EMISSIONS trading rules have just been agreed to at the climate summit in Baku, creating a new wave of options and opportunities for countries and private sector companies to plan long-term transactions in emission trading. What do the adopted rules on emissions trading mean for Pakistan? How can we build upon the new momentum, prioritise our early engagements, and still keep an eye on long-term projections on the regulated market by the Paris Agreement?

After almost a decade of negotiations, countries have formally recognised two different types of markets for trading emissions under Article 6. The first, Article 6.2, will facilitate voluntary cooperation among countries to achieve their Nationally Determined Contributions (NDCs) by allowing the transfer of Internationally Transferred Mitigation Outcomes (ITMOs). The second, Article 6.4, will establish a regulated international carbon market overseen by a UN body. This mechanism is designed to ensure structured oversight and accountability in the trading of emission credits.

Experts are sceptical about the integrity of the rules adopted under 6.2, arguing that they could open the floodgates for the sale of junk carbon credits. Because of complex ambiguities surrounding 6.2, the informal market will risk unequal and non-transparent transactions. Countries with weaker governance and accountability mechanisms are likely to fall prey to such transactions, dealing particularly with their mangroves or forests.

Pakistan’s journey on carbon trading began in 2017 with the first voluntary market agreement for Delta Blue Carbon Project, followed in 2023 by a Statement of Understanding with Verra, the largest voluntary market certification body. Several companies are........

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