WHILE Pakistan struggles with the accumulated cost of climate inaction and finds international climate finance elusive, it must now confront an emerging challenge: trade barriers priced according to the carbon embedded in each exported product. The false comfort that this does not touch our key exports to the EU and UK has deferred reforms, with the cost growing steeper by the day. Contradictory policy, misusing carbon levies instead of building a domestic Emissions Trading System (ETS), has made trade even harder.

Since January 2026, EU importers of steel, cement, aluminium, fertilisers and electricity have had to buy certificates for the carbon embedded in their imports, with the first annual declarations due next year. Direct exposure under these sectors is small for Pakistan — roughly 1.2 per cent of total exports, typically a percentage easy to ignore.

CBAM (Carbon Border Adjustment Mechanism), however, is a serious warning. On March 9, 2023, my column on ‘Trade and climate adaptation’ in this paper flagged that Pakistan would need to build carbon labelling and export competitiveness around it, not wait it out. As I wrote then, “they are expected to shift demand towards less carbon-intensive products”. Some three years later, in January 2026, my argument turned from a warning to heed to an opening to seize, urging that CBAM “should be seen as an incentive to accelerate our own decarbonisation”. Two columns, three years apart — but one constant: Pakistan’s institutions have moved slower than the mechanism they were warned about.

Pakistan’s exports to the EU reached $8.86 billion in FY25, up from $8.24bn the year before, with textiles, which accounted for the largest........

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