a bigger scale, and Pakistan is already benefiting from them thanks to a forestry initiative.
The process of replicating this unique success story of obtaining carbon credits for other forestry and GHG-controlling initiatives is now hindered by a lack of institutional structures, commitments, and capabilities. Concerning the ownership of carbon stock, which is controlled mainly by provinces following the devolution prompted by the 18th Amendment, Pakistan lacks the necessary competence, clarity, and promises.
The Ministry of Climate Change serves as the focal point for the UNFCCC and other international agreements, such as the methane pledge and the carbon trading scheme, but Pakistan’s ability to make money from the sale of its carbon credits is in jeopardy due to the absence of a clear policy and mandate. The government must focus only on creating a register, ending concurrent efforts to pursue financially lucrative solar, hydel, and methane-pledge projects.
The ministry’s choices made by generalists, also known as taboos, are hurting the potential to earn carbon credits on a fast track since they lack the technical understanding in this very creative field. With a proposal submission rate of only 0.6% and earnings of only 0.4% of the dollars compared to the Asia-Pacific, CDM, which ran from 2005 until recently (existed only for a few years in project mode), they have failed to generate any revenue for us (India and China). We will again be missing a much larger chance if business as usual continues.
Pakistan may make money, just like the government of Sindh did, by selling carbon credits from mangroves. Ironically, there is confusion about voluntary markets as well as capacity. The hallways of the central ministry are entirely silent when it comes to directing, instructing, and raising awareness about this burgeoning industry. Pakistan is implementing solarization to address its electricity shortfall, but the ministry is mute on the carbon credits that solar energy generates at the individual and corporate levels. Also, all green industries like hydro, biogas, plantations, and others may bring in money quickly if the main ministry is aggressive and eager to promote such tactical efforts.
